CNN's '70s Flashback: Serwer Sees Specter of Stagflation

CNN's '70s Flashback: Serwer Sees Specter of Stagflation
But economy is performing strongly and inflation is well below 1970s levels.

By Ken Shepherd
Business & Media Institute
June 15, 2006

      The only thing CNN contributor Andy Serwers was missing for a recent business update was appearing on air in a leisure suit.

     The Fortune magazine editor raised concerns of 1970s, disco-era stagflation in a June 15 Minding Your Business segment on American Morning. Stagflation, Serwer correctly defined, is stagnant economic growth coupled with inflation.

     Inflation at an annual rate of 3.8 percent, the highest rate in 11 years and an economy thats not particularly firing on all cylinders, raises the specter of stagflation, warned Serwer.

     But before heading out to Studio 54 this weekend, Serwer would do well to remember just how much better the economy is in 2006 as opposed to President Jimmy Carters 1979.

     The May 5, 2005 Economist magazine found that the economic picture in the U.S. bore scant resemblance to the 1970s.

     In 1979, the British magazine explained, Americas core inflation, which excludes oil and food, was rising at over 7% a year, while the economy grew barely over 1 percent. The bottom line, said The Economist, There is a tad of flation but not much sign of stag.

     The broadest measure of American economic growth, the gross domestic product (GDP), shot up an amazing 5.3 percent in the first quarter of 2006, according to the federal Bureau of Economic Analysis (BLS). The early report indicated that growth was a strong 4.8 percent and that number was actually upgraded.

     Veteran business reporter Malcolm Maiden also dismissed the notion that the United States is headed back to stagflation in his June 12 column. The associate editor for Australias The Age newspaper cited the 5.3 percent growth in the first quarter growth and estimates that the American economy is probably expanding right now at a rate of about 3 per cent a year.

     Maiden added that The stagflation theory also stumbles on the fact that Bernanke is signaling [sic] that he will do what it takes to eliminate inflation, noting that 1970s stagflation resulted from long-term easy money policies at the Federal Reserve.

     The Business & Media Institute has previously documented Serwers pessimistic economic reporting.