Commentary
The evidence of economic weakness and decline fill the headlines day by day, with major banks reporting lower earnings, big box stores with excess inventories, home sales skidding, and consumer sentiment crashing. Meanwhile, inflation in all sectors is raging so high and hot that it has overtaken every other issue that polls say matter in the lives of average Americans.
This inflationary recession—also called stagflation—is an odd beast in any case. The combination of both purchasing power declines and falling productivity violates not only every modeling presumption made since the Keynesian revolution of the 1930s but also just plain intuition. Higher prices are supposed to signal higher demand and/or tighter supply, not lower demand and higher supply….