by James Rickards
Daily Reckoning
Most economists don’t believe we could have stagflation today. The prevailing view is that recessions are characterized by higher unemployment and reduced spending, and inflation is triggered by full employment and increased spending and therefore they cannot both happen at the same time.
This prevailing view is wrong, as I explain today. Yet it’s a powerful narrative that blinds most analysts to situations where stagnation and inflation are both happening at the same time.
That’s stagflation and it is emerging today.
The first wing of the stagflation thesis is stagnant growth. This can take the form of an outright recession (two consecutive quarters of declining GDP) or simply slow growth at a rate below the potential growth of a strong economy.