The coronavirus economic 'disaster' scenario: Stagflation
The Federal Reserve has already slashed interest rates by half a point to counteract a possible coronavirus-induced economic slowdown.
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But the threat of stagflation -- the term used to describe an economic slowdown coupled with rising prices -- is real.
For those unfamiliar with the term, stagflation was a major problem for the US economy in the 1970s, when there was an oil shock and surging prices for gas. The Fed chose to fight the inflation aspect more aggressively, raising interest rates as high as 20% by 1981.
"Stagflation would be a disaster. People are dismissing it as an old threat from the '70s that won't happen again, but you could see it come back," said Nancy Davis, chief investment officer of Quadratic Capital Management and portfolio manager of the Quadratic Interest Rate Volatility and Inflation Hedge ETF.
https://www.msn.com/en-us/money/markets/the-coronavirus-economic-disaster-scenario-stagflation/ar-BB110bql?li=BBnb7Kz
Back when Trump was pressuring the Fed for a rate cut I brought this possibility up. The point I was trying to make was that the last time the Federal Reserve buckled to political pressure was under Nixon.
I get no pleasure in being right.
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