Economic stagnation and inflation: becomes uncomfortable

wooHe used to disregard the economic benefits of globalization characterized by efficient supply chains, but now these weeks have an opportunity to correct his erroneous decision. The German economy, which is closely linked with the world, is feeling the consequences of material shortages. And even the Chinese economy, which is certainly impressive but has been repeatedly underestimated in the West, sending out troubling signals with temporary power cuts.

So far, economic projections have been based on the assumption that these difficulties will be overcome quickly, but companies and some economists are slowly beginning to wonder whether the world economy will not run smoothly for a long time. An expression that was known half a century ago and which does not bring back any pleasant memories is being circulated more and more often: stagflation.

Significantly rising labor costs certainly send the wrong signal

Stagflation marks the meeting of economic stagnation and inflation. Over the past few decades, stagflation was not uncommon in emerging and developing countries, but industrialized nations were rarely hit by the plague. Because high inflation usually appears there as a temporary by-product. Boom. Still those praying for health are on the way, assuring them that the economy will pick up pace again in the coming year, but that the currently fairly high inflation rate will fall again.

This belief assumes that people are present inflationschub as temporary and not push for significant increments. It’s not so sure. If the state wants to set an example with a significant increase in the minimum wage, unions should not hesitate for long with proud demands of collectively agreed wages. Significantly rising labor costs are certainly a bad sign of economic stagnation. Stagflation is an uncomfortable situation in which it is easy to make policy mistakes. The next federal government could quickly face unexpected challenges.