Stagflation is highly transitory. Price shock without growth kills demand which lowers prices.
See oil shocks of the 70s and ensuing recessions.
EconomistWithaD on
Short answer. Maybe. Long answer. Also maybe.
The next inflation read is going to be interesting, given the divergence between the PPI and CPI over time. And the labor market just continues to soften, and appears softer going back to at least 2024, maybe 2023.
That said, a large fraction of anemic growth and job market softening is at least due to the self imposed negative supply shocks that have become the hallmark of Trump 2.0.
Scary_Firefighter181 on
Very good chance of it happening.
The main issue is that inflation remains high and is increasing, while unemployment is also rising. The main cause is the tariff+ pissing off the entire world(for more info, check out the China soybean fiasco). If you want a deflationary policy like raising interest rates, you will end up sacrificing growth and increasing unemployment. If you want more stimulatory policies to reduce unemployment, such as cutting interest rates and increasing government spending, you will end up causing inflation to get worse.
The Fed is stuck between a rock and a hard place, so the US is prolly heading for Stagflation, which is the worst of both worlds(stagnant economy+ high inflation). The dumbest part is that one of the easiest ways to ease this would be reducing trade barriers, like cutting tariffs(or, yk, not putting them up in the first place), which would not only increase the supply chain but also improve economic activity, but the felon in chief is an economically illiterate asshole.
RustySpoonyBard on
The CPI in the 70s included housing appreciation, which means as Volcker raised rates inflation rose.
Now they ask boomers who bought their home for a sack of potatoes what they would rent their home for. The inflation index isn’t what inflation is, its a gamified number made to increase the speed of new money creation.
DaySecure7642 on
Trying to bring back manufacturing and reduce trade deficits are necessary, but very difficult and requires very organized and strategic methods as well as political skills.
Missteps can lead to stagflation, or even recession.
USAFGeekboy on
We keep putting terms of past economic cycles into use today, which makes them meaningless. 4.5% rates (Fed) and unemployment rate is 4.3%.
We are so far away from actual stagflation in terms of historical data that putting that term back in us and describing the current economic climate is a joke.
Interest rates are well below 1996 to 2000 and again 2006 to 2008. Unemployment rates have been very, very low for the past 45 years (not counting self inflicted wounds of 2020 and 2008).
If 4.5% and 4.3%is considered stagflation, the term has lost all meaning. The same goes for recession, which had a STRICT definition and we are now 3 quarters away from recession.
littleredpinto on
Cronynomics is in full effect, so you can expect future marketable economic terms to describe the oncoming phenomena..usually if stagflation isnt in vogue, usually around 18-22 years is a cycle for it, then it will be time to move onto something new. Stagflation was seventies..reganomics was eighties..so the new recycled term will be from the mid to late 2000’s or so..lets see how about “financial crisis economics” or “lost decade flation”
“By 2005, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.” some Nobel prize laureate in economy
7 Comments
Clickbait.
Stagflation is highly transitory. Price shock without growth kills demand which lowers prices.
See oil shocks of the 70s and ensuing recessions.
Short answer. Maybe. Long answer. Also maybe.
The next inflation read is going to be interesting, given the divergence between the PPI and CPI over time. And the labor market just continues to soften, and appears softer going back to at least 2024, maybe 2023.
That said, a large fraction of anemic growth and job market softening is at least due to the self imposed negative supply shocks that have become the hallmark of Trump 2.0.
Very good chance of it happening.
The main issue is that inflation remains high and is increasing, while unemployment is also rising. The main cause is the tariff+ pissing off the entire world(for more info, check out the China soybean fiasco). If you want a deflationary policy like raising interest rates, you will end up sacrificing growth and increasing unemployment. If you want more stimulatory policies to reduce unemployment, such as cutting interest rates and increasing government spending, you will end up causing inflation to get worse.
The Fed is stuck between a rock and a hard place, so the US is prolly heading for Stagflation, which is the worst of both worlds(stagnant economy+ high inflation). The dumbest part is that one of the easiest ways to ease this would be reducing trade barriers, like cutting tariffs(or, yk, not putting them up in the first place), which would not only increase the supply chain but also improve economic activity, but the felon in chief is an economically illiterate asshole.
The CPI in the 70s included housing appreciation, which means as Volcker raised rates inflation rose.
Now they ask boomers who bought their home for a sack of potatoes what they would rent their home for. The inflation index isn’t what inflation is, its a gamified number made to increase the speed of new money creation.
Trying to bring back manufacturing and reduce trade deficits are necessary, but very difficult and requires very organized and strategic methods as well as political skills.
Missteps can lead to stagflation, or even recession.
We keep putting terms of past economic cycles into use today, which makes them meaningless. 4.5% rates (Fed) and unemployment rate is 4.3%.
We are so far away from actual stagflation in terms of historical data that putting that term back in us and describing the current economic climate is a joke.
Interest rates are well below 1996 to 2000 and again 2006 to 2008. Unemployment rates have been very, very low for the past 45 years (not counting self inflicted wounds of 2020 and 2008).
If 4.5% and 4.3%is considered stagflation, the term has lost all meaning. The same goes for recession, which had a STRICT definition and we are now 3 quarters away from recession.
Cronynomics is in full effect, so you can expect future marketable economic terms to describe the oncoming phenomena..usually if stagflation isnt in vogue, usually around 18-22 years is a cycle for it, then it will be time to move onto something new. Stagflation was seventies..reganomics was eighties..so the new recycled term will be from the mid to late 2000’s or so..lets see how about “financial crisis economics” or “lost decade flation”
“By 2005, it will become clear that the Internet’s impact on the economy has been no greater than the fax machine’s.” some Nobel prize laureate in economy