Ben Stein on the perils of economic inflation

Now for some bad news.

The economic event that really turns life upside down in recent years has not been recession, but inflation. Only a fairly small percentage get unemployed in a downturn. Only a much smaller percentage has their homes foreclosed upon.

But when serious inflation hits, it hits everyone.  

It started this time with industrial commodities, which have now risen spectacularly after their lows in 2008 and 2009. The rise has largely been fed by demand from the far East. This is the proverbial butterfly's wing that started the typhoon. Then came agricultural commodities, again pulled up by demand from China.

But now, we are getting serious crop shortfalls in China - an enormously important agricultural producer and consumer. U.S. crop forecasts are also disappointing. There are huge problems in Australia, South America, and Russia. Corn, wheat, rice and other foodstuff prices are just going wild.

And, as we all know, gold has had an amazing rise, although a recent pull-back.

But most important of all, the Fed is just shoving money out the door as fast as it can, creating piles of cash in banks. So far, the banks are mostly hoarding that money, which we don't like because it does not help the recovery.

But if the banks ever start lending that money, and the recovery begins in a big way, the pieces will be in place for serious inflation. It may happen even without the banks opening their vaults. Food prices at the grocery store are astronomical. Gasoline has shot up. Air fares are up.

We used to think we could not have high unemployment and high inflation at the same time. The experience of the late '70s and early '80s showed that's not the case.

It even has a name: stagflation.

This causes political and economic stress. Rising prices were major causes of the unrest in Egypt. Now, it sure looks as if it's going to get worse. And it could be serious here, too.

I am not predicting it in a big way here. I am just saying the tea leaves are ominous. And if it comes, it won't be pretty. Once it starts, inflation is incredibly painful to stop without stopping the recovery, too.

I told you it was bad news.