Stagflation

I was staggered to discover that if you Google Stagflation my site is number 4 on page 1; my old economics teacher would be so proud, xxxx yyyyy where are you?

Samuel Brittan's FT article is particularly good, it starts "There is not all that much difficulty in steering a modern economy when it is faced with one main danger. If that is inflation, the need is clearly to rein back on the growth of demand. If the central bank overdoes the restraint it is not all that difficult to correct its error by loosening its policy. If its first measures prove inadequate, it can step up the dose.

Should the main danger be recession or a severe slowdown it will need to apply a stimulus, for instance by lowering the policy-determined short-term interest rate. A point may indeed be reached where monetary policy needs to be supplemented by fiscal policy, which is a posh way of describing lower taxes or higher public spending, in principle temporary. As long as policymakers do not delude themselves that they can achieve pinpoint accuracy and are not afraid of a little trial and error the task is not all that complicated, and outside analysts are kept in employment predicting their next move.

What, however, should they do if the economy is faced with both increasing inflation and severe growth slowdown? This is the dilemma of stagflation."

Do read the rest of it.


You might want to read some of the other articles as they will give you a very good idea as to what is coming our way - and it will not be pleasant...