America is expected to see a period of stagflation, similar to the 1970s. It is a period of economic stagnation, i.e. no economic growth, high unemployment, coupled with a high rate of inflation. The lack of economic growth means that the high rate of unemployment will continue to be high, and the cost of living will increase, due to inflation. It will be a difficult time for many people. The problem is that this stagflation is likely to spread to other countries, due to the global environment.
What is the cure for stagflation? The economic stimulus adopted during the past three years did not seem to work. We need a new approach.
What is the cure for stagflation? The economic stimulus adopted during the past three years did not seem to work. We need a new approach.
Even if there is stagflation, and even if it last for many years, America will remain democratic and politically very stable and peaceful, unlike countries in the Middle East and elsewhere where riots or violent overthrow of govt occurred when there is an economic crisis.
ReplyDeleteThe US dollar will also continue to be the de facto international currency, even if the US is bankrupt.
This is the beauty of the land, people and things in America.
In Singapore we may also face prolonged bad economic times but we will remain politically stable and socially peaceful, not even peaceful (but illegal) protests or ruling party losing its 2/3 majority in elections.
This is the (more) beauty of the land, people and things in Singapore.
Hence it is really fortunate to live in Singapore. No wonder we can attract so many foreigners to come here.
Instead of entering into Stagflation, I think we are going through the following economic cycle in sequence based on my reading:
ReplyDelete- Agflation (2009-2010)
- Biflation (2010-2012)
- Stagflation (2012-3?)
- Recession (After U.S. presidential election? Beyond 2013?)
- Economic Growth again (when??)
Conventional economic wisdom implies that we are only capable to solve either 'inflation' or 'anaemic growth' one at a time.
A repeat of U.S. 1979-83 scenario might be highly likely.
Recalled how Paul Volcker engineered a series of monetary tightening (via successive rapid rates hikes) to curb sharp inflation and economy slipped into deep recession during that period?
The only difference is the deficit then was in Billions but currently we are dealing with Trillions!!
Lip Wee