The Legacy Of The Bernanke Regime Will Be Stagflation

Several months ago we presented a dramatic change in David Rosenberg’s outlook when from a die hard deflationist, he uttered the first rumblings of an inflationista. Since then he has further focused his substantial shift in perception culminating with this: “The number of firings, in fact, are more than 10% lower today with a 7.5% unemployment rate than they were in May 2007 when the unemployment rate had hit its cycle trough of 4.4%. Right there that tells you that 7.5% is the “new 4.4%”. Yikes. Sounds very 1970s-ish — and recall in that decade, real spending growth was weak but the supply curve was so sclerotic that inflation stayed stubbornly high. At the same time, at a time when firings are at record lows and job openings are rising at a double-digit annual rate, the number of people quitting their current job for greener pastures elsewhere is on a discernible uptrend. All this points to higher wage growth ahead, and frankly, this is a good thing for society.” Of course, Rosie is simply picking up on what we discussed over a year ago: namely that courtesy of central planning, Okun’s law is now terminally broken.