(December 1 – 12:30 ET) – Stagflation — slowing growth and rising inflation — appears to be re-appearing, says CIBC World Markets chief economist, Jeff Rubin

“Credit spreads are widening globally, capital is once again starting to flee East Asia, American banks are reining-in loan activity, and some 40% of the capitalization of the Nasdaq has gone up in smoke. All of a sudden financial markets look a whole lot less liquid,” says Rubin.

Despite all these warnings signs, Rubin says there isn’t much to validate the market’s anxiety, noting that Asian growth remains strong, as are corporate profits in the U.S.

“But, at the same time there are some compelling reasons to doubt whether those performances will last. Oil prices continue to defy forecasts of their imminent demise, while equity markets around the world are lightening consumer pockets. Everywhere one looks, there seems to be a slowdown lurking around the corner.”

Asia looks poised to suffer worst, Rubin says, and compared to 1998, U.S. inflation is rising and will do so on the back of energy prices regardless of growth. Back in 1998, the Fed cut rates three times to help stem the Asian contagion. Rubin says it won’t have that flexibility with energy prices pushing upward.

“A dramatic slowdown in domestic spending may keep the Fed from ever acting on its tightening bias, but rising inflation will surely keep the central bank from reliquifying financial markets with rate cuts.”

“More and more, the economic fallout from this energy shock is beginning to look like those of the past,” says Rubin.