A Central Banker's Nightmare:(Bush gave us stagflation)

[papau]

http://online.wsj.com/public/article/0,,SB109260622463991800,00.html?mod=todays%5Ffree%5Ffeature

A Central Banker's Nightmare:(Bush gave us stagflation)
Inflation and Slow Growth Together

By PATRICK BARTA
Staff Reporter of THE WALL STREET JOURNAL
August 16, 2004; Page A2

BANGKOK -- <snip>"Oil at $45 a barrel is a stagflation problem," warned economists at UBS Ltd. in a recent research report. By their reckoning, sustained prices at that level would slow global growth rates by almost half a percentage point in 2005 and by about one percentage point in 2006. Perhaps more important, such prices would push inflation up by about the same amount -- giving the world its first taste in years of what stagflation can be like.

In Europe, the surge in oil prices at a time when the economy is only slowly recovering from a three-year slump has also ignited fears of stagflation. Europe is somewhat shielded from the effects of pricier oil thanks to the euro's strength against the dollar. That makes buying oil, which is quoted in dollars in international markets, relatively cheaper.

Nevertheless, inflation in the 12-nation euro zone at 2.4% is above the European Central Bank's inflation target of "less than but close to 2%." And growth in the second quarter slowed to 0.5% from 0.6% in the first. Some economists fear that the ECB might react by raising rates earlier rather than later to fight the spike in inflation, and in the end dent growth. But the ECB believes that inflation will subside next year, and appears likely to leave its key rate at a postwar low of 2% for some time.

For now, the stagflation concerns seem to be most pressing in Asia, though they could intensify elsewhere if oil prices stay high. That is because Asia's burgeoning manufacturing sector forces it to burn more fuel as a percentage of economic output than the more service-oriented economies of the West.<snip>

[yardwork]

1. It's decent of WSJ to start reporting some truth

Defined as a noxious blend of stagnant growth and rising prices, stagflation last appeared in force in the 1970s, when it bedeviled U.S. policy makers and gradually degraded the standard of living of average Americans. Economists long thought a repeat to be extremely unlikely.

That's because most economists are intelligent people who couldn't imagine a series of moronic decisions like those made by BushCo. Well, here's a message to our friends at WSJ - you helped put shrub in power, you helped keep him in power, and he's your problem now.