Powell made an interesting comment on 1970s stagflation during his speech today. He noted that back then inflation averaged around 7% with it spiking to double digits a couple of times. He also noted that unemployment was around 6% with at least one spike to 9%.
Contrast that to today with a close to full employment rate and inflation maybe running a percent above baseline. Powell said that he would only use the term ‘stagflation’ to describe conditions back in the 70s and wouldn’t use that term to describe the more moderate conditions we have today.
So even though things may seem bad today, we’re not back to the conditions we had in the 70s.
The allocation of money for consumption is a mess today. Reinvestment in the means of production is a mess today. We need different solutions. That is a mess today. The jobs data is going to get much worse.
For one, the US is far more energy independent. That said, we’re still very much affected by the shenanigans happening in other oil producing / refining nations.
For two, an oil shock isn’t the only jabberwocky lurking in the shadows. We also have other bandersnatches threatening our economy. An out-of-control fiscal policy continues to add vast amounts to the debt. The potential for a private credit blow-up is very real. Almost $80 trillion of wealth has been transferred from the bottom 90% to the top 1% since 1975. We’re about to find out if our economy can continue to thrive given the US’s extreme wealth inequality. Potential AI disruptions are yet to be completely understood, yet we’re running full speed ahead into a possible economic disaster. Just like this guy -
For three, it doesn’t matter what we call it. Stuckflation, slowgrowthflation, stagflationcito, things feel bad regardless of what we call it.
Well, we are and we aren’t - primarily due to our decades-old refining mismatch. We can’t refine our own oil so we still have to import much of the oil we use.
It is crazy to me that this has existed for the better part of a century and even after the explosion in our ability to pull oil from our own soil that we have not developed the refining capacity to use it.
Time for a constitutional amendment regarding US representatives. If the national debt is higher than what it was when they were elected; they cannot run for re-election. I dunno but methinks a lot of voters might support that. It would in effect freeze the national debt because I can see US representatives ever increasing taxation to reduce the debt. US GDP would continue to grow in effect shrinking debt to GDP ratio.
I get what it currently looks like. The CPI points to major inflation. The oil prices point to major inflation.
But as the wheels fall of employment, this economy is going for a great depression with a massive dose of deflation. And into it our scuminess himself will default.
We are not yet as bad off as we were in the 70’s but we may be headed there. The OECD, which historically has been considered a reliable source of economic analysis, has significantly upgraded their inflation prediction for the U.S. to 4.2% - far above the Fed’s recent estimate. I have no idea which is correct and will try to keep an eye on both: Global forecasting group sees U.S. inflation at 4.2% this year, much higher than Fed estimate
No need to hyperventilate. We’re not even back to where we were four years ago. Our current (annual) inflation rate is 2.4%. Even if it goes up to 4% it would be far below the 7% rates we experienced in 2021 and 2022.
You wrote “we are not yet as bad off as we were in the 70’s”. This is true, but currently we are nowhere near the rates of that period (and not even halfway to where we were four years ago). That is what I meant by hyperventilating.
I can’t wait for the next one. Because the rise in gas prices trailed the rise in oil prices through the month, and April will show them at their fullest - not to mention the “trickle down” effect of energy prices throughout the economy as transport, production, and other energy inputs reach their zenith.
It will be interesting to see what happens with oil prices over the next couple weeks, as oil stocks at refineries start to decline in the face of “old oil” running out, and newer, higher priced oil starting to run through the supply chain. And then, of course, a month after that, transportation, production and other energy inputs rise. Lather, rinse, repeat.
This is going good, eh? So glad we have competence at the top, because I saw this movie before, about 50 years ago, and it wasn’t pretty.
