Talking Stagflation With My Daddy
Next time, I’ll be a better daughter instead of an economic data junky
“Inflation’s through the roof. Gas prices are sky-high. They’re talking about stagflation,” my daddy said. The words tumbled out in a single breath as if building to a horrific prophecy of economic doom. Instead, the conversation shifted to the price of canned pinto beans costing more than $0.50.
Five minutes into the conversation, he repeated the word “stagflation.” In between talks about price hikes for gas, groceries, garden seed, chicken food, and dog food, stagflation popped up again and again.
“Daddy, we don’t have stagflation.” These words popped out of my mouth sometime around the fifth mention.
“The news…” His following words were lost in a red haze as I visualized beating a news anchor over the head with a dictionary.
We don’t have stagflation. Is it possible? Yes. Is the US Economy at a higher risk of stagflation? Yes. The World Bank has some concerns.
Here’s the huge but. Stagflation is characterized by slow or negative growth with inflation and high unemployment. For example, in 1974, US GDP growth fell to negative 0.5%, unemployment rose to 7.2%, and inflation hit 11.04%. That’s inflation measured by the consumer price index (CPI), not the core personal consumption expenditures price index (PCE price index).
As of May 2022, the US unemployment rate sits at 3.6%. That’s low unemployment, not high.
By definition, that’s not stagflation.
Knowing this, I whipped out old textbooks and recent statistics. I talked through the definition of stagflation and showed him the numbers. I believed that seeing where we stand would alleviate his fears. In short, I acted like a good data junky instead of a good daughter. I listened but failed to think.
For thirty minutes, he tolerated my numbers. Then, he turned the conversation back to stagflation and the price of gasoline. He talked about cars lining up at the gas pump and bumper stickers proclaiming “Ayatollah Assahola.”
Finally, it clicked.
Daddy grew up and came of age during The Great Inflation (1965–1982). The Great…