Paul Brodsky: "Stagflation On The Horizon"
// Zero Hedge
Submitted by Paul Brodsky Of Macro Allocation, Inc.
Stagflation on the Horizon
Logic and current trends suggest that declining output growth accompanied by higher prices will begin hitting economies and facing policy makers in the coming years. Markets should begin sniffing out this stagflationary macroeconomic setup this year.
We have published data showing global output growth is in decline and have argued this trend will continue. Indeed, a long term graph of US Real GDP growth implies a change in complexion since 1999, from credit-induced boom-bust economic cycles to a secular trajectory of decline (red lines on graph 1).
Graph 1: US Real Gross Domestic Product: Percent change from preceding period is in secular decline
This trend is especially troublesome following the debt-induced wash-out recession in 2008/2009, subsequently offset by zero-bound interest rates and central bank asset purchases. Since then, real GDP growth, characterized by ...