# Stagflation - Economic and Social Implications

**Published by:** [jelca thinks](https://paragraph.com/@jess/)
**Published on:** 2022-07-14
**Categories:** other tech
**URL:** https://paragraph.com/@jess/stagflation

## Content

Normal Reaction to an Average RecessionLow inflation, low growthMonetary policies = easing = stimulate demandLower fed funds rate to stimulate demand / economic growthE.g. early 2000s, 2008-2009What is StagflationLow real growth but high nominal growth (aka lots of inflation)Last strong case was in the 70s and 80sNeed to reduce inflationImplement more restrictive monetary policyHistorical Treatments of Stagflation = Increasing FFRHistorically, monetary policies around easing during stagflation = MISTAKEIn the 70s: prematurely lowering FFR--> FFR < inflation --> inflation remains highIn the 80s: High FFR, even >inflationToday's Economic State of AffairsToday looks like stagflation with real GDP growth negative. FFR <0.5% toodue to a large net export deficitCPI and PCE increasing rapidly at almost double digit growth rateCPI is inflation for out of pocket expenditures, affects the low to middle income people the most (shelter, food, etc.)PCE more heavily weights healthcare / financial servicesShelterHigher mortgage rates, higher cost of home ownershipMore rentals (seems more affordable)Interest around rent stabilization regulations and policiesInflation Expectations1 year: Affects wage increase expectationsHas risen from 2-3% to 3-6%Long termIncreased moderately but not as muchWage increasesBiggest portion of the labor force hourly earnings growing 5-6%Aggregate wages for private nonfarm increasing ~7%Increasing wages and expectations push inflation even further upLow supply, high demandNominal spending continue to be high especially since the government gave everyone moneyExcess savings highest for rich peopleUnemployment at historical lowsOverall labor market still tight with low unemployment rates, despite seeing layoffs recentlyoverall strong labor market, recovered to pre-pandemic with few unemployed and many job openingsactually lots of people voluntarily quittingLoans / lendingHigher lending capacity! loan to deposits is much lower. Pre-pandemic was ~75%Social ImplicationsCOVID Created Generational ConflictMillennials / Gen Z feel like they sacrificed years of their “prime time” for the oldThe old want low rates to preserve asset valueYoung people need inflation to wipe debt and accumulate wealthLife of a Boomer vs MillennialBoomerAverage childhoodPublicly funded schools are actually great schoolsRise of service sectors = lots of jobs = everyone becomes more wealthyLow asset prices = can easily buy housesHigh inflation = pay off debt easilyBurst internet bubble = rate cuts but can buy more housesPension payouts = goodMillennialEducation becomes increasingly competitive - those who were wealthy sent their kids to the best schools and then only they could go to the best collegesTuition skyrocketsTakes loans to cover tuitionGoes increasingly into more financial crisis and debtStarts family later because of financial situationExpensive costs for houses and healthcare - lives paycheck to paycheckAffects future generationsCOVID hits and everything goes more to shitThe Future is Ruled by Today's Young PeopleOur presidents are old as hell, their time of pushing inflation down is overNew influential political members will push for more "liberal" policies and economic governance surrounding healthcare/Medicare, inflation to cancel debt, environment, etc.What Has the Government Done Differently vs 2008Printed a hell of a lot of money and sent it to people instead of bailing out banksWhat Does this Mean "Post-COVID"Everyone will want to spend because they feel pent upFood prices shooting up because of supply chain issues (can't cross borders)Deflationary actions such as bankruptcies and layoffsEffects of the Bull Market Run of the 2010sProperty prices skyrocketBirth decline, fertility rates declineSocial reasons to justify not getting married and having babies/families = really messes up this generationthis has become hip and cool for both men and women to better value themselves and be single and hoard money for themselvesRESULT: Low growth, constant stimulus checks / liquidity injections, super high asset prices, fuck load of debtAffected boomers too! rate cuts = bond portfolio future incomes are done, retirement savings into assets that have lost tons of value e.g. VC and EMThe Economic and Social Case for Stagflation in the Worst Case Scenario, Inflation at BestSad b/c hedge funds implode (Five arrow!), negative real yields, bankruptcies = tectonic shifts in the marketFrom a social POV: Assets need to be ultimately transferred (generational wealth transfer), debt paid off, households/families formedINTL FCStone: Stagflation, Pershing Square

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