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What is Stagflation?

by Alan Daniel
What is Stagflation?

We are living in extraordinary times regarding our economy. Cryptotradernews has presented commentary on intriguing signs of a bubble in private equity markets as well as signs of excess in public equity markets.

The economic picture in the United States, at the current moment, looks bright. Maybe a little too bright if you were to study analyses and insights from financial luminaries such as Mark Yusko, Paul Singer, Peter Schiff, and notable individuals such as Christine Lagarde from the IMF.

Political unrest rages on around the world. Trouble is present through the Mouvement des gilets Jaunes in France, extreme turmoil in Hong Kong over freedom and liberty, and Catalonia distress over freedoms. We can’t discount the issues in Chile with people protesting over economic difficulty as well. Brexit negotiations still going on, and predictions of a global slowdown do not help to build confidence in yields and returns into the next few years.

Finally, signs of distress are present in the United States.

There is strong evidence of economic dissatisfaction in the land of opportunity. These issues are present in the industrial sector (see GM and UAW, Mack Truck Plants), the teaching sector (see Chicago teacher strikes), and other industries. Indeed, a recent headline by the New York Times referencing this point sums up the confusion quite well “In A Strong Economy, Why Are So Many Workers On Strike?”

Even still while economic contraction and woes rears its head to political instability and slowing growth, we see that unemployment in the United States is reasonably low. Conversely, stock market indexes such have been relatively flat over two years. Further, the Federal Reserve states that we are in a period of low inflation.

There are mixed signals overall.

There are strengths and weaknesses.

So what gives?

It is in this context that we look at stagflation.

What is Stagflation

Stagflation is an economic concept where we see continuous excessive levels of inflation with increasing levels of unemployment and a decline in demand for goods. The word stagflation an amalgamation of inflation and stagnation. It is a bizarre economic period where an economy undergoes stagnant growth with high levels of inflation.

There is much debate over what causes stagflation.

Stagflation causes may include lack of supply, increased prices for goods, and excessive money supply increases.

This economic condition was present in the 1970s and 1980s in the United States. A recession helped to cure this economic concept at that time.

Alan Greenspan, a prior central banker, noted in an interview that our current economy has traits of stagflation “it has some of the characteristics of buoyancy, but underneath it is an erosion which ultimately will disable an economy unless corrected.” He’s further commented on the rising national debt, the expenditures, deficits, and entitlements.






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