Stagflation?

As we enter the Summer of 2011, we are faced with, in my opinion, a dangerous combination: inflation and persistently high unemployment.  Despite of (and in some cases, in spite of) the actions taken by the Obama Administration, unemployment is still over 9% in the United States and prices are on the rise.  The Federal Reserve bank argues that inflation is muted, but anyone who has filled up their gas tank or gone to the grocery store lately will big to differ.  In economics, we call this combination of inflation, lack domestic demand and high unemployment stagflation.  The last time the nation suffered from stagflation, Jimmy Carter was president and I was still 19 years away from being born.  Really, the only way to combat stagflation is to both get people back to work and to get prices under control.  There are many ways to do this.  So which should be taken?

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