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The world seems to be entering a new period of stagflation similar to the 1970s – high
inflation and low GDP growth – but expect this to be continually denied by mainstream news sources. Words: 633
So says Daryl Montgomery (www.nyinvestingmeetup.blogspot.com) in edited excerpts from an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Montgomery goes on to say, in part:
UK (Britain)
Britain shocked the markets this week when it reported an inflation rate of 5.2% for September. This was up from 4.5% the previous month and well above government projections. The only surprising thing about the UK inflation rate is that the official rate is so low given the amount of money printing done through quantitative easing in 2009 and 2010. Despite the low growth and high inflation that has resulted from it, the Bank of England (BOE) has just started another round of QE. BOE Governor Mervyn King recently stated, “Without monetary stimulus — low interest rates and large asset purchases — there is a risk that growth will stall and inflation fall below our symmetric 2 percent target.” As of September, the UK inflation rate has been above the bank’s target rate for 22 months in a row…
EU (European Union)
Inflation is also rising elsewhere as well. On the European continent, the official EU rate rose from 2.5% in August to 3.0% in September. GDP increased by 0.2% there in the second quarter.
China
China’s September inflation rate was 6.1% with food prices increasing at 13.4%. The price of necessities is rising faster there than the price of other goods. This is a common pattern in a number of countries.
India
In India the yearly inflation rate was 9.0% in August.
US
According to the CPI consumer prices for September indicated a 3.9% year over year rise. This rate severely underestimates actual inflation.
According to the alternative numbers produced by Shadow Stats, the current U.S. inflation rate is approximately 11% (Shadow Stats calculates its numbers with the formulas utilized by the U.S. government in the 1970s and this is the only way to get valid comparisons of U.S. inflation numbers across time).
Official U.S. GDP growth for the second quarter of 2011 was 1.3% — well below even the government’s reported inflation rate.
[CanadaStatistics Canada have reported that consumer prices rose by 3.25 in September, led by higher prices for gasoline and food, up from an annual inflation rate of 3.1% in August. The core rate – stripping out volatile items including some food and energy products – was 2.2% on an annual basis (up from 1.9% in August) which is the largest year-over-year gain since December 2008.]
Conclusion
Even though a clear picture of stagflation is emerging globally, expect this to be continually denied by mainstream news sources. Even yesterday in its reporting on U.S. producer prices, one of the major news services stated, “the strong rise in wholesale prices last month is unlikely to prompt a broad increase in inflation pressures given the weak economy.” This is actually pure misinformation. There is a long, long history of high inflation throughout the world during periods of low economic growth or even severe decline. One of the most recent cases historically was in the 1970s when inflation skyrocketed in 1974 during the worst economic downturn since the 1930s depression. Both Fed Chair Ben Bernanke and BOE Governor Mervyn King were around at that time, but apparently can’t seem to recall it.
Perhaps if central bankers had better memories, they wouldn’t be repeating the mistakes of the past today.