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Stagflation Scenario

January 15, 2008

Probably the second worst economic scenario is stagflation. Depression would of course be the worst. Stagflation is a condition of slow economic growth, rising unemployment, and rise in prices, or inflation. The 2007 inflation figures that were just released today verify the things the I’ve been saying for the last year. And this is another reason that GOLD is headed to $1,000 an ounce and beyond.

Who Wants Cheaper Auto Insurance?

Wholesale inflation jumped in 2007 by the largest amount in 26 years even though falling gasoline costs allowed price pressures to moderate in December. The Labor Department reported that wholesale inflation was up 6.3 percent for 2007, reflecting a huge increase for the year in various types of energy costs ranging from gasoline to home heating oil.

And we need to add $0.40 cents more per gallon of gasoline?

A special commission is urging the government to raise federal gasoline taxes by as much as 40 cents per gallon over five years as part of a sweeping overhaul designed to ease traffic congestion and repair the nation’s decaying bridges and roads. The two-year study being released Tuesday by the National Surface Transportation Policy and Revenue Study Commission, the first to recommend broad changes after the devastating bridge collapse in Minneapolis last August, warns that urgent action is needed to avoid future disasters.

Talk about adding to the deep recessionary fears!

The Commerce Department reported that retail sales fell by 0.4 percent in December. It was a worse-than-expected decline and increased worries that the country could topple into a recession. The combination of rising inflation pressures and a weak economy represent a dilemma for the Federal Reserve over whether to cut rates to boost economic growth even at the risk of making inflation worse.

Last week, Federal Reserve Chairman, Ben Bernanke sent a strong signal that the Fed is more worried at the moment about weak growth than inflation — given a series of weaker-than-expected data in recent weeks. He knows it’s a recipe for stagflation. Have you noticed how few are talking about the war anymore? It’s all about the economy as the Michigan primary is held to. Michigan is a peerk into our future.

Michigan has the highest unemployment of any state in the nation, is dependent upon an obsolete industry as Ratan Tata is proving, and the high cost of labor simply cannot compete with foreign nations. Maybe stagflation isn’t our most serious problem in 2008.

Written by Ernie · Filed Under Daily Commentary 

Comments

2 Responses to “Stagflation Scenario”

  1. United States Bankruptcy? on January 17th, 2008 8:56 am

    […] Congress what can be done to keep Americans in a lavish lifestyle- at least those who are in power. Stagflation is enering the doors. Merrill Lynch just reported a $10,000,000,000 loss and that’s not acceptable of course- for […]

  2. Is Dow 6,000 Possible? on January 20th, 2008 5:57 am

    […] in the real world, the stock market ended on Friday with the Dow Jones industrial average falling 59.91 points, to 12,099.30. That modest decline capped a four-day 678-point plunge that left Wall Street traders and everyday […]

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