Stagflation is defined as a period of high interest rates and high inflation.

Currently, we have neither.

But if we ever were to start running out of resources, high inflation would be expected. The high interest rates would come from an overly aggressive fed chairman raising rates in a vain attempt to get in front of the expected high inflation (Something Greenspan did a few years back as I recall). The inflation never materialized...Maybe Greenspan dodged the stagflation bullet...Maybe he over-reacted as is the current conventional wisdom...In fact, I think deflation is more of a risk than inflation...An aggressive fed chairman should also attempt to avoid deflation (By lowering interest rates) as deflation can be even more damaging than inflation. Complete deflation leads to things like the farming crisis of the early 80's. As asset values decrease, one's ability to raise capital by putting those assets up as collateral also decreases. This can become a deflationary spiral and lead to a total economic collapse (the great depression is the best example of this phenomenon that I can think of off hand).

I don't see stagflation on our near or long-term horizon. Maybe if we extend the long-term horizon out from 5 to 10 years we’ll get there.

Scott (of course there could be a war or something that changes all the economic conditions overnight)