Stagflation? You Ain't Seen Nothing Yet

This past week, Bill Griffith of CNBC began to speak of the return of "stagflation." In one of the network's seemingly endless "debates" between analysts whom they dig up from who knows where, Griffith asked both guests about "slowing" GDP growth and "rising" inflation possibly triggering the resurgence of the dreaded 1970's malady.

Talk about overreaction. The irony, of course, was that Griffith is old enough to actually recall stagflation, as am I, while his two guest economists were not. That said, Griffith sounded like some addled old codger.

Let me tell you, as far as "stagflation" goes, you ain't seen nothin' yet. Try interest rates at 18%. It's easy to read about it. But, you have to have actually lived in a functioning economy to understand it. Money market accounts yielding 12%. Lending still going on, but many loans simply refused, because bankers were too embarrassed to quote rates in the mid-20%'s, in order to cover risk.

And of course, inflation running in the teens.Yes, the 70s were truly a time of economic sickness. But it coincided with the years after the Fed was chaired by G. William Miller, surely one of the most inept men to have ever held the position.

Today, we have inflation running at a full 10 percentage points below what it was back in the late 1970s. Rates are a dozen percentage points lower as well. Using the word "stagflation" at this time, with this Fed, borders on irresponsible.

Additionally, we just had very strong global growth last year, and a torrid first quarter in the US. Basic economic activity is quite far from moribund. The private equity deals demonstrate how much confidence there is in current markets, that private investors are putting so much money directly into large businesses, in order to add even more value before spinning them back out.

Fortunately, both young economic pundits on the CNBC show that afternoon rapidly and forcefully dismissed Griffith of his mistaken notion. However, if there is any justice, he should have lost whatever on-air credibility he still had to that point.

With comments like "are we in danger of brink of stagflation" at this juncture in our economic history, Griffith makes a strong case for replacing him with someone of like business sense. Say, Regis Philbin or John Stewart?