Starting to see guys (like Deutschebank) talk about a major recession. That could easily damp inflation, but it won't go away. So... We could be looking at stagflation, a stagnant economy with inflation. We had that for a while, about 40 years ago. It wasn't fun. It's hardly a disaster, but it is a PIA. If there is an extended period of inflation, that can result in inflationary expectations, which is a royal PIA. Last time, the Fed body slammed the economy. It's not clear they even could do that now. Bon chance, mon ami..
I remember the 'Stagflation' period very well, and the measures that Fed. Chairman, Paul Volcker and President Ronald Reagan took to return the United States to productivity, success, and financial stability for our economy. You're right... it wasn't easy. But I look back on that period of the 'Reagan years' as very truly the BEST we have had since at least the mid-1960's. By contrast, what can we expect from our leaders today? Even Trump wanted the Fed to crush interest rates BELOW zero -- just like the idiots in Europe had done. And today? Geriatric Joe's 'woke' regime? And a Federal Reserve System run by a gaggle of 'insider' stock market gamblers, led by Jerome Powell? What are our hopes for ever returning to a healthy economy now? Link: https://www.nytimes.com/2021/09/09/business/economy/fed-stock-trading.html Oh, uh, by the way, right now our national debt-versus-GDP ratio is 137.2%. Link: https://tradingeconomics.com/united-states/government-debt-to-gdp And, the 'tipping point' most economists agree is the dangerous threshold for any country's economy is 77%. THIS WILL NOT END WELL....
Those you use the term "stagflation" are usually making the false economic assumption that inflation is usually connected to economic growth. I'd say the two are not really fundamentally related. (It is true that inflation can sometimes be connected to an economic bubble though) If by "stagflation" you merely just mean a combination of economic decline and inflation combined together, then I will not argue with you. In some cases, if it is bad enough, inflation can be a large factor that is contributing to that economic decline.
What makes you think a recession would necessarily cause a deflationary effect or would damp inflation? The last recession was due to the housing bubble bursting, so yes that did have a deflationary effect (which would have been seen if the government had not printed so much money, which was a completely intentional economic policy to prevent prices from falling).
Yes, when the Central Bank ("the Fed") holds down interest rates too low for too long, then it runs out of tools if an actual big emergency arises. The cause of this is pretty simple: A lot of those on the Left and academics are not very good at self-control. They want all the "goodies" now and have sold out their future. They expect that government or the Central Bank can somehow create magical wealth out of nothing. So the Central Bank hasn't been saving its policy tools for a real emergency. It's a very similar to the mentality of overspending and then eventually running out of money. John Maynard Keyne's original idea was that government should save money and stop using tools to stimulate the economy during good times, and then spend excess money and use tools to stimulate the economy during bad times. It was a sound and reasonable basic idea. Unfortunately that idea seems to have gotten abused and reinterpreted over the years to just constant excess spending of money and stimulus, with people complaining the economy is "not good" and needs constant help. Keyne's idea doesn't work if the economy needs constant help. It only helps smooth out the relative ups and downs.
In other words the Fed hasn't been doing the best job and the government has been running excessive budget deficits.
That's like someone borrowing a bunch of money on 10 credit cards and then later when the bills start coming wondering what they should do now. The Fed wasted and whittled away their resources and tools before when they did not need to, and now they are left with few available tools or options that would work. It was stupidity and bad long-term economic policy. There's no magical solution. The Fed should not have been holding interest rates down so low, and the Fed should not have reduced the Reserve Requirement to zero. The Fed should not have expanded the money supply so much. Because it did all these things, there are no tools left to be able to deal with any new problems. But like I said before, this wasn't really a problem of logic or strategy, this was a problem of human nature. Some people have no self control and want everything now, and view government as a God-like entity with powers that can be used to solve any problem. So because of their emotions, they thought it was perfectly good for the Fed to be constantly trying to keep the economy up. Until we recognize that the problem is human nature and human emotions, then the problem here will never get fixed. It will happen again and again. People will just ignore actual logic and common sense.
The Reagan years turned us from a country that ran on credit, to one that ran on debt. They also made it easy for the rich to cheat on their taxes. You were talking about self control? Just look at a debt chart, the elbow is in the 80s... Let's take this a step further, which party did massive tax cuts and screwed up wars over the last 40 years. Hint, not Dems. Iraq alone was over 4 freaking trillion bucks. Your schtick is based on a fantasy. Dems ain't great, but most of those trillions are Republican...
Yes, you are correct. Reagan was the big exception. (To be entirely fair, the majority of that spending was in response to the Cold War) I guess my point wasn't really so much about politicians, but about ideologies, and common people's attitudes. I think if there were some real conservatives on the board, the Fed (Central bank) would be run very differently. (Or maybe you can argue that it's mostly not the Fed's fault and they are pretty much obligated to just buy government debt if no one else will buy it, and print more money in response to government deficits) I don't mean to argue against "The Left" specifically in this discussion, I am simply arguing against attitudes and beliefs that seem to be prevalent on the Left (maybe some people on the Right hold these beliefs too).
Reagan did a big tax cut (and more). W did 2, and Trump also did a tax cut mostly for the rich... Exception?? I see the problem differently, I think the root problem is corruption.
