I think people may be wrong about stagflation ahead πŸ›‘

While I think the economy may slow in coming months, I am not sure if that will lead to stagflation. Stagflation only exists if inflation doesn’t slow when the economy slows. Much of the current bout of inflation is due to high demand and not enough supply. A recession is likely to lead to significant demand destruction, especially with oil and energy usage but also most other material goods.

In the 1970s, stagflation was a relatively new thing. The federal reserve didn’t really know the way to break inflation is to slam on the brakes on economy really hard, no matter how hard the politicians and the public scream in pain. But Paul Volcker taught the economic world a lesson — it’s possible to break inflation — if you slow the economy enough by high enough interest rates. Jerome Powell is a Republican, and there is no reason to think he will be gentle at raising interest rates to keep President Biden happy from the mobs of angry home-builders, automakers and farmers likely to storm the Washington Maul. 

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