If the economy is upward and inflation is upward, there is no big problem.
If the economy goes downward and inflation goes upward, the problem will be big.
Because of "stagflation" will cause a lot of troubles.
1. Three stagflations in the United States in the 1970s.
The United States experienced three stagflations in 1969-1980: from 1969-1970, 1973-1974, and 1979-1980, these three stagflations were more serious each time. During this period, the annualized growth rate of the US real GDP was 2.91%, but the annualized growth rate of the CPI index was as high as 7.68%. ZF tried economic stimulus policies again and again, but they could only last for a short period of time. After that, the economic growth rate began to decline again, and even showed negative growth.
Starting from Nixon, it proposed a "new economic policy", including freezing wages and prices to curb inflation, while reducing federal spending, implementing investment tax cuts to stimulate investment, stop foreign central banks from using US dollars to exchange gold to the United States, and surcharge taxes on imported goods increased by 10%. Price control was suppressed for less than two years, and then it began a retaliatory rebound in mid-1972, rising from 4% to 12%, and Nixon scored GG.
followed by Ford and Carter . One is to reduce government spending, balance budgets and maintain high interest rates, tighten credit and currency, and the other is to limit wages and price growth. Inflation was suppressed for a short time, then it rebounded retaliatoryly, rising from 7% to 14%, and Ford and Carter successively scored GG.
Before this, American people rarely experienced "stagflation", and everyone agreed that the unemployment rate and inflation rate should fluctuate. That is, the unemployment rate is very low, everyone has jobs and can make money, so the prices are getting more and more expensive. However, during the stagflation period, the more people are not working, the prices are rising and the more they are rising. The phenomenon of high unemployment rate + high inflation rate has shattered people's views.
2. Causes of "stagflation".
① Too much currency. ZF prints too much money, and excessive funds chase limited goods and services, so the prices naturally rise.
② loss of efficiency. Everyone knows that there is too much money, but it is difficult for ZF to make up its mind to reduce its currency because it will increase the unemployment rate and thus affect stability. Therefore, we can only make some sideways, such as price control. Price control distorts the market's resource allocation and damages the interests of the companies that provide this party. Prices are regulated and companies are not willing to provide goods and services, which is a long-term damage. Because this means that there is still so much money, chasing less goods and services.
③ is expected to be ignited. Since inflation is not controlled at the signs, people's expectations are ignited. As long as people have high inflation expectations, employees will demand business salary in order to compensate for inflation. If companies want to meet these requirements, they either sell products and services at more prices or recruit less people. Form a double helix of rising wages + rising prices. The three factors of
are the basis for the formation of stagflation and . At this time, some external factors are added, such as the food crisis or the energy crisis, and things become uncontrollable. People are unemployed, companies are going bankrupt, and the economy is in recession.
3. How to get out of "stagflation"?
①Monetary policy+Financial policy is reasonably matched. deals with stagflation, it is difficult to eliminate monetary policy alone, such as hike rate . Because interest rate hikes will increase the burden on enterprises, leading to further economic recession; then in the future, stable growth will have to be loosened, triggering a new round of inflation. In theory, appropriate interest rate hikes, while increasing fiscal expenditures, and reducing taxes and burdens for enterprises are ways to combat stagflation. Appropriate interest rate hikes to curb inflation and tax cuts and reductions stimulate the economy, which actually turns the burden on enterprises into the burden of ZF. If the debt pressure on ZF is too high, new problems will arise. Therefore, for countries that are in the stagflation stage and ZF debt pressure is very high, a crisis is inevitable.
②Digest more labor. The increase in the working population will help reduce inflation. Stagflation in the United States in the 1970s was finally alleviated by the rise of the working population, because after World War II, the United States ushered in a baby boom, and the generation of baby boom began to gradually become a labor force in the 1970s. At the same time, the entry of large numbers of immigrants has also brought new labor force, increasing the proportion of the US labor population from less than 60% to 66%-67%.
4. Conclusion.
Most people in my country have not experienced "stagflation", but some signs of "stagflation" have appeared, such as excessive currency, losses in corporate efficiency caused by various internal and external reasons. The good news is that people's inflation expectations has not been ignited. In addition, the proportion of our working population has gradually declined since 2013, which means that if there is stagflation, it will be difficult for us to break through by "exploding more labor".
There are many FIRE groups in Douban, such as the poor FIRE group, the rich FIRE group, and the endless FIRE group... Their original intention is to reduce material desires, increase sustainable income, quickly save 25-30 times of the annual expenses, "redeem yourself" as soon as possible to achieve freedom, and get rid of the state of "selling time for money". But some people have the mentality of "Can xxx stabilize FIRE monthly passive income", which is as risky as those who retire with pensions, because the ZF that issues currency does not promise how much purchasing power our currency is.
Unless a large-scale replacement of machines can be realized in the future, the decrease in labor will inevitably lead to fewer and fewer products and services. Therefore, we should not only pay attention to "whether there is enough deposit" and "whether the income is stable enough", but also pay attention to "whether the purchasing power will change." A better way is to link cash flow to inflation, such as rent, dividends (which companies can get money first during inflation), etc.
Review of the performance of U.S. stock in the 1970s. If the dividend returns are considered, the S&P 500 has doubled in the 1970s. Overall, if dividend returns are considered in the 12 years from 1969 to 1980, the yield was 113.35%, and the annualized yield was 6.52%, which was still good.
From the perspective of industry performance, energy > real estate > finance > industry > utilities > materials > essential consumption > health care > IT > optional consumption > communication services, technology stock performed the worst.
major assets annual returns, crude oil > gold > real estate > other commodities > stocks > cash > bonds. Due to incomplete data, the real ranking of real estate is doubtful, but rent has been proven to outperform inflation in the past 200 years.
I hope everyone can FIRE as soon as possible, "redeem themselves" as soon as possible, and achieve freedom.
I wish you all a happy life.
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