Are we heading into Stagflation?

ilvmm

We all know we are heading into an inflation period, despite of what government has told us the other way. So are we heading into a slow growth period as well?

 

Despite the liquidity in the market, financial institutes have tightened up the credit policy. That means average business would have higher cost of borrowing to expanding the business. So are we going to have higher growth rate, compare to last couple of years, think again. Another hit economy has to get is higher commodity prices. With higher commodity, business will have less profit and will have higher resources constrain on expanding their business. High commodity price, one thing means higher inflation, but on the other hand it also means supply is short of demand. Agriculture products and industry metals are good examples, oil is a bit different beast here. So with short of supply, business will adjusted with slower expansion. In both cases, I see economic will have significant potential of slowing down.

 

Fundamentally, U.S. economy is walking in a very fine line here. I see limited up potential with lots of downward risk. Will Fed lead us out off this mess? I sure hope so, but I do not see the light at the end of tunnel, not yet.

revolver

And indeed, a lot of economists believe we are already in one.