Monday, Apr 3, 2023

Stagflation, BTC options and more...

“We are told that talent creates its own opportunities. But it sometimes seems that intense desire creates not only its own opportunities but its own talents.” – Eric Hoffer ||

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MARKETS

The stagflation blow

You may have heard the word “stagflation” pop up here and there recently. It refers to periods of low growth and high inflation, and the word is rarely used compared to more evocative terms such as “recession” or even “depression”. It was only a few decades ago that economists realized it was even a possibility.

In the 1970s, economic theory was radically altered when an oil price shock combined with rapid money supply growth sent prices higher yet kept growth subdued, breaking the assumption that inflation and recessions were mutually exclusive. The result was eye-watering hikes in US interest rates, all the way into double digits, that eventually brought inflation down and led to not one but three recessions in the space of 10 years.