Stagflation is now the word heard on the floors of Wall Street that is putting fears in investors mind. This particular economic condition is generally characterized by slow growth, rapidly rising consumer prices, and relatively high unemployment, which for now is not happening in US. Stagflation occurs when the economy isn't growing but on the other hand there is a high unemployment (stagnation) while prices rise (inflation). This happened to a great extent during the 1970s, when world oil prices rose dramatically, fuelling sharp inflation in developed countries. From my point of view, the current high prices of commodities may put this economic condition in action. In addition, early this morning, the government reported that consumer prices in country rose more than forecast last month, indicating that the slowing American economy isn't alleviating inflation pressures. The 0.4 percent rise in consumer prices was led by increases in the prices of food, energy and health care. Now, the FED has a big problem in their hands, slow grow with high inflation. I don't know but this is not good, as I said before, we may be living a problem of stagflation. Keep your eyes well open, and play on the defensive side.
Original by AC Investor Blog