Economics 101. Stagflation.

[Wind_FURY]

Stagflation will probably be an economic term that many of us plebs will start hearing more and more of from the news as the economic situation in many regions around the world continue to worsen. Stagflation is an economic cycle, or condition, when there's slow growth, low demand, low employment, BUT high "sticky" inflation. That's where many countries are probably going.

Plus if you didn't pay attention in your Economics class in school, it's currently the best time to learn about it because it's probably going to come sooner than expected. So let's discuss.

What Causes Stagflation?
There is no real consensus among economists about the causes of stagflation. They have put forth several arguments to explain how it occurs, even though it was once considered impossible.   

Blame Oil Price Shocks
One theory states that stagflation is caused when a sudden increase in the cost of oil reduces an economy's productive capacity.

The oil crisis of the 1970s is the prime example. In October 1973, the Organization of Petroleum Exporting Countries (OPEC) issued an embargo against Western countries. This caused the global price of oil to rise dramatically, therefore increasing the costs of goods and contributing to a rise in unemployment.
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Because transportation costs rose, producing products and getting them to shelves became more expensive and prices rose even as people were laid off from their jobs.

Critics of this theory point out that sudden oil price shocks like those of the 1970s did not occur in connection with any of the simultaneous periods of inflation and recession that have occurred since the embargo.
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Blame Poor Economic Policies
Another theory is that the confluence of stagnation and inflation is the result of poorly made economic policy. Harsh regulation of markets, goods, and labor in an otherwise inflationary environment are cited as the possible cause of stagflation.

Some point to former President Richard Nixon's policies, which may have led to the recession of 1970—a possible precursor to other periods of stagflation. Nixon put tariffs on imports and froze wages and prices for 90 days in an attempt to prevent prices from rising.
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 Once the controls were relaxed, the rapid acceleration of prices led to economic chaos.

While appealing, this is an ad-hoc explanation of the stagflation of the 1970s which does not explain later periods that showed a simultaneous rise in prices and unemployment.

Blame the Loss of the Gold Standard
Other theories point to monetary factors that may also play a role in stagflation.

Nixon removed the last indirect vestiges of the gold standard, bringing down the Bretton Woods system that had controlled currency exchange rates.
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This decision removed commodity backing for the currency and put the U.S. dollar and most other world currencies on a fiat basis, ending most practical constraints on monetary expansion and currency devaluation.

https://www.investopedia.com/terms/s/stagflation.asp

[STT]

What Causes Stagflation?
There is no real consensus among economists about the causes of stagflation.

I got a good idea of what forms it, the lack of value in a transaction especially the lack of price certainty.   If inflation is occurring some will equate this to growth, nominal figures rise.    Whats actually happening is during my business I might barely make a profit for all my efforts, by the time I order the base commodities and processed with labor a product to sell, distributed and retailed this product;  all this amounts to time for inflation to deduct any profit margin.
   Quite easily any business activity is attacked like acid decay over time, reduced and impaired till value gained is near zero with nominal figures only showing some gain for efforts and investment made.  Any product or business I can flip over night becomes the bias in the economy.  Nobody will want to stand around long enough to lose money on their balance sheet to this inflation tax from government.
  Price controls dont work, whatever came next it wasnt any worse then pretending you dictate a price.  Ultimately government orders amount to violence on the economy, its brutalizing in its effect and damage done.  By that I mean if you disagree with a price control you become a criminal, its not a solution to anything actually you have reduced the market, increased rigidity and the situation with fracture imo   Any time production drops you can cause harm and it easily raises the price (vs demand which is unaltered) so price control ironically can actually raise a price.

  Government with its thumb on the scales can easily start a failure situation, at the least supply will ship aboard.    Energy export was banned till recently I think and there's dozens of anti competitive laws causing problems for industry and an open market to be most efficient.  https://www.cato.org/blog/russian-oil-table-jones-act-serves-barrier-using-domestic-supplies

[Faisal2202]

You have started an informative topic here. But this topic would have consisted of more information about Stagflation and it must have answers to some common questions that would come after reading this information about SF (Stagflation). For example.
1. What is the main difference between Inflation and Stagflation?
Inflation is the increase in prices of goods and services over a period of time. While Stagflation is the ultra-pro-max version of Inflation. In SF, with the increase in prices of goods and services, the rate of unemployment also increases.

Well, now I wonder why we used to say BTC is a hedge against inflation and not a hedge against Stagflation! Or is it? I am a bit confused now too hehe.

As BTC also provided a lot of employment over time and increased the employment rates. It created a lot of Blockchain, Metaverse, NFTs, AI, etc., etc. developers. Who is working and living a life (happy one). I think it won't be wrong to say that BTC is also a hedge against Stagflation.

[Upgrade00]

In reality about half of the countries in the world are experiencing some form of stagflation already and have been for several years now. This was only worsened by the recent economic events like the lockdown caused by covid-19 and crisis in different countries in the world but the issue has always existed for different countries and some of this countries supply wealth to their neocolonialists boosting their economy.

The next decades will be full of uncertainties but there will be good economies borne out of it while some others will slip further into inflation.

[Gozie51]

I think most economy are already in this situation because of the high inflation that causes price of goes to rise and bringing purchasing value down as the currency is devalued. Production in turn is also affected because when goods don't leave there manufacturing area to the customer where utility is delivered then no need for continuing production and that means the economy because stagnated.

Bitcoin is not the solution for economies that are struggling with inflation IMO at least not when it is not legalized.

[BIT-BENDER]

I can relate with the theory that the STAGFLATION has a link with oil price, I am from a country that is already experiencing economy down turn due to the increase in fuel the product of refining oil, this situation has really affected the country's economy and citizens.

And due to this crises it has cost increase in standard of living, with transportation, food and other commodities going up .

[Casdinyard]

Pretty counterintuitive if you ask me but it definitely happens.

In commerce I think this happens the most when a newly-introduced product in the market was so groundbreaking it's making other older variants of the same product useless. Since nobody's using these products anymore let alone buying them, the supply is flooded with newly-produced products that are not accounted for especially when the market change was so sudden everyone was blindsided. This increase in price along with the lessening interest of the people for this particular product, contribute to a stagnating/deflating value of the product in question.

It would've been really nice if everything's just deflationary in value and in nature yeah? But that wouldn't really sit well with the laws of physics as well as the law of supply and demand, so we're stuck here creating mental gymnastics over concepts that don't make sense at first glance but are a great factor for why our whole economy's collapsing lol.

[DrBeer]

Interesting topic.
A bit of history about the term itself:
Stagflation - a situation in which economic recession and depressed state of the economy are combined with rising prices - inflation. The invention of the term is attributed to Ian MacLeod, a British politician and finance minister of the early 1970s. The expression was first used by Macleod in a parliamentary speech in 1965

But today the description is more commonly used: A dangerous combination of low GDP growth, high inflation and unemployment.

Sorry for the example, but a synonym for a long description, is one word from the Russian language, in folk folklore, and this state is described by one word "ZHOPA".

However, judging by analytics, this very stagflation is receding in the US and EU, at least by the indicator of declining unemployment and slowing inflation.
China is even experiencing deflation, but it is "interesting" - prices are falling not because of the strengthening of the yuan, but due to a decrease in purchasing power and demand of domestic consumers.

It is interesting to know what is the situation in other countries/regions ?

[yhiaali3]

In fact, all of our economies live in these cases regardless of the names. We may not realize the subtle differences between the different names in the economy, but in fact we live and suffer from them without knowing what the name is called.

In my country, we have been suffering for years from the deterioration of the economy, slow growth, low demand, low employment, high prices, low domestic product, the collapse of the value of the national currency and hundreds of other economic problems. I do not know how any government can solve all these problems?

In fact, the average person does not care much about all these academic terms. All he cares about is searching for practical solutions to get out of this misery, because there is no hope for him that the government will solve any problem from the list of accumulated problems.

[Gozie51]

In fact, the average person does not care much about all these academic terms. All he cares about is searching for practical solutions to get out of this misery, because there is no hope for him that the government will solve any problem from the list of accumulated problems.

The government has jettison both the school economic theories and even the off book economy teaches and they seem like no direction any more. Perhaps one is tempted to think that the past leadership were more knowledgeable in economics and how to move their country forward. The current leaders are so engrossed in power tussle but they forget that when you go to war, instigate it or try to push others into it then you have changes and challenges in your budgets and financial policies which of course also leads to negative changes in your capital projects and amenities to improve the lives and standard of living of the people.

[stompix]

Stagflation is an economic cycle, or condition, when there's slow growth, low demand, low employment, BUT high "sticky" inflation. That's where many countries are probably going.

Which ones?
Inflation is going down so you can't talk about high and ticky inflation unless it's Argentina or Turkey or Iran!
Employment is going up in most countries again, some even hit record employment levels this year!
So, in order to qualify for stagflation, is there any country (that matters globally) that meets those criteria?

Right now it's far more possible we're going to get hit with a recession and deflation rather than stagflation!

[MusaMohamed]

They are creative with terminologies, inflation and stagflation. I remember how politicians try to mislead citizens with recession and technical recession which is reflected recession but they want to avoid it and reduce its severity by using a creative term, technical recession.

Why they don't use a term hyper inflation but use stagflation? Because hyper inflation sounds very bad while stagflation is not and looks to be a new term, need time for citizens to discover and accept it.

Bad economic policies, gold standard removal and other reasons like oil price increases are some factors that come together with governments to print more money into their economies then cause inflation in some countries or hyper inflation in some special nations.

[ancafe]

Stagflation will probably be an economic term that many of us plebs will start hearing more and more of from the news as the economic situation in many regions around the world continue to worsen. Stagflation is an economic cycle, or condition, when there's slow growth, low demand, low employment, BUT high "sticky" inflation. That's where many countries are probably going.

Plus if you didn't pay attention in your Economics class in school, it's currently the best time to learn about it because it's probably going to come sooner than expected. So let's discuss.

Don't teach stagflation, recession and inflation to people who work to get a bite of rice because they don't need that explanation but what you can give them. I remember these words coming out of the mouth of a political figure and he was one of the people who always spoke out for justice for small communities. Economic conditions greatly influence healthy thinking and when someone can take a small role individually that is where they will learn to get out of the current bad economic problems. The government's job is to provide solutions because they are ordered by law to concern the survival of its people and a corrupt government will also create misery for its people.

Theories only explain some events and there is no consensus that can be applied in a plurality to all countries because conditions may vary, culture and the area where people work can determine which theory can be applied because it needs appropriate adjustments. A country looks strong if its people do not live in poverty in large percentages and a country can also be said to be strong if they are able to dominate the world economy.

[dothebeats]

It's been happening in my country for years now, albeit not as severe or felt as it now after many events that occurred (example: the COVID-19 lockdown) but it always has been present. Low employment has always been a problem in my country despite a big percentage of the population seeking a job, in connection with that food prices and other necessities like utility rates continue to rise. When COVID-19 hit these problems' impact became double and you can actually feel just how much it has affected the country, heck even people who seldomly talks about economy in my area had started having discussion about it due to worry and well mostly complains. Stagflation will probably be a term more talked about in universities in my country soon.

[Text]

This is exactly what we are currently experiencing in our country. Almost all of the basic necessities are becoming more expensive, and while there may be other reasons not mentioned here, I believe these are also the factors contributing to the challenges we are facing today. Sometimes, corrupt leaders are also to blame. There doesn't seem to be a concrete plan to improve things; it feels like they are only thinking about their own interests. They are even borrowing heavily from other countries, but where is the money really going? We can't feel the benefits. They even use traffic as a sign of economic progress in the country, my god, it's more like gaslighting.

[michellee]

The economy is getting worse with all its problems where almost all costs in every country have risen to higher levels than in the last few years. And this condition may have reached its peak when the pandemic hit almost all countries yesterday. Many businesses cannot survive and even reduce their employees by stopping them from working to reduce costs.

And the affected countries are starting to wake up slowly by moving everything so they can overcome all the problems that have occurred. Maybe it will still take a few more years until we see the condition of each country recovering and developing, but until that time comes, we can only keep trying and do what we can as citizens.

Economists will probably discuss this more often because they are used to discussing the state of the economy in their country. And hopefully, economists can find the right solution to quickly get out of a situation that is not yet profitable for every country.

[Latviand]

Maybe if the policy makers get off their high horse and start doing things that's beneficial to the people and not the private business sectors, probably we will see that stagflation thing go away, hell even just focusing on education and worker's rights will probably make a big difference already. I don't have the data or articles read to back this yet but in my opinion, protecting the labor of a country and making sure that they're at the happiest level makes the labor less unbearable thus creating efficiency.

[davis196]

Well, now I wonder why we used to say BTC is a hedge against inflation and not a hedge against Stagflation! Or is it? I am a bit confused now too hehe.

The financial assets, which serve as a hedge against inflation could theoretically serve as a hedge against stagflation as well.
The problem is that stagflation could lead to economic stagnation, which pulls the prices of various assets down.
We can't have booming gold and real estate prices in times of stagflation, because there's not enough money in circulation to help in boosting the prices.
There's no hedge against unemployment. You will have to find a job.
The good thing is that stagflation is impossible in reality, because we life in the world of the "money printing machines".
When there is a small sign of recession and stagnation, the central banks simply respond by throwing more money at the economy.

[DrBeer]

Don't teach stagflation, recession and inflation to people who work to get a bite of rice because they don't need that explanation but what you can give them. I remember these words coming out of the mouth of a political figure and he was one of the people who always spoke out for justice for small communities. Economic conditions greatly influence healthy thinking and when someone can take a small role individually that is where they will learn to get out of the current bad economic problems. The government's job is to provide solutions because they are ordered by law to concern the survival of its people and a corrupt government will also create misery for its people.

Theories only explain some events and there is no consensus that can be applied in a plurality to all countries because conditions may vary, culture and the area where people work can determine which theory can be applied because it needs appropriate adjustments. A country looks strong if its people do not live in poverty in large percentages and a country can also be said to be strong if they are able to dominate the world economy.

No offense - but the global economy doesn't care about people who work for a "bowl of rice". It's rude and unpleasant, but it's a fact. You just have to realize that these are different levels of the economy.  This layer of the earth's population does not affect the "wallets" of the big economy....
And in some sense, the presence of poor regions, countries and people is even "good" for the global economy, these people do not create problems like the middle class, for example, who have more rights, money, and the ability to express their opinions and demand something. Unfortunately, this is the way the world works.

[348Judah]

Stagflation will probably be an economic term that many of us plebs will start hearing more and more of from the news as the economic situation in many regions around the world continue to worsen. Stagflation is an economic cycle, or condition, when there's slow growth, low demand, low employment, BUT high "sticky" inflation. That's where many countries are probably going.

I believe we are already into it partly, if we are to consider the way the governments are handling the economy situations in each of their countries, almost everyone is being affected by inflation allover the world, will this be a continuous influence or just a present challenge we will soon get away with, it's not about being affected by inflation but the role of governments towards the people who should find live affordable at all cost, we are in a situation now whereby the government is not focusing on their own people by after their usual global recognition being a figure head, while the people were left unattended to, inflation is affecting the masses daily economy and earning a living is becoming more tougher.