01-16-07 by dugan
Here’s the picture: President Gerald Ford, addressing the nation wearing a "Whip Inflation Now" button pinned to his sweater (in my memory, a yellow sweater) That was the last time the U.S. suffered "stagflation," simultaneous economic slowdown and inflation. But it’s back today, and spreading terror into halls of government.
Economic growth is falling like a rock, while inflation keeps rising–almost entirely because of the price of oil.
When Ford was president, the inflation part of the equation was also driven by oil, because of OPEC’s retaliatory 1974 cuts in production.
This time it’s not OPEC and there are no lines at gas stations–the price of energy is being pushed by out-of-control speculative markets. That unregulated speculation briefly drove the price of a barrel of crude oil to $100. It’s back around $90 a barrel now, but that’s hardly a relief. Gasoline, for instance, is about 80 cents a gallon above where it was this time last year, a few months before it hit an all-time record high. (And refineries are announcing cutbacks in production of gasoline, hoping to boost it higher)
The major oil companies are going to report big 4th-quarter profit boosts from selling that $90 oil. But the rest of the economy can only hunker down and wait for the rest of this inflationary recession to wash through it. The Ford recession didn’t end until the early 80s.
Yet Congress and the White House still haven’t taken the baby step of regulating electronic energy markets to get a grip on speculation. It ought to be their first step, since they can’t stimulate their way out of recession when it’s wrapped in inflation.