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Friday 18 Aug 2017 | 01:32 | SYDNEY
Friday 18 Aug 2017 | 01:32 | SYDNEY

Stagflation: That '70s feeling

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22 February 2008 13:53

The 1970s will no doubt be remembered for a whole range of things, but for many economists I suspect that this will always be the era of stagflation – the poisonous mixture of simultaneously rising inflation and unemployment that marked the end of the so-called Golden Age and the collapse of the Keynesian consensus.

As far as economic policymaking goes, stagflation is a Very Bad Thing Indeed, creating as it does an uncomfortable choice between tightening macro policies to deal with inflation or loosening them to combat recession.  I therefore found it interesting, and more than a little worrying, that yesterday both the NY Times and the Wall Street Journal ran stories warning that the US economy might be flirting with a period of stagflation.  The US – and the world – economy really does not want any part of that kind of 1970s revival.

Photo by Flickr user enrevanche, used under a Creative Commons licence.

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