The Athenian, “The old saying is quite right: it is difficult to fight against two enemies, especially when they are fundamentally different”.Plato, The Laws
The paper discusses the nature of the economic mechanism at work during the stagflationary phase of the on-going global crisis, over the period August, 2007-August, 2008. The analysis draws on the insights of both the structuralist and the mainstream macro models and suggests how in a multi-commodity world, characterised by sharp differences in the price/quantity adjustment process across various markets, policies based on the Taylor rule are likely to be in appropriate, if not seriously counter productive.
