Andy Xie: The global economy has already entered into stagflation with a growth rate of 2% and inflation at 3%. The inflation rate is likely to rise above 4% in 18 months while the growth rate will remain stuck in the same range.
By Andy Xie
BEIJING (Caixin Online) — The global economy has already entered into stagflation with a growth rate of 2% and inflation at 3%. The inflation rate is likely to rise above 4% in 18 months while the growth rate will remain stuck in the same range.
With inflation twice as high as the growth rate, the global economy will slip deeper into stagflation.
The recent decline in commodity prices doesn’t signal a reversal in the inflationary trend. It is a onetime redistribution of mining income to consumer purchasing power.
The prevailing negative real interest rate channels monetary growth above economic growth into inflation wherever there is shortage. Manual labor in emerging economies, skilled labor in the developed economies, agricultural commodities, rent, healthcare, education, etc., are leading the inflationary trend.
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