"Government numbers are starting to reflect the anxious state of the economy. Friday's report by the Commerce Department showed that gross domestic product (the value of all goods and services produced in the country) grew at an annual rate of 2.5 percent, down from 5.6 percent from the last quarter. That same report showed inflation increasing to 2.9 percent -- the highest since 1994.

A classic definition of stagflation is when a stagnant economy must also deal with price inflation.

Deep in the Commerce Department's report are even more troubling concerns: The personal savings rate of Americans continues to decline; we essentially are spending $141 billion more than we earn. (For those who care, the personal savings rate is now a minus 1.5 percent, dropping from minus 1 percent last quarter.)

Our lack of savings has been a big deal for a while, but we've been able to mask that problem because the housing market has been so strong. But that is changing, too."

Get the Story:
Mark Trahant: Easy credit driving housing prices? (The Seattle Post-Intelligencer 7/30)

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