Subject: The smell of stagflation in the morning
https://paulkrugman.substack.c...

Jerome Powell doesn’t want you to use the S-word. In the press conference following the Federal Reserve’s decision to leave interest rates unchanged, he argued that current economic difficulties aren’t enough to warrant that description:

What we have is some tension between the ​goals and ​we’re ⁠trying to manage our way through it. It’s a very difficult situation, ​but ⁠it’s nothing like what they faced in the 1970s and ⁠I ​reserve stagflation for ​that — the word — for that period. Maybe ​that’s just me.

Fair enough, although any statement that things aren’t as bad as they were in the 1970s should come with the caveat “so far.” As I write this the price of Brent crude is above $116 a barrel, up from about $70 before the bombing began. If the blockade of the Strait of Hormuz goes on for months rather than weeks this will be a shock to world oil supplies substantially worse than the shocks of 1973 or 1979. And while I’m not a strategic expert, I don’t see how that strait reopens any time soon. Neither do prediction markets: