Stagflation - What is it?

stagflation /stægˈfleɪʃən/ [stag-fley-shuhn]

I was pondering on the word "stagflation." Big word, huh? Everyone in the industry seems to think we are in it or headed for it. At least the ones I spoke to think it is here. Now, what exactly does stagflation mean anyway?

1. "An inflationary period accompanied by rising unemployment and lack of growth in consumer demand and business activity" (Dictionary.com)
2. "Sluggish economic growth coupled with a high rate of inflation & unemployment" (American Heritage Dictionary)
3. "A condition of slow economic growth & relatively high unemployment, accompanied by a rise in prices, or inflation" (Investopedia.com)
4. "Stagflation occurs when the economy isn't growing, but prices are... . This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries..." (Investopedia commentary)
5. An economic phenomenon of the late 1960s & 1970s characterized by sluggish economic growth & high inflation.

Where do we get this word, anyway?
In 1965, the word "stagflation" was apparently coined by U.K. Conservative Party Finance Minister Iain Macleod, from stag(nation) + (in)flation.
(Online Etymology Dictionary, © 2001 Douglas Harper)

A Tutorial & View of "Flation"
Inflation - Expansion of money and credit
Deflation - Contraction of money and credit
Disinflation - Expansion of money and credit, but at a declining pace
Hyperinflation - Rapid rise in inflation accompanied by a complete loss of confidence in currency

From the above, stagflation seems to be based on rising prices (instead of an expansion of credit), and furthermore, the term seems to imply that rising prices are bad only in context of stagnation & high unemployment.

Where exactly does it supposedly fit in?
In the 1970s, economists had been conditioned to associate economic downturns with deflation. Suddenly recession coincided with the effects of the concurrent inflationary monetary policy becoming highly visible, something happened that wasn't supposed to happen. So some really smart people thought it required a new term - 'stagflation,' equaling recession cum inflation, the supposedly 'unnatural' state of affairs. Double whammy.

However, once & if you define inflation correctly (expansion of the fiat money supply), such a term actually makes little sense, especially considering that the Keynesian recipe for 'combating economic downturns' consists of deficit spending cum monetization, i.e., printing lots of money! Application of this recipe usually leads only to bigger failures, like the housing bubble in the U.S..

Truth is: no one can seem to agree on any easy or standard definition for an economy in which growth is slowing while inflation is rising, such as it is today. Could it be 'fearflation,' a term that means it's all just fear, rather than actual inflation that's driving the current economy? Maybe it's 'bubbleflation,' as the U.S. seems to be stuck in a bubble of higher prices, growing unemployment, high housing prices, and a falling dollar. Then again, it could be 'gasflation,' the cycle of high gas prices leading to higher inflation. Or how about 'deceleflation,' a slowing down accompanied by inflation?

I think if Mr Bernanke is to be believed, it's not inflation we need to fear, but the expectations of inflation. Maybe we should describe the current economy as 'Fedflation.' Call it whatever you like, we can all agree to disagree, & there is nothing wrong with that. Should unanimous opinion ever form on something economically related, I confidently predict we would all be wrong, and probably sooner, rather than later.

What do you think?

Devote Our Life to Worthwhile Actions

"Often we allow ourselves to be upset by small things we should despise and forget. We lose many irreplaceable hours brooding over grievances that, in a year's time, will be forgotten by us and by everybody. No, let us devote our life to worthwhile actions and feelings, to great thoughts, real affections and enduring undertakings."

- Andre Maurois, 1885-1967,
Writer

陶喆 - I Believe

曲名：I Believe
歌手：陶喆

在我的视线
有一个模糊的光芒
指引我追寻
心里的梦想
每一天
我需要多一点勇气
灌溉我的心
让信心能继续

我知道
这旅程一定会很艰难
必须面对这一切
不管多累

I Believe 我有一天
会能够让自己
所有的梦想实现 wo yeah
我知道会有一天
生命中的希望
会在我眼前出现 wo wo yeah
再也不用一直怀疑
因为爱存在我心里面
Coz I Believe
Coz I Believe

要看清楚
很容易迷失了方向
追寻这个梦
让未来发光 oh..
不怕错
只怕我知道不敢做
绝不能轻易
把一切都放弃

I Believe 就在今天
我一定让自己
所有的梦想实现 wo
因为我相信在眼前
每一个梦想都实现
我看的清楚
看的很清楚

Arthritis

A drunk man who smelled like beer sat down on a subway seat next to a priest. The man's tie was stained his face was plastered with red lipstick, and a half empty bottle of gin was sticking out of his torn coat pocket. He opened his newspaper and began reading.

After a few minutes the man turned to the priest and asked, "Say, Father, what causes arthritis?"

"My Son, it's caused by loose living, being with cheap, wicked women, too much alcohol and a contempt for your fellow man."

Well, I'll be damned," the drunk muttered, returning to his paper.

The priest, thinking about what he had said, nudged the man and apologized. "I'm very sorry. I didn't mean to come on so strong. How long have you had arthritis?"

"I don't have it, Father. I was just reading here that the Pope does".

Anxiety Does Not Help a Bit

"It has been said that our anxiety does not empty tomorrow of its sorrow, but only empties today of its strength."

Charles Haddon Spurgeon, 1834-1892
Preacher & Author

The Source of Possibilities

"Ideas, theories and concepts are only expressions of our greatness, they not the heart of possibility; we are! Our providence is the great gift of containing the capacity to achieve anything that we may desire, that we are the core of possibility, that in the face of any obstacle, man or woman may toil, fight, struggle or climb to surmount anything in his or her path.

There really is nothing that limits an individual; no disability, mountain or river can withstand a focused mind but the mind itself. Examine the thoughts that govern your daily activities and identify those thoughts that may be holding you back. Choose to break away today."
- John Kanary

"Man is so made that when anything fires his soul, impossibilities vanish."
-John LaFontaine

Listening skills

I remind myself every morning: Nothing I say this day will teach me anything. So if I'm going to learn, I must do it by listening.
- Larry King