Rolf Englund IntCom internetional
Stagflation. Plain and simple.
How can inflation accelerate if the economy is slowing?
Unfortunately, out here in reality, the Phillips Curve does not exist. It never did.
The problem with the Phillips Curve is that it does not take into account the difference between credit creation and money creation.
Credit creation drives up asset prices.
Over time, massive credit growth causes asset prices to become overpriced relative to consumer prices, commodity prices, and wages.
Few can afford houses at their current prices. And many companies cannot generate enough earnings to support their debt levels and stock prices. Asset prices simply cannot be justified relative to consumer prices.
The Fed doesn't want asset prices to come down because asset prices lead to bankruptcies, especially among banks which are highly leveraged.
Fed has to create actual money to replace the credit that is being destroyed.