On The Market Stagflation Risk Rising Fast as US Economy Falls Out of Balance
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Apr 24, 2025 Dive into the phenomenon of stagflation, a rare and troubling blend of inflation and stagnant growth. The potential economic implications are severe, affecting everything from unemployment to consumer confidence. Historical insights from the 1970s crisis reveal the impact on real estate prices that could echo today. Learn about the Federal Reserve's dwindling options to combat this looming threat. Also, discover how smart real estate investing could provide opportunities despite the economic challenges.
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What Is Stagflation?
- Stagflation combines high inflation and slow or negative economic growth, which rarely occur together but are very harmful if they do.
- Normally inflation and unemployment move inversely, so stagflation breaks this usual economic pattern.
1970s Stagflation Causes
- The 1970s stagflation was triggered by unusual factors like oil shocks, monetary policy mishaps, and fiscal policy changes.
- This period showed concurrent rising inflation and declining GDP, a rare and damaging economic combination.
Fed’s Dilemma in Stagflation
- The Federal Reserve is constrained during stagflation because its usual tools work in opposite directions for inflation and unemployment.
- Raising rates to fight inflation worsens unemployment, while lowering rates to boost jobs can increase inflation further.