Finance: What is Stagflation?

Stagflation is a condition of the economy marked by slow (stagnant) economic growth and high unemployment and inflation

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Transcript

00:23

getting higher That is there is in fire ablation Well

00:26

fuse those two elements together and you have stagflation Generally

00:30

high inflation and stagnant growth live on opposite sides of

00:34

the economic playground You usually don't have one without the

00:38

other far far away Like if the economy is weak

00:41

and demand is light and people are unemployed Well then

00:45

why Or even how could prices possibly go up in

00:49

an inflationary environment rather than down Yeah doesn't make sense

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But this phenomenon does happen So what causes the perfect

00:56

storm to create it To create this stagflation Well it

00:59

could be one of two things Really There might be

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a supply shock Like if oil prices suddenly skyrocket like

01:06

they did in the seventies Or there is quote extra

01:10

unquote e two largest supply of money Well how does

01:14

that happen While the government simply prince too much cash

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The central bank expands the money supply and or creates

01:20

too much credit low interest rates for borrowing for all

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and well now we have inflation even in a stagnant

01:26

time Then taxes go up and or interest rates rise

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so we have slower growth Punishes it on the other

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waves People are starting to buy last They're feeling the

01:35

interest rate Incheon was expensive credit cards right They bite

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you when you go to the mall and you have

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to pay twenty two percent a year So yeah it's

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a rare situation but it has happened in the past

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So when did this phenomenon most recently occur How vicious

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was it Yeah the nineteen seventies they're known as the

01:51

era of stagflation The government was manipulating the business world

01:55

trying to grow the economy while at the same time

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demanding wage khun trolls feeling supply and supporting unions making

02:03

america less competitive globally while the rest of the world

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was suffering as well as we were under the oil

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price shock that the arab opec oil boycott of america

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and the rest the world kind of came to bear

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it was an ugly time the era of stagflation and 00:02:19.61 --> [endTime] yeah thanks there jimmy