Heaven knows, America's miserable now. With US unemployment up to 5.7 per cent in July, and with US inflation in June running at 5.0 per cent, life is no longer quite as comfortable as it used to be. Combining these two measures generates the so-called "misery index", a gauge of the overall degree of economic distress resulting from an unfortunate combination of rising joblessness and higher inflation. According to this calculation, Americans have every right to be feeling miserable: the index has reached its highest level since the early 1990s, when another George Bush presided over an economy which, like now, was on its knees.

The misery index doesn't capture every form of economic distress. If, for example, unemployment is rising rapidly but prices are falling, life won't look particularly miserable. The 1930s, therefore, don't look too bad, a conclusion which is patently silly. As a way of capturing the evils of stagflation, however, the index works really rather well.

Stagflation is, of course, a combination of excessive inflation and high unemployment, a particularly testing mix. Should policymakers raise interest rates to squeeze inflation out of the system, all the while accepting an even higher rate of unemployment? Or should they, instead, cut rates in the hope of generating higher demand, thereby reducing unemployment but threatening a persistent rise in inflation and inflationary expectations?

Until now, there's not been much of a debate about stagflation in the US. The main focus of attention is clearly the weakness of the housing market and the associated credit crunch. In these circumstances, it's difficult to believe that inflation can rise on a permanent basis. After all, declining house prices should, ultimately, be deflationary. Meanwhile, a credit crunch is defined by the inability of banks to lend, suggesting that money supply growth will, eventually, be heavily constrained. Can inflation, then, really be a lasting problem?

Not all inflations, though, are the same. In an important way, they're all monetary phenomena (in other words, the value of money falls relative to a given bundle of goods and services) but knowing that money has a role to play doesn't tell you, directly, whether inflation is about to make an unwelcome return. Inflation will pick up either because money supply grows too quickly or because, for a given money supply, the available bundle of goods and services shrinks.

For the US and many other parts of the developed world, the inflationary threat really stems from the second of these possibilities. The problem is similar to the difficulties last encountered at the end of the 1960s and the beginning of the 1970s, when inflation picked up in part because policymakers had yet to recognise that the heady growth rates of the 1950s and 1960s couldn't be repeated year after year. Supply constraints – associated with rising commodity prices and increased union militancy – weren't properly understood. As a result, monetary conditions were calibrated for an economic speed limit which, as it turned out, was no longer achievable. Inflation was the unfortunate consequence.

Are we, again, seeing a constraint on the economic speed limit? The answer, I think, is "yes", but the story is a little different from the late 1960s and early 1970s. The commodity price theme today is obviously similar, but this time around there is little upward pressure on US wages. Many investors believe, probably rightly, that wage inflation is a bigger problem currently for Europe, with its relatively inflexible labour markets and collective bargaining, than for the US, which famously has a labour market able to adjust easily to economic surprises, whether good or bad.

Other constraints on the economic speed limit are, though, possibly more important. The fast-growing emerging markets are challenging the West's economic command over raw materials. If China is able to purchase more oil or metals than before, the price of these things is likely to rise for the rest of us. Other things being equal, western consumers will be made worse off: prices will rise faster than wages.

There's also the issue of population ageing. The US boomer generation, which once disproportionately added to the numbers of people in work, is now adding to the numbers of people in retirement. Japan went through this process in the 1990s, and the experience, as is now widely known, was not a happy one. The US is fast approaching the same demographic challenge.

As the proportion of people in retirement swells, so the burden on workers tends to increase, as does competition over resources. Whether or not people have funded pension schemes, the ultimate problem relates to claims on output. If there are fewer people in work, there may simply not be enough output to satisfy all the competing claims. Options to deal with this problem include immigration of youthful workers, emigration of capital to where the young workers currently live or, via some kind of manna from heaven, a productivity boost which suddenly raises the output of those people in work.

Each of these is tricky. The US, under George Bush, has become less immigration-friendly, a dispiriting reaction to the security challenges post-9/11. Sending capital elsewhere through off-shoring and outsourcing sounds sensible enough but, by allowing other countries the opportunity to develop economically, only adds to the upward pressure on commodity prices. Meanwhile, productivity miracles too often are overstated: productivity certainly picked up in the US in the late 1990s, but the gains were nothing like as impressive as some claimed at the time.

If the values of the competing claims simply don't add up, their collective worth has to be reduced. For would-be pensioners, there are two threats. First, asset values decline. The assets of the older (and bigger) generation have eventually to be sold to the younger (and smaller) generation. In the initial stages of this process, it may be that the younger generation borrows too much to get a toehold on the property ladder but, after a while, reality takes over. Property prices fall and the boomers begin to lose their claims on output. Arguably, this may be what is now happening in the US (and UK) property markets.

The second threat relates to inflation. The other way to reduce the value of claims on output is for inflation to rise. Unless people have invested entirely in inflation-protected bonds (and the relative illiquidity of the index-linked market in the US suggests they haven't), they're vulnerable to any pick-up in inflation. Could it be, then, that we're facing a perfect storm, a combination of population ageing and emerging market success which reduces the West's claims on output via declining asset markets and rising inflation?

Central banks would never admit to this. They have mandates for price stability and, nowadays, are mostly free of unwanted political influence. Imagine, though, that the speed limit for the US economy has really tapered off. Imagine we discover that the underlying growth rate has slowed to no more than 1.5-2.0 per cent. In these circumstances, efforts to kick-start the economy are more likely to kick-start inflation. It's not yet clear that America's only problem is the housing market.

Stephen King is managing director of economics at HSBC

stephen.king@hsbcib.com