Making your life stagflation-proof

PHILADELPHIA. Oil prices are threatening to reach $120 a barrel this spring, yet report after report indicates our economy is contracting — and some experts are beating the drum for the idea that stagflation is returning.

While many, including Federal Reserve Chairman Ben Bernanke, are trying to allay fears about stagflation — the dreaded term for rising inflation coupled with stagnant growth that was a hallmark of the late ’70s — it is clear the current climate is not promising.

“Stagflation is inflation taking off as the economy is slowing, and we’ve got that shaping up here,” said Peter Morici, an economist at the University of Maryland.

During stagflation, “life gets harder,” Morici said. Consumers lose buying power because the cost of goods rises faster than peoples’ income. But socking money away instead of spending it isn’t that rewarding, either, as the Fed cuts interest rates to stem the crisis.

But there are ways to ease the pain, he said:
• Go from a Hummer to a Honda Civic. If you can cut your energy consumption 25 percent, you’re going to make an impact.

• Eat healthier: Cut back on processed foods and you’ll also save money in the checkout line.

• Put money in higher-interest accounts: Several big banks offer accounts that allow you to earn 4 percent.

• Consider cash-back credit cards: Some companies reward you for necessary purchases, such as gas or groceries. Take advantage — just don’t go crazy.

• Plan your car errands and consider not driving one day each week to cut down your dependence on oil.

“It all sounds like little change, but here and there you pick it up and you’ve got $25 [extra] to spend,” Morici said.