Forget inflation: Stagflation, the ugly reality where both prices and job loss are on the rise, is our bigger threat – by Armine Yalnizyan (Toronto Star – June 1, 2022)

You thought inflation was bad? Buckle up. This ride is about to get bumpier. With every passing month, inflation — seen in higher food, gas and housing costs — is squeezing your budget harder, with no end in sight.

We all want someone to do something, but the “cure” for inflation — rate hikes to cool higher prices — is almost guaranteed to be worse than the disease. Rising prices and rising joblessness is the new fear, now that it’s clear inflation isn’t a passing problem, due to wave after wave of shocks to the global economy.

Now the word “stagflation” is making a comeback — the ugly reality where both prices and job loss are on the rise as economies stagnate. Usually unemployment moves in the opposite direction from inflation; when prices rise it’s usually because the economy is running hot, which means there are more jobs.

When they move in the same direction, it’s a tougher problem to solve, because policies that cool prices usually create more job loss, but fixes for unemployment like more government spending or tax cuts can add fuel to inflation.

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