#Stagflation Stagflation is a market condition where the push and pull forces of supply and demand g

• 11/02/22

#Stagflation Stagflation is a market condition where the push and pull forces of supply and demand gets wacky. Most experts agree that stagflation is caused by monetary policy (by The Federal Reserve), but a lot of blame also needs to be placed on government-initiated fiscal policies like economic stimulus programs, tax hikes and Tax breaks. In a stagflation environment more supply doesn’t always equal more demand and increases in demand don’t always necessitate increases to supply. What exactly is stagflation? 💙 “Stagflation represents a dilemma in economic theory. It occurs when there is high inflation and moderate or imbalanced economic growth. For economists and elected leaders, this predicament can be a devastating combination—it plagued the US in the 1970s.” -aspeninstitute 👀look at the supply chains: 📦Our supply chains are still not completely recovered from the pandemic. We are still needing items like computer chips for cars and electronic devices, yet consumers aren’t buying them (Apple’s recent iPhone miss) because everyone has already purchased or upgraded Their electronic devices and appliances. ⛽️ Gas is in short supply because most of the world is boycotting the world's 3rd largest oil supplier (Russia) and OPEC is cutting production by about 2 million barrels. Gasoline prices remain higher even though the supply crunch has caused many people to cut back on oil usage (demand destruction) by driving less and purchasing more energy-efficient cars/appliances. 🏡 Thanks to the federal reserve, our housing market is slowing down considerably but prices have not returned to “normal”. Part of the reason why the housing market is stagnating is because prices remain high, interest rates are rising and builders are not adding much new supply despite having building supplies. Remember when wood prices skyrocketed in 2021? Despite having supplies, builders are not building because real estate demand is starting to decline. Takeaways 💙 “Stagflation refers to an economic phase where inflation increases while the gross domestic product becomes constant or low. Additionally, the employment level plummets. It proved the Keynesian macroeconomic theory wrong, which explained the trade-off between unemployment and inflation.” -wallstreetmojo 💙 stagflation causes “high commodity prices, lessened purchasing power, poor GDP, business shutdowns, a decline in consumer spending, and escalation of unemployment brought out by corporate layoffs.” -wallstreetmojo 💙 “In the 1970s, the United States struggled with stagflation. The Federal Reserve Chairman Paul Volker took necessary steps in 1979. He implemented various contractionary monetary policies. He managed to bring down the inflation rate.” -wallstreetmojo Disclaimer ⚠️These are my thoughts and opinions not investment advice. Please read through these materials and do your research before trusting the thoughts and opinions of a random internet stranger like me. I wouldn’t purposely mislead you but if you don’t check my sources, you’ll never know 👍 📚Additional reading : 1️⃣ rhttps://www.wallstreetmojo.com/stagflation/ 2️⃣ https://www.aspeninstitute.org/blog-posts/what-you-need-to-know-about-stagflation/ 3️⃣ https://www.investopedia.com/terms/s/stagflation.asp

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