Stagflation. It was the dreaded “S word” of the 1970s.
For Americans of a certain age, it conjures memories of painfully long lines at gas stations, shuttered factories, and President Gerald Ford’s much-ridiculed “Whip Inflation Now” buttons.
Stagflation is the bitterest of economic pills: High inflation mixes with a weak job market to cause a toxic brew that punishes consumers and befuddles economists.
For decades, most economists didn’t think such a nasty concoction was even possible. They’d long assumed that inflation would run high only when the economy was strong and unemployment low.
But an unhappy confluence of events has economists reaching back to the days of disco and the bleak high-inflation, high-unemployment economy of nearly a half century ago. Few think stagflation is in sight. But as a longer-term threat, it can no longer be dismissed.
This week, the World Bank raised the specter of stagflation in sharply downgrading its outlook for the global economy.
“The world economy is again in danger,” the anti-poverty agency warned. “This time, it is facing high inflation and slow growth at the same time. … It’s a phenomenon—stagflation—that the world has not seen since the 1970s.”
To read the full report from Paul Wiseman at the Associated Press please click here.