A Boy Named Stagflation

Scott Grannis deftly points out (and minces no words) that the conventional theory of inflation is taking a beating. That is not the only theory that has taken a beating in recent times. Those that obsess over "aggregate demand" have discredited themselves as a trillion dollars of spending has done nothing to have "aggregate demand" come to the rescue of the unemployed. I have described for you what happens when these two erroneous theories get together (and you add a little populist, anti-business rhetoric as lubricant). The offspring is called "stagflation." We have it and the remedy is tight money and pro-growth tax cuts and deregulation. We have the exact opposite right now...in the absence of a change of course expect this baby to grow into one obnoxious youth. Buy inflation-hedging stocks, like resources and big metal things. Avoid bonds and too much cash.

UPDATE: David Branchflower agrees, tax cuts are our best chance right now.