Comment: Global economy heading for stagflationary debt crisis

Conditions are ripe for a repeat of both the 1970s stagflationary shock and the 2008 debt crisis — this slow-motion train wreck looks unavoidable as matters stand

‘Debt ratios are much higher than in the 1970s, and a mix of loose economic policies and negative supply shocks threatens to fuel inflation, setting the stage for the mother of stagflationary debt crises over the next few years.’ Picture: Getty

In April, I warned that today’s extremely loose monetary and fiscal policies, when combined with a number of negative supply shocks, could result in 1970s-style stagflation (high inflation alongside a recession). In fact, the risk today is even bigger than it was then.

After all, debt ratios in advanced economies and most emerging markets were much lower in the 1970s, which is why stagflation has not been associated with debt crises historically. If anything, unexpected ...