Stagflation fears are back

[applegrove]

Stagflation fears are back

Courtenay Brown

https://www.axios.com/2025/08/02/stagflation-economy-inflation-growth-trump

America is showing new signs of stagflation — inflation running hotter, the job market suffering new weakness, and economists warning both are at risk of getting worse in the months ahead.

Why it matters: The word "stagflation" revives miserable memories of the 1970s, when Americans faced a dreadful combination of higher prices and few job opportunities.

The big picture: This was the week mainstream economists were vindicated.

Predictions of weaker growth and more persistent inflation — the "stag" and the "flation" — looked farfetched, until now.

[Walleye]

1. It occurred to me that a large percentage of the adult population wasn't alive the first time around

[applegrove]

2. That's so true. Anyone under 55 would not remember it.

[customerserviceguy]

3. This is why post-Covid inflation

freaked out so many voters. For about forty years, we had an economy that produced around two or three percent inflation, and people built that into their expectations.

[Walleye]

14. Yeah, I remember in the 80s 16 per cent interest rate on mortgages

[customerserviceguy]

15. Yeah, I thought I was lucky

with my 10.5 percent FHA mortgage taken out in 1979. But, that tight market messed me up (I worked in title insurance at the time) and in the divorce, she got the house. Oh, well.

[customerserviceguy]

4. As I recall

a big part of the "flation" of stagflation was rapidly rising oil costs, twice. We just don't have that situation right now.

[applegrove]

5. But higher prices, think tomato tariffs, on a whole

host of consumer products, could result in inflation. In the aggregate prices could be way higher.

[customerserviceguy]

7. Possibly

But some goods are more easily substituted. Yes, there are no substitutes for tomatoes, but people could gravitate towards meals that have no tomato, or just less of one. You can't do that when your car needs gasoline.

[applegrove]

9. Natural gas then. Trump is apparently pushing to export more

Natural Gas. There is no easy substitute for that.

[customerserviceguy]

10. Is there a shortage of natural gas?

If so, I wasn't aware of it. I figure we produce a lot of it here in the US. And if you had told me six months ago that Drumpf was going to bomb Iran and gasoline would still cost less than three dollars a gallon, I would have questioned your sanity. But, that's the reality.

[applegrove]

11. Natural gas markets: Price swings amid a shifting global landscape

The World Bank's natural gas index is projected to rise over the next two years, although risks remain tilted to the downside. The U.S. benchmark price is expected to increase by more than 50 percent in 2025, followed by a modest 3 percent in 2026.Jun 17, 2025

https://blogs.worldbank.org

Natural gas markets: Price swings amid a shifting global landscape

[NickB79]

6. We do: tariffs

A 10-15% tariffs on all imports will shock as much as expensive oil did then.

[customerserviceguy]

8. That still remains to be seen

If you lived in the 1970's, you needed oil, if not for your own car, then for the bus that you'd ride, or the truck bringing goods to your store. It may well be that people avoid highly tariffed products and gravitate towards domestically produced goods.

[NickB79]

13. For many goods, there are no domestic alternatives

And it can takes years to set up manufacturing here for said goods.

[customerserviceguy]

16. True

but I maintain that the oil price shocks of the 1970's were tremendously inflationary in that era's economy, much more so than tariffs could be. Having lived through both, I'd say it was as consequential to the economy as Covid was five years ago.

[raccoon]

12. Trumpy FAFO'd with the tariffs.