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Global Stagflation a possibility.

Posted by Adrian on February 28, 2008

The Federal Reserve is becoming more and more predictable, Ben Bernanke and co will attempt to ward of a US recession (which has already begun), cut rates and anticipate consumption from the 170 million dollar fiscal injection into the US economy. The illogic there, even if the Fed are not concerned about inflation (which is huge concern), it’s now global problem. Japan and the rest of Asia are grappling with high inflation on oil, food and other amenities.

The worlds second largest economy Japan is inches away from falling into a recession, their industrial output came lower at 0.2%; which basically means all output industry is slowing sharply. Japan which in a lot of ways is caught in a problematic situation, stagnant growth and high inflation on oil food – and extreme low interest rates, now at 0.5%. even talk, that if American dives further into harsher recession, BoJ may cut rates. Japan, could be already in recession; but also have a reserve bank that again talks in denial rhetoric of it’s economic predicament.

But with Asia in inflation predicaments such as South Korea, Philippines, Indonesia, Singapore (beginnings of stagflation?) and Japan. The question is, to what point do inflation and recession begin to form stagflation? Also, will stagflation occur globally? With Europe struggling to contain inflation, yet have slowing economies such as the UK – the inflation problem being tossed aside with the hysteria that a country can maintain growth. The UK, like the US is in the midst of a rate cutting policy (UK rate now at 5.25%). The UK could be the first EU country to go down the stagflation road with the US.

For a brief explanation on stagflation go to this: Fortune online. A good short video, I actually think Fortune has being putting out a lot of decent articles lately, namely following inflation and the investment banks debt/writedowns (losses) fiasco.

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