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America may be headed for this rare type of economic crisis
https://www.vox.com/politics/407296/stagflation-trump-tariffs-recession-inflation-risk-oddshttps://www.vox.com/politics/407296/stagflation-trump-tariffs-recession-inflation-risk-odds
President Donald Trump’s decision to impose large tariffs on all foreign imports has triggered a global trade war, stock market collapse — and predictions of an imminent recession.
In the wake of Trump’s tariff announcement last week, JP Morgan raised its odds of a US recession to 60 percent, up from 40 percent. Other banks have similarly adjusted their economic forecasts downward.
The real reason Trump is destroying the economy
What makes these forecasts even more disconcerting, however, is that the US is at risk of slipping into an especially dreadful type of recession: one characterized by “stagflation” — meaning, the simultaneous presence of stagnant growth, rising inflation, and elevated unemployment.
Here is a brief guide to what stagflation is, why it’s so feared, how it occurs, and whether Trump’s policies will cause it.
What is stagflation and why is it so feared?
Typically, when economic growth slows or sputters out entirely, unemployment increases and inflation falls. This is because weak economic growth — or an outright recession — lowers consumer demand.
To understand these dynamics, it might be helpful to picture the economy as an extremely large and complicated auction. Consumers bid against each other for access to goods and services. And the more money that these bidders have to spend, the higher they can push up prices.
If policymakers increase demand to fight unemployment, they make inflation worse; if they remove demand to fight inflation, they make unemployment worse
https://www.vox.com/politics/407296/stagflation-trump-tariffs-recession-inflation-risk-oddshttps://www.vox.com/politics/407296/stagflation-trump-tariffs-recession-inflation-risk-odds
President Donald Trump’s decision to impose large tariffs on all foreign imports has triggered a global trade war, stock market collapse — and predictions of an imminent recession.
In the wake of Trump’s tariff announcement last week, JP Morgan raised its odds of a US recession to 60 percent, up from 40 percent. Other banks have similarly adjusted their economic forecasts downward.
The real reason Trump is destroying the economy
What makes these forecasts even more disconcerting, however, is that the US is at risk of slipping into an especially dreadful type of recession: one characterized by “stagflation” — meaning, the simultaneous presence of stagnant growth, rising inflation, and elevated unemployment.
Here is a brief guide to what stagflation is, why it’s so feared, how it occurs, and whether Trump’s policies will cause it.
What is stagflation and why is it so feared?
Typically, when economic growth slows or sputters out entirely, unemployment increases and inflation falls. This is because weak economic growth — or an outright recession — lowers consumer demand.
To understand these dynamics, it might be helpful to picture the economy as an extremely large and complicated auction. Consumers bid against each other for access to goods and services. And the more money that these bidders have to spend, the higher they can push up prices.
If policymakers increase demand to fight unemployment, they make inflation worse; if they remove demand to fight inflation, they make unemployment worse
