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Fears of a Coming Stagflationary Economy Continue to Grow

By Nicholas Larsen, International Banker

 

“Six months ago, we were really concerned about a slowing recovery and very high prices of some commodities, and now I think we are much more concerned about a generalized stagflation, which brings back really bad memories of the mid-1970s and the lost decades,” Indermit Gill recently acknowledged. And by using the dreaded “s-word”, the World Bank’s chief economist echoed what much of the world now fears: One of the most dreaded macroeconomic scenarios will befall us sooner than later.

It is clear that the global economy is now facing a monumental catastrophe, one which has been both caused and exacerbated by accelerating inflation, which in some major economies has climbed to double digits in recent months. And with central banks the world over now scrambling to contain runaway prices through steep interest-rate hikes that will undeniably lead to worsening conditions…

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