Stagflation is a rare and difficult economic scenario in which three things happen at the same time: high inflation, slow or stagnant economic growth, and high unemployment.

Younger generations may not remember this era and the 1973 oil crisis, but baby boomers sure do.

Long lines to get gas were the hallmarks of the era, when your license plate number determined whether you could fill up on odd or even days.

A look back at the 1970s can provide an important economics lesson that we, hopefully, won’t repeat. But it’s worth noting the similar cause of an oil supply shock.

While waiting in two- to three-hour lines for gas was bad, the simultaneous double whammy of high inflation, recession and high unemployment is the real story — and one worth understanding today.

So, how bad was it back in the ’70s? The Dow Jones Industrial Average rose just 0.05% for the entire decade, opening at 800.36 on Jan. 1, 1970, and closing at 838.74 a decade later.

And from 1968 to 1983, the Consumer Price Index hit 14% (yes, 14%) in 1980 and soared to 186%, an annual rate of 7.3%.

Energy prices jumped at 9.9% per year. Yet the only thing worse than stagflation is its cure. 

In 1974, economist Robert Gordon told The Wall Street Journal, “Find me an economist who can explain the causes of the current surge of inflation and cure it without massive unemployment, and I’d like to meet him.”

Well, economist and Federal Reserve chairman Paul Volcker did cure inflation, but not without massive unemployment as the U.S. economy saw “double-dip” recessions in 1980 and 1982 that crushed American families.

Recent crude oil prices flirting at $100 a barrel, persistent inflation above the Fed’s 2% target, and signs of a weakening job market have started getting economists and investment strategists quietly muttering the word “stagflation” again.

To be fair, our nation’s energy situation is dramatically different — and better — than it was back a half-century ago when we imported about a third of our oil consumption, with OPEC nations accounting for 70%-80% of our needs.

In response to President Richard Nixon’s request for emergency aid to Israel for the Yom Kippur War, an oil embargo was levied on the United States by OPEC, which ceased all oil exports to the country.

The price of crude rose from $2.90 a barrel (yes, you read that right) to $11.64 a barrel in January 1974.

So, while arguments supporting the possibility of stagflation are in the minority, there are potential signs. If so, what should we do about it?

Therein lies the rub, for as Gordon notes, the cure may be worse than the problem.

You’re seeing this in discussions about Fed policy these days. While the political story is that the Iran war will be short-lived and oil futures are priced for decline over the next several months, what if the Strait of Hormuz stays closed longer and providers need to cut production?

What if already sticky inflation stays higher than target? And what if employment weakens, whether from the current “no fire/no hire” levels to more layoffs?

That, my friends, is the conundrum: raise interest rates to fight inflation but show economic growth with the risk of more job losses or lower interest rates and feed inflation but, hopefully, help growth and employment.

Or just stand pat and hope things go well.

We’ve seen at least a similar movie before and it wasn’t very fun. I’m hoping our long efforts toward energy independence and an offramp for the war in Iran will make all of this just more economic chit-chat.

But stay tuned.