THE Stagflation Thread (merged)

[Cashmere]

One problem with labels (deflation/stagflation/etc) is that we humans just love to categorize current issues based on prior experiences and definitions. The crisis we are experiencing now, which I believe is still in its early stages, is unlike anything we've ever seen before. If you give it a label (stagflation), you will be subconsciously limiting your ability to truly understand it.

Housing prices in severe decline (deflationary). Oil prices up ~10x in 10 years (inflationary). Banking/mortgage credit crisis and debt writedown (deflationary), but government response to pass debt load on to taxpayers is highly inflationary. Government debt spiraling out of control. Consumers tapped out and unable to put upward pressure on wages due to cheap global workforce. Add it all up and what do you have? Damned if I know, but I wouldn't try to simplify it by calling it stagflation....

You make a good point.

No doubt any label is, to some extent, a simplification.

But I think stagflation fits.

Forget about houses - they're about the only thing going down in price. Virtually everything else is inflating rapidly.

Meanwhile, economic growth is stagnating.

Stagflation.

Perhaps it's a limiting label, but if the word "stagflation" can't be applied to what's going on <i>right now</i>, then we need to strike the word from the language.

[kpeavey]

The crisis we are experiencing now, which I believe is still in its early stages, is unlike anything we've ever seen before.

It has to start somewhere. The early stages will be that with which we can identify using historical perspective and examples: recession, the '73 oil embargo, the Great Depression. It is the later stages-depression leading to regression, for which we have no historical precedent. While economies have collapsed before, they have been limited to geopolitical regions. The world is more interconnected now than ever before, relies on a single dominant and non-renewable resource, and has a population that has overshot the ability of the earth to provide its needs.

The future holds events which will make it into the bible, should such a thing survive the transition.

[TheDude]

The 1973 oil crisis, all in all, cost the U.S. economy no less than $900 billion, and probably as much as $1,200 billion.

So don't do that again!

Silver lining: it gave the US the incentive to build the TAPS and open up the North Slope, to create the EIA, and to develop the CAFE standards. Dunno what the collective dollar value of those were, but it weren't no drop in the bucket. And of course Nixon called for Project Independence to wean us off depending on relying on foreign sources of energy - forever.

Too bad those were all prime examples of what around here we call "low hanging fruit."

[the48thronin]

<snip> And of course Nixon called for Project Independence to wean us off depending on relying on foreign sources of energy - forever.

Too bad those were all prime examples of what around here we call "low hanging fruit."

read my lips.....no more ARAB OIL! LOL

[Daniel_Plainview]

The crisis we are experiencing now, which I believe is still in its early stages, is unlike anything we've ever seen before.

It has to start somewhere. The early stages will be that with which we can identify using historical perspective and examples: recession, the '73 oil embargo, the Great Depression. It is the later stages-depression leading to regression, for which we have no historical precedent. While economies have collapsed before, they have been limited to geopolitical regions. The world is more interconnected now than ever before, relies on a single dominant and non-renewable resource, and has a population that has overshot the ability of the earth to provide its needs.

The future holds events which will make it into the bible, should such a thing survive the transition.

Excellent summary .......

[Snowrunner]

I am not an economist (though I did study it at high school 20 years ago). I am a scientist and engineer by profession. Attempts to debate several related points with friends I went school with who now have dual degrees in law and economics have stalled. I believe the world they live in and worship is in the final stages of self destruction. Our debate stone walled. It all came down to what you really believe and not about debating the facts. The link below is about where I decided to stop wasting my time with these guys.

Economists think that they have learned a "science", only to discover that it's really just luck.

Several different experiments have pretty much shown that "reading the economic future" is roughly as successful as reading your own personal future.

The funny thing is that the "house of cards" that economists have build over the last 50+ years is about to come crashing down in a very very ugly way.

I had several "chats" with economists (of all stripes) too, and investment bankers etc. etc. The one thing I noticed with all of them is that there ARE no problems, or crises or anything similar. It is always just "temporary' and "it always worked out in the end".

Not having learned all their secrets though I have a similar outlook on the whole thing.... It'll be interesting to see when the majority will have to admit that in the end they know as much as we do.

Thanks for the link btw.

S.

[Starvid]

In Sweden we currently (and suddenly!) have 4 % inflation (core inflation about 2 %) and 0 % growth, but things are pretty nice anyways.

Further, and contrary to the US, public finances are in excellent shape. Count on large amount of contracyclical spending in the form of tax cuts and increased infrastructure investment in the fall budget.

Swedish growth might well rise and inflation fall, at least during the next few quarters.

[Alanintx]

I disagree that we are in a period of stagflation. Simply becasue the money supply is actually shrinking as opposed to remaining stagnant.

While we can see price inflation in things we purchase, such as gasoline and food, the actual money supply is deflating. Soon, price deflation must follow as night follows day. Which is really scary, becasue "things" will be cheaper, but you won't have money to buy them. And by things, I mean food/oil/healthcare.

Stay liquid, and get out of debt. That is the only strategy to survive deflation.