Caught in the jaws

THE world economy is starting to look remarkably, even dangerously, vulnerable. America's growth seems to have fallen close to zero in the current quarter. Japan has almost certainly slipped into another recession. And although the euro area is still growing, its pace has slowed more sharply than expected. Worse, a nasty complication has emerged: just as growth has slumped, average inflation in the big rich countries has gone up to its fastest rate for almost eight years, kindling fears that stagflation, the disease that spread around the globe in the 1970s, may return. If it did, the task of central banks would be a lot tougher: rising inflation would cramp central banks' room to cut interest rates to ward off recession, and could even force them to raise rates. But fears of inflation are exaggerated. Recession remains by far the bigger risk.