We all know that stagflation is here. It’s simple. Rising asset prices like the stock market and real estate and food and energy are the “flation” part. Flat wage growth, rising unemployment and lower productivity and consumer consumption from the real economy is the “stag” part. Now remember, Jerome Powell famously said he doesn’t see stag or flation.
But this is the guy who also said a year ago that he is “navigating by the stars under clowdy skies.” Translated, “I don’t know where I am right now, but trust me.”
JP Morgan and Citibank have recently said they see two things happening. Morgan’s Jamie Dimon things the rate cut that’s coming shouldn’t if the long term is in view. But he knows that the long term is not a concern in this election year. So he sees dangerous rate cuts, as does the most of the market. Citibank sees an economic crash that requires 8 rate cuts.
What’s shocking how long we’ve been able to extend and pretend that stagflation isn’t happening. Trillion dollar deficits and credit cards has created the illusion of growth and activity. That means we could have a major recession (think 2008 debt crisis) and $10 Big Macs thanks to inflation.
Two ways that doesn’t happen or at least lessens the impact. End the wars that keep energy prices high. Cut back on the onerous regulations that hogtie business productivity. See my blog on the Chevron Deference for more.
Those two things could cause the spark that ignites the productivity of the American people. As I’m writing this, we don’t know who’s running for President on the Democrat ticket. And the concern that no one speaks about is if either side will concede after election night.
So what do you do with this type of uncertainty on the horizon? That depends on your individual situation. If you’d like to talk about it, that’s what I do. Click here.