Analysis: The stagflation threat to the global economy is real and growing

Inflation is rising in many advanced economies, and growth is slowing sharply, despite massive monetary, credit, and fiscal stimulus.

30th August, 2021
Analysis: The stagflation threat to the global economy is real and growing
‘It is worth noting that various measures of inflation are not just well above target but also increasingly persistent.’ Picture: Getty

I have been warning for several months that the current mix of persistently loose monetary, credit, and fiscal policies will excessively stimulate aggregate demand and lead to inflationary overheating. Compounding the problem, medium-term negative supply shocks will reduce potential growth and increase production costs. Combined, these demand and supply dynamics could lead to 1970s-style stagflation (rising inflation amid a recession) and eventually even to a severe debt crisis....

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