In 1970s, when stagflation occurred in America, there was an oil supply shock sending its prices up leading to inflation when the employment rate was low.
This time around there are several factors that might contribute to stagflation -
1) Decrease in oil supply due to the civil unrest in middle east - US and its clan have already done about 100 air strikes on Libya. Saudi army personnel are in Bahrain and shootings occurred in Saudi due to protests.
- Oil is already at the $105 level
- Airline prices are soaring.
2) The Tsunami and earthquake in Japan and its after effects - Japan is very critical in the global supply chain and many of the semiconductor companies in Japan are affected. This would most probably increase the prices of all the consumer electronics.
- I wouldn't bet my money to find a lot of cheap deals on laptops.
3) We are still slowly coming out of the recession from the employment rate perspective. Unemployment rate is currently 8.9%.
4) The monetary easing that seemed to be a good idea until now might suddenly become a burden fueling inflation.
We might be caught in a rock and hard place. If Feds tightens the interest rates, GDP might falter. If Feds maintain the low interest rates, inflation would spike up.
This time around there are several factors that might contribute to stagflation -
1) Decrease in oil supply due to the civil unrest in middle east - US and its clan have already done about 100 air strikes on Libya. Saudi army personnel are in Bahrain and shootings occurred in Saudi due to protests.
- Oil is already at the $105 level
- Airline prices are soaring.
2) The Tsunami and earthquake in Japan and its after effects - Japan is very critical in the global supply chain and many of the semiconductor companies in Japan are affected. This would most probably increase the prices of all the consumer electronics.
- I wouldn't bet my money to find a lot of cheap deals on laptops.
3) We are still slowly coming out of the recession from the employment rate perspective. Unemployment rate is currently 8.9%.
4) The monetary easing that seemed to be a good idea until now might suddenly become a burden fueling inflation.
We might be caught in a rock and hard place. If Feds tightens the interest rates, GDP might falter. If Feds maintain the low interest rates, inflation would spike up.
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