Increasing CPI and PPI data points to mature stage of stagflation – what comes next is deflation driven depression – the macroeconomic cycles repeat
Karen Zuba
Jul. 16, 2008

US consumer prices rose by 5 per cent in June compared to a year earlier, the biggest yearly jump since 1991. The PPI rose with a similar jump. The data shows the inflation is accelerating fast as the economy is sliding slowly into a pit hole.

If history is any guide to the futures, the stagflation is at its peak. What comes next is actually worse that stagflation. The economy accelerates downwards, bank failures start in massive scale and commodity and wge inflation changes into deflation. Economy plunges into deep depression for decades. It happened in may economies over thousands of years.

Interestingly, when econometric models of the past were looked at closely, it was food and energy that created the inflation in the stagnating economies in the past. This time it is no different.

What will happen in the next six months? Expect oil to go down and other commodities to slowly form a long term top. The economy will slide into a deep recession. By 2010, the inflation numbers will change to deflation and the GDP number will be clearly negative below –3% or lower.

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