Stagflation

So, of all the posts I’ve ever made, this one is by far the most popular:

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It routinely is the most popular post on any given day for the last month or more, and the fourth-highest ever (after one on the Phillips Curve, one on Minimum Efficient scale and my About Me page).

Well, and as the blog Big Picture detailed yesterday, the likes of the Wall Street Journal seem to catching on to the idea (my post was December 1st of last year – it was hardly the first time I’d thought about or mentioned it, nor was I anything like close to being the first to raise the issue).

A simultaneous rise in unemployment and inflation poses a dilemma for Fed Chairman Ben Bernanke. When the Fed wants to fight unemployment, it lowers interest rates. When it wants to damp inflation, it raises them. It’s impossible to do both at the same time.

Yes, it has taken this long for this basic fact of macroeconomics – one that we teach in Eco 1 (and that I’ve made a point of explaining in each of my last three semesters to date) – to start making the rounds amongst the grown-ups.

Should you ever be given pause to wonder how nobody saw this coming (and let us hope that you don’t) – some people just have a real blind spot for the trucks that hit them, I guess.

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