Deutsche Bank concerned about Stagflation

[KnightWhoSaysNit]

It seems even a major bank is beginning to see that the threat of a 1970s style stagflation is increasing.

Jamie Dimon voiced concern about the threat last week, saying that we should be prepared for a 7% yield on the 10 year (if a worst case stagflation takes hold). He thinks that is possible. Note that he made this comment before the Hamas invasion, so whatever his thinking, the threat is much worse now.

Why is this? Well, the same factors are occurring:

• Uncontrolled spending on wars and handouts. (Same as the 60s)
• No solutions in Washington (like papering over the problems by removing the gold standard)
• War in the Middle East (this one likely worse than the one in the 1970s)
• Arab states aligning in opposition to Israel and the USA. (Look for them to cut production, Biden to draw down our reserves, and then for some other country to take advantage of our weak position. See China.)

The article states that we are not as energy dependent, a positive, but our debt situation is a similar cost center and it is much, much worse. I think it is a bigger millstone than people realize. The interest payments are staggering.

Let me reiterate what is meant by stagflation. It's a weak economy that nevertheless suffers from rising prices. If central banks tighten then the economy weakens even more. If central banks loosen then they induce inflation. This was the pattern in the 1970s. There were several loosening/tightening cycles because the Fed mismanaged the lag effects associated with its policies. With each cycle the inflation peaks became worse.

We had incompetent leadership then as we do now.