The Return of Stagflation?

[whell]

Its funny that I was just thinking the other day about the term "Stagflation" and if (or how) it might apply to our current economic scenario. And poof, here it is in the Wall Street Journal.

http://online.wsj.com/article/SB1000...googlenews_wsj

"In mid-2011, the supply of ordinary bank credit to firms and households continues to fall from what it had been in mid-2008. Although large corporate enterprises again have access to bond and equity financing, bank credit is the principal source of finance for working capital for small and medium-sized enterprises (SMEs) enabling them to purchase labor and other supplies. In cyclical upswings, SMEs have traditionally been the main engines for increasing employment, but not in the very weak upswing of 2010-11, where employment gains have been meager or nonexistent."

This synchs pretty well with the feedback I get from many of my clients, who are "SME's". Some of them are seeing market opportunities where they could expand and increase revenue (and add employment), but can't get the working capital from banks that they used to be able to get. To get a line of credit in the current market is more difficult than it has ever been for most of them.

The banks will suggest that the tightening of federal loan requirements makes it more difficult to lend, and of course recent history is likely making banks more risk averse. Banks are, interestingly enough, fueling government spending by buying bonds, since they have the excess liquidity.

Also, if the stimulus was meant to provide equity to grease the skids in the employment sector, it either has yet to arrive, or it hasn't worked.

Is this set to be a return of the Carter economy, complete with Stagflation and malaise?