semar

Strategies for Surviving Stagflation in the U.S. and Asia

wrote about staglation this week in one of my articles. I'll add an excerpt here:

[...]Some voices have started to indicate that the next thing to come is stagflation, inflation linked with no growth. All all the cycles that a country goes into, stagflation is the worst, and the answer is very simple: to fight inflation properly high interest rates are needed, but high interest rates kill growth in the economy, that is the point of it. To fight a slowdown, monetary policy can be used to cut the interest rates, but then inflation will increase at a very fast pace. So basically, the Central Bank is between the hammer and the anvil, not being able to move easily in any direction.

Inflation expectations are very high on both sides of the Atlantic and at the same time the whole world is sharing this view. The other common thing shared on both sides of the pond is a visible slowdown.

We could very easy say, and this may surprise many, that at this time the Euro-area, UK, Japan and US are all in a stagflation period or very close to going into one. If future inflation and growth estimates come true, stagflation will be here. Morgan Stanley reveal charts showing each major economy, and in what cycles is currently in. Guess what, all of the major economies are heading to stagflation and the only improvements from a 70s like period are the developments in the monetary policy arena and the financial markets, to keep us far enough away from a prolonged period like that. At least Japan seems to be making a big step forward from deflation to inflation. Good job BoJ, you only needed 18 years for that to happen.[...]

The full article can can be read here Stagflation is next