What Does 'Stagflation' Mean for You?

Listen to this 'Talk of the Nation' topic

On Thursday, President Bush addressed concerns about the country's sluggish economy. As higher oil prices, foreclosures and the weakened dollar make headlines, the word "stagflation" has started floating around. What does it all mean for your finances?

Economists answer questions about how to alter your short-, middle- and long-range financial plans and the different ways to protect your assets.

Guests:

Dean Baker, economist and co-director of the Center for Economic and Policy Research

Michelle Singletary, financial correspondent, for The Washington Post; personal finance contributor, on NPR's Day to Day

Putting a Stopper in All the 'Stagflation' Talk

Robert Siegel talks with Robert Samuelson, a contributing editor to Newsweek magazine, about the term "stagflation," which is being tossed around a lot by economic commentators these days. Samuelson says it's being misused.

The term stagflation has historically meant not only a mixture of high inflation and high unemployment, but "the persistence of this poisonous combination over long periods of time."

"When you just have it for a few months or even a year and then it disappears, you don't really have stagnation," Samuelson says. "You just have a mix of high unemployment and high inflation."

Samuelson also argues that sometimes a recession is necessary to prevent the larger and longer lasting harm to the U.S. economy.

"Although recessions are unhappy events," Samuelson says, "and they hurt people — they put people out of jobs, they reduce profits, they reduce incomes — they are sometimes necessary to prevent worse eventualities and a worse recession."

He argues that in the 1970s, efforts to avoid and minimize economic downturns made inflation and the recession in the U.S. even worse.

Robert Samuelson's column, "The Specter of Stagflation," appears in this week's Newsweek and in The Washington Post.

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