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.
Topic: Economics 101. Stagflation. - page 3. (Read 313 times)
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What Causes Stagflation?
There is no real consensus among economists about the causes of 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
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.
8
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.
9
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.
10
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.
11
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
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.
Quote
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.
8
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.
9
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.
10
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.
11
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
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