Thread by @paulkrugman

Now that the big Biden package has been enacted, we're hearing warnings from some economists — well, one economist — about stagflation. As always, history is extremely useful in thinking about such things; and I've been reviewing the great inflation panic of 2010-11 1/

My sense is that this episode has been widely forgotten, but it's very relevant. Here's what happened: as the economy began to recover from the 2007-9 recession, headline inflation picked up to almost 4% 2/

Producer prices — basically wholesale prices — were rising at a double-digit clip 3/

And commodity prices were rising at an annual rate of almost 40% 4/

Republicans like Paul Ryan raked Ben Bernanke over the coals, intoning about the dangers of a debased dollar 5/ nytimes.com/2011/02/10/bus…

But the Fed argued that this was a blip, driven by temporary factors, and refused to tighten policy. This was the right call — in contrast to the ECB, which gave in to inflation panic 6/ bruegel.org/2016/01/the-ec…)

It's easy to see how we could have an inflation blip in the months ahead, including for some unusual reasons: the lingering effects of the pandemic have disrupted supply chains 7/ businessinsider.com.au/more-expensive…

But you don't get stagflation unless price-setters who *don't* change prices very often — including employers setting annual salaries — begin building expectations of inflation into their pricing 8/ krugman.blogs.nytimes.com/2010/02/26/cor…

A one-time price blip as the economy booms and supply chains struggle to keep up won't do it. 9/