Slipping into Stagflation


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Although the Federal Reserve chairman and a few Federal Reserve Bank presidents believe the risk of inflation is nil, rising prices for food and gasoline are slapping consumers in the face. This comes at a time when the economy is still struggling to right itself.

Whispers of likely stagflation—the mix of rising prices with stagnant growth and high unemployment—are heard across the land, as worrisome memories of the depressing stagflation of Jimmy Carter days flow back to mind.

Could the Obama era duplicate the dreary years of Carter’s fail administration?  Too many likenesses are already evident. During the Carter Presidency, 7.3 million people were unemployed. Today, 13.5 million are unemployed. The rate of unemployment in Carter’s term was over 7 percent. With Obama in office, we have seen the rate up to 10 percent.

A bitter stalemate between Republicans and Democrats over how to attack the $14.3 trillion debt crisis appears likely. This, together with Obama’s threat of a tax hike, threatens economic recovery and could continue the high unemployment rate.

The Federal Reserve is in charge of monetary policy, which it guides by changing interest rates businesses and consumers must pay. The Fed has tried to hold unemployment down by keeping interest rates near zero. It attempts to target a non-inflationary growth rate of GDP.

But the Fed has been encouraging future inflation by its policies to print more money, thereby reducing the worth of the dollar. The way it does this is by buying bonds from banks. The Fed has been buying bonds since early 2009. It can electronically credit money to the bank accounts of sellers. They, then, sell government securities or mortgaged-backed securities to the Fed. The Fed isn’t printing dollar bills. But it is creating money electronically that wasn’t in the system before. So, in effect, it is printing money. Likewise, Obama has cut into the value of the dollar by spending recklessly.

Policy makers on the Federal Reserve’s Open Market Committee are split over inflation risks. Fed bank presidents, such as Charles Plosser of Philadelphia and Richmond’s Jeffrey Lacker, have said the Fed may well need to raise interest rates this year. On the other side, Fed Vice Chairman Janet Yellen and the Federal Reserve Bank of New York’s president William Dudley have said rates may have to stay low for a longer period.

The Consumer Price Index (CPI), released April 15 increased 0.5 percent in March for urban consumers, the Bureau of Labor Statistics reported. Seems tiny; but the index rose 2.7 percent over the past 12 months for the all-items Index, the largest increase since 2009. “Gasoline and food prices continued to rise and together accounted for almost three quarters” of the “all Items” increase in March.

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  • kafir4life

    BamO's not really worried about 2012. If it appears that he will lose, there will be an "event". An event that will require him to declare martial law, and suspend the elections for our own good (remember his comments about the 2010 mid-terms where he said "Part of the reason that our politics seems so tough right now, and facts and science and argument do not seem to be winning the day all the time, is because we’re hard-wired not to always think clearly when we’re scared, And the country is scared.”)
    BamO and his fellow extreme far left-wing flea-baggers want to protect us, and suspension of elections are just the ticket. 2008 may have been the last open general election this generation will see.

    • Andres de Alamaya

      That's the last thing that worries me. America's law enforcement, army reserves and, enlisted men who would revolt because they have a clear picture of this socialist and racist who has set American racial relations back fifty years. America went color blind to bring in a president who staffed up with folks who talk of "our people." He'd get support from some blacks but not that many. No, if we get into trouble it will be our own fault for not finding and running an effective candidate.

    • Andres de Alamaya

      That's the last thing that worries me. America's law enforcement, army reserves and, enlisted men would revolt because they have a clear picture of this socialist and racist who has set American racial relations back fifty years. America went color blind to bring in a president who staffed up with folks who talk of "our people." No, if we get into trouble it will be our own fault for not finding and running an effective candidate.

    • Bert

      For most people this prospect seems unimaginable. But most people are slow to catch up with the rapidly changing reality. I can definitely envision the possibility of Obama finding a pretext to remain in power even if he faces a loss in 2012. Notice how he keeps appointing his 'czars' that require no Senate approval and who report only to him. Notice also how he casually ignores those laws and regulation that he does not agree with. Step by step we are all being controlled more and more and lied to more and more. I really fear that by 2012 we will have only the illusion of freedom but not the substance. I hope I am wrong.

    • Jim_C

      First, all the lefties were saying the same thing about Bush in 2004 ("He's gonna allow another terrosit attack!" blah blah). No, he ran against a putz; and that's how it will play out with Obama.

      Second, will you give the "no more free elections" "martial law" thing a rest? Why is everything an apocalypse? How many dumb "predictions" won't come true beofre you guys admit they're baloney?

  • Andres de Alamaya

    Something in my benign text seems to trigger the automatic censor in this system to block me from free speech. No, Kafir4life, that's the last thing that worries me. America's law enforcement, army reserves and, enlisted men who would revolt because they have a clear picture of this socialist and racist. No, if we get into trouble it will be our own fault for not finding and running an effective candidate.

  • Andres de Alamaya

    O.K. Have it your way. Front Page Mag is now blocked from my mail box for good.

  • Josie

    He shouldn't even be the POTUS he's a Kenyan and should be removed from office. I've seen the video where he and Michele admitted he was born in Kenya. Our congress is betraying us big time!!!

  • 080

    Stagflation if we're lucky. We are about to take l.6 trillion dollars out of the private economy and dump it into the public sphere. In itself this will produce stagnation. That's because the government produces very little while hamstringing the private sector. It will probably continuewith the QE3s and QE4s because that'sf the easiest path to follow. Go back and read the newspapers from 1974-l983 to find out which investments paid off. Then go and do likewise.

  • Len Powser

    Any amount of suffering will be well worth if it lasts until 2012 and the Cursed One has been removed from office. For if he is not removed in 2012 then our suffering will never end.

  • Farrel

    Get real – the man will serve a full double term irrespective of any dubious first term policy decisions he makes while in office. His support from democrats, leftists, liberals, pro Palestinains, anti Zionists, anti-semites, feminists, anarchists, Jews, Christians, Muslims, blacks, whites, reds, yellows etc, etc will far outweigh anything a weak & specious Republican leadership can dish up as viable opposition. He is America's poster child & you can bet your house & home that nobody will beat him in 2012!

  • matt dickinson

    It seems like conservative websites didn't talk about the Fed printing money until more recently, after the semi-success of Ron Paul, Alex Jones, Peter Schiff and others. Did they really have an influence?

  • matt dickinson

    Anyway, I think it's fine that the Fed prints money. He should print some for Israel, or maybe we should consider that a fake new currency worked wonders for Brasil.

    Everybody wants us to move to gold or silver, but that's just a way for people who sell silver and gold to make money. Eventually the prices of these metals will go down, or the prices of goods that use silver will go up, or people like George Soros and Jim Rogers will sell their metals, and I read that Soros already is.

    Rogers said he'd sell when the "mania sets in." Has it set in? Are people going to lose their money now?

    I Hope so. Every gold-lover I've met on the internet seems to be a JERK.