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Stagflation

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KAIZOS

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Jul 11, 2019
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Hey Fastlaners​


I think stagflation is on the horizon. I already saw a thread about hyperinflation and wanted to share this perspective.


Causes, according to wikipedia[edit]​

- Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when the economy faces a supply shock, such as a rapid increase in the price of oil. An unfavorable situation like that tends to raise prices at the same time as it slows economic growth by making production more costly and less profitable.[7][8][9][10]

Suez-canal blockage anyone?

- Second, the government can cause stagflation if it creates policies that harm industry while growing the money supply too quickly. These two things would probably have to occur simultaneously because policies that slow economic growth do not usually cause inflation, and policies that cause inflation do not usually slow economic growth.[citation needed]

Lockdowns anyone?

Both explanations are offered in analyses of the 1970s stagflation in the West. It began with a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to counteract the resulting recession, causing a price/wage spiral.[11]



The main question is, how to make a profit from this?

Curious about your perspectives
 

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EternalStudent

Contributor
Read Millionaire Fastlane
Apr 4, 2020
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Australia

Hey Fastlaners​


I think stagflation is on the horizon. I already saw a thread about hyperinflation and wanted to share this perspective.


Causes, according to wikipedia[edit]​

- Economists offer two principal explanations for why stagflation occurs. First, stagflation can result when the economy faces a supply shock, such as a rapid increase in the price of oil. An unfavorable situation like that tends to raise prices at the same time as it slows economic growth by making production more costly and less profitable.[7][8][9][10]

Suez-canal blockage anyone?

- Second, the government can cause stagflation if it creates policies that harm industry while growing the money supply too quickly. These two things would probably have to occur simultaneously because policies that slow economic growth do not usually cause inflation, and policies that cause inflation do not usually slow economic growth.[citation needed]

Lockdowns anyone?

Both explanations are offered in analyses of the 1970s stagflation in the West. It began with a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to counteract the resulting recession, causing a price/wage spiral.[11]



The main question is, how to make a profit from this?

Curious about your perspectives
There is no supply shortage. The issue is demand. Factories are nowhere near 100% output capacity. Wage/price spirals are not really a concern anymore as any increase to wages just incentivises companies to invest more in automation, which weakens demand for workers.

imo the future is in robotics automation. It will bring manufacturing back to US/AU/UK soil when it can compete on price with china, not to mention the supply chain risk issues it addresses. Its not far off. Look at the charts for Solar prices. Robots will follow a similar curve.

If you have a spare hour i recommend listening to this podcast episode where economists interview an Entrepreneur who started a solar company that uses robotics automation here in Australia. Incredibly exciting stuff.
 

WJK

Platinum Contributor
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We did the stagflation around 1980. Interest rates on mortgages went from around 12% to 21% or 22% almost overnight. And the economy came to a total screeching halt -- especially the runaway inflation.
 

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