Friday, July 8, 2011

Stagflation ahead?

Stagflation is a nasty combination of stagnant growth, which we’re experiencing, and inflation, which has already crept into food and energy prices – (I don’t care what the Fed says!)  Could we be headed for a long period of stagflation?  I certainly hope not, but all signs suggest the chances are high and they keep increasing.  Inflation was up 3.6% from last year and first quarter growth was a lame 1.9%.  Unemployment nowstands at 9.2%, which is the official rate and much lower than the actual rate.

Job growth is non-existent at the moment.  Private employers see no reason to be optimistic about the future, due in large part to regime uncertainty, and are neither hiring workers nor expanding plant and equipment.  But part of the problem (maybe a BIG part) is not private firms, but government. 
Canada was blessed with tar sands – lot’s of tar sands.  Normally, cheap oil makes turning tar sands into useable oil uneconomical.  However, with $100/bbl oil, Canadian tar sands become viable, and our northern friends are churning out the oil for us.  Private firms would like to build a pipeline to transport that oil to thirsty refiners in America.  This massive undertaking has the potential to create tens of thousands of jobs.  So why are they not building it?  Our government (EPA and State Dept) have failed to bless the project over environmental concerns.  No surprise, but to the unemployed Americans who would benefit from this project, it’s a slap in the face, and another example of government’s misguided priorities.  See here for the WSJ article (OpEd) on the Can-Am pipeline.

When private firms undergo mass layoffs that always makes the news.  In all fairness, it’s time government makes the news when its stupid and misguided policies prevent mass hiring. 

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