In a scenario reminiscent of the “Back to the Future” movie franchise, a Harvard professor says that we’re close to being mired in the economic disaster of the 1970s, except that Barack Obama instead of Jimmy Carter is at the wheel as the country roars toward inflation.
Fueled by the oil crisis, government overspending, money printing at the world’s central banks, and chaos in the Middle East, inflation is poised to take off, says Harvard economic historian Niall Ferguson.
The world faces a “pretty inflationary scenario" not seen since the 1970s, he said. How bad did inflation make the ’70s? Those who bought houses, or tried to, faced mortgage rates of 17, 18, and 19 percent.
Today, food prices are through the roof, chaos continues in the Middle East, and the nuclear crisis in Japan is multiplying the devastating effects of the deadly earthquake and tsunami Friday.
In the best of times, these are bad economic and news trends. After surprising bull run for stocks, it’s a flashing “sell” signal to some.
“You’ve got to be myopic if you’re not at least concerned that there might be a major correction,” investing legend Carl Icahn told the Financial Times.
Just a week before, Icahn gave back $1.75 billion in investor cash, saying he no long wanted to take risks with other people’s money.
Part of the problem, Icahn said, is the big unknowns ahead. The Federal Reserve this week stood firm on virtually zero interest rates, but an end to the easy money is set. The Fed has said repeatedly that it will let its latest $600 billion bond-buying program expire in June.
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We remember so well the Carter years, with the high interest rates, the long lines at the gas pumps, the Americans being held hostage, and all the other marks of an ineffectual President. Carter himself used the work malaise to describe the overall feeling pervading the country.
ReplyDeleteSo here we are again: inflation taking over, high unemployment, low production. We have an equally ineffectual President, in whom we put so much promise and who has let us down big time. There doesn't seem to be even a glimmer of hope on the horizon. Again we are mired in malaise. The 2012 elections can't come soon enough.