February 9, 2009
What is Stagflation?
Stagflation is a sluggish economy coupled with a high rate of inflation and unemployment.
Stagflation occurs when an economy isn't growing but prices are, which is not a good situation for a country to be in. The word was coined during the inflationary period of the 1970's.
It is our belief that we will soon see far fewer foreign products imported into the United States, which will more than offset the diminished demand brought about by the recession, causing consumer prices to rise.
So while American consumers will be buying fewer products, they will also be paying substantially more for these products.
As the money supply in the U.S. grows and the liquidity in the system increases, people will need to spend the money as quickly as it is printed just to be able to afford necessities.
By the Federal Reserve lowering interest rates to 0% and increasing the money supply through bailouts, they are ensuring that we will soon see Stagflation and eventually Hyperinflation.
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