Stag Bag ⬇️

Stag Bag

Stagflation is one of the most dreaded and scariest concepts in economics, and currently, it’s being discussed as a serious long-term possibility by some economists. So, what is stagflation? Well, if you’ve ever taken an intro to a Macroeconomics course, you’ll learn there are two main kinds of inflation: cost-push inflation and demand-pull inflation. Demand-pull inflation is more common, and it is when inflation arises when aggregate demand increases at a faster rate than aggregate supply. On the other hand, cost-push inflation is a result of an increase in the price of inputs due to the shortage of cost of production, leading to a decrease in the supply of outputs. Cost-push inflation is the cause of the infamous “stagflation,” which occurs when the market doesn’t naturally correct itself, employment and demand fall while inflation rises.

The last time the U.S saw stagflation was in the 1970’s during the embargo which caused the price of crude oil to skyrocket. Today, however, stagflation is becoming a concern and some economists are worrying about a more than possible recession. So, in what scenario could we see stagflation? Well, according to most economists, if the hike in interest rates doesn’t reduce inflation, and unemployment increases back to 5%, we could see a lighter form of stagflation.

What do you think about stagflation and will we see it happen?

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

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