Stagflation

2009-05-03

Over the past week or so I've been reading a lot about the economy. Some observers like Harry Dent argue that the next great depression is here, with serious economic contraction, asset deflation, and consumer price deflation. Based on the tremendous increase in the money supply being generated by the Federal Reserve, others argue that hyperinflation is on the way. I don't see how we can avoid asset deflation because residential and commercial real estate holdings have been vastly inflated and need to come back to earth. Yet I also don't see how we can avoid inflation in consumer prices, despite decreased demand. Therefore it seems to me that we are probably in for something like the 1970s: economic stagnation and price inflation at the same time, a.k.a. stagflation.

May you live in interesting times.


Peter Saint-Andre > Journal