Investors remained paralyzed last week by events in the Middle East and watched from the sidelines.

Sellers found buyers noticeably absent and prices fell across a broad front in active trading. The Dow industrials lost nearly 72 points for the week to a 2,644.80 close.

This brings the current slide in the Dow to more than 12 percent from the July peak of nearly 3,000.

Since the fine line between corrections and bear markets is supposed to be 10 percent and no more, concern is building that the recent bad news might be the start of a trend. Let’s hope not.

The only bright spot last week — if you could call it that — was a power outage Monday that affected most of the financial markets. Brokers had little to do but stare at empty screens. Even news of the Mideast was blocked out.

Curiously, the Dow rose 30 points that day.

If it wasn’t Kuwait last week, then it was the U.S. economy. More bad news showed business was already weaker than thought before oil prices shot up.

The July inflation rate came in at 0.6 percent, which is an annualized 7.2 percent and that’s before compounding.

Housing starts went the other direction that same month and plunged to an annualized 1.15 million units. It’s the lowest since the disastrous recession of 1982.

Put those two events together and you can get a whiff of a new concern. It’s one I thought was behind us. Yes, stagflation.

It may be a dusted off term from a decade ago but the economy is anything but strong. In fact, it’s stagnant.

And inflation coming in at a 7.2 percent annualized rate for July? Well, that’s not price stability.

Adding to this latter concern is a newfound fear of flying interest rates.

We all know that American interest rates may be 1 or 2 percent lower than they would be otherwise. That is, without the effect of the Japanese who often bought more than 40 percent of our long-term debt.

See, our free market interest rates were higher than theirs by 3 or 4 percent. So they invested here and kept our rates down. Besides, a rising dollar was icing on the cake.

Well, no more. Or at least not the last few weeks. Japanese interest rates have shot up and the yield difference between here and there is only one percentage point.

Worse, the dollar has been going down, not up, and eroding even that 1 percent advantage. They no longer have the financial incentive to buy our debt.

Worse still, the Japanese stock market has been plunging so fast that what little excess cash they may have is needed to shore things up at home.

The result? Japanese investors have cut back their buying of our debt on the order of 40 to 75 percent. It’s hard to put a number on these sorts of things.

For this, our markets now are concerned interest rates may react upwards. At the very least, it looks like America’s debt party — be it real estate, political pork or transfer payments — is in for a change.

Paul Jarvis is a stockbroker in Bangor with A.G. Edwards.