Tag: Stagflation

What worked (and didn’t work) during 1970s stagflation

Guest Post by Simon Black

When the New York Stock Exchange opened for trading on January 2, 1970, the Dow Jones Industrial Average was at 809 points.

It was the start of a new decade, and expectations were high.

Consumer confidence was high, the economy was strong, and NASA had just put a man on the moon only a few months prior.

America was ready to move on from the tumultuous 1960s and was looking forward to a boom in the 1970s.

But that didn’t happen.

Over the next 10 years, the US economy would suffer its most painful episode since the Great Depression.

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Stagflation Strikes As US Consumer Prices Surge At Fastest Pace In 5 Years

Tyler Durden's picture
by Tyler Durden
Mar 15, 2017 8:39 AM

After the hotter-than-expected PPI print, Consumer Prices confirmed that inflation is running hot with the fastest rise since Feb 2012.

Notably core CPI (at 2.2%) has been above The Fed’s mandated 2% ‘price stability’ level for 15 months in a row.

 

Of course, one of the big drivers of this price surge is in shelter and rent inflation…

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Consumer Prices Surge At Fastest Pace In 5 Years As Real Wages Tumble

Tyler Durden's picture
by Tyler Durden
Feb 15, 2017 8:43 AM

Stagflationary trouble looms.

As prognosticators ohh and aah over the soaring consumer price index (up 2.5% YoY – the most since March 2012), driven by a 14.2% YoY spike in gasoline prices, it appears they missed the fact that real average weekly earnings  plunged by 0.6% YoY – the biggest wage collapse since November 2011.

After Germany and China’s inflation-a-palooza, US consumer prices are soaring too.

Some details from the report:

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IT’S CALLED STAGFLATION

Two posts on ZH this morning tell you everything you need to know about Obama’s economy. Real wages are stagnant, just as they have been for the last eight years. In addition, the BLS drones are no longer able to hide the true inflation affecting average households across the nation. Even their “fake numbers” show inflation at 3.6% over the last four months. We know that is bogus, and the true number is in the 5% to 7% range for real Americans paying rent, health insurance premiums, heating their homes, and filling up their gas tanks. 

But the Fed continues to keep rates near 0% so Goldman Sachs can report record earnings and average pay of $338,000 for their “doing God’s work” bankers. When you have no wage growth, while your expenses are rising rapidly, you’ve got STAGFLATION. It’s the worst possible economic situation for deplorables living in the real world outside the bastions of the elite in NYC, DC, LA and SF.

Numerous low, middle and high end retailers have reported atrocious holiday sales and earnings. This contrasts with the bullshit reports from the National Retail Federation and the US government saying holiday sales were solid. Kohls, Macys, Sears, and now Target have admitted their business absolutely sucks. They are closing stores, laying off employees, and slashing their earnings estimates. Does that happen when an economy is booming, as our esteemed president has been crowing about on his farewell tour?

Do you trust your government or do you trust the reality of your bank account and what real businesses operating in the real world are saying?

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Deflation, Hyperinflation, Stagflation, and Where We Are Going

Guest Post by Jesse

This is a repost of a column from four years ago almost to the day.

This is where I make the case most explicitly for the stagflation forecast I made in 2005.

Although I add one parenthetical note and some underlining for emphasis, otherwise I did not have to change a word. I could have rewritten a few things a little more smoothly but at this point why bother.

I believe that things are playing out pretty much as I had thought. The ‘top down’ approach to monetary stimulus favored by the Fed and their Banks and their politicians is fostering more inequality and slack aggregate demand while inflating select asset prices, a type of stagflation. The ‘inflation’ component of that has not yet set in yet generally, but is certainly visible to anyone who uses incidental things like healthcare and food.

I think that the same dynamic is playing out in Europe and the UK.

It will end involuntarily in a social dislocation, or by a voluntary reform. Since the oligarchs have apparently not yet been satisfied in their acquisition and looting, they believe that they can keep pushing the envelope for now.

One new area of thought for me now is how China and Russia and a few of their friends will attempt to implement a new regional currency and a global reserve currency with some inclusion or reference to gold, and perhaps silver. That they are leaning into this area is to be found in their own words and actions.

What I am struggling with is how they might do this without exposing themselves to currency manipulation and rigging, which is probably a lot easier to accept as a given now than it was in 2011, although it was certainly occurring before all these market rigging scandals broke. I don’t think a market was left untouched.

I suspect it will center around the terms for the exchange and the valuation or peg. A misstep will open them to the predations of the global hedge funds and the Banks, and the status quo centered on the Dollar.

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