I sure hope not, because stagflation would be extremely unpleasant for everyone. Central banks like the Federal Reserve would be forced to raise interest rates, to put stress on businesses and consumers, so businesses find themselves unable to raise prices further and consumers find themselves unable to demand greater pay at work.
Raising rates to put stress on businesses and consumers is the only method known to work for ending self-reinforcing high inflation. It's what Paul Volcker did at the Federal Reserve in response to the stagflation that started in the early 1970's in the US and other countries, after OPEC raised oil prices. Volcker raised the federal funds rate in fits and starts to a high of 20% in 1981:
The good news is that these economic problems are entirely the result of bad policies and can be reversed.
If we were to also raise broad based taxes, it would allow the Fed to cut interest rates, stoking long term investment, loosen up the housing market (which would allow more people to move), lower the Federal deficit, and improve the trade balance (as if that actually mattered).
The effect of a bad policy doesn't necessarily end when the policy does. The economy has inertia so some effects, such as inflation, are self-reinforcing and need active undoing even when the policy is relaxed.
And then we have Japan, which has spent 30+ years in the economic doldrums.
What I'm saying is that these types of systems have "inertia" and can be exceptionally long lived in their 'bad' state, regardless of the policies used to try to get them out of that state.
And a lot of other things that are never going to happen
It will take a decade to dig out of this hole
And then there will be 11 million people "disappeared" from labor market
They are on a crime-spree, you don't do this much damage without malice
Look at what they are doing to the WhiteHouse Oval Office, Rose Garden, ballroom, look at the BILLION dollars stolen from nuclear missile maintenance for a personal jumbo jet, etc. etc.
Zoning is the bigger issue than interest rates with the housing market. Most hand over fist growth happened in our cities when there were higher interest rates but also plenty of zoned capacity. Zoned capacity is barely ahead of present population in cities with exorbitant housing prices today.
> The good news is that these economic problems are entirely the result of bad policies and can be reversed.
I think one danger for western countries is having governments that just move from one bad policy of one kind to a bad policy from the other end of the political spectrum. Look at what’s happened recently with resignations at the highest levels of government in multiple countries. And in America, if Trump gets replaced by someone who is put forth as a reaction to him, are they going to really do any good? Even if they had great policies, they’d be in danger of being undone a few years later. There isn’t the same guarantee of consistent forward progress that a country of China seems to be enjoying.
Strictly speaking, Volcker caused two recessions (the first of which likely ended Carter's re-election prospects).
Although raising interest rates tamped down inflation on the demand side, we don't give enough credit to Carter for attacking the supply side by deregulating energy markets.
Carter typically doesn't get credit because prices didn't really ease until he was out of office. However, it looks like energy prices wouldn't have decreased if Carter hadn't deregulated the oil and gas industry, which allowed domestic producers to become competitive. (Ironically, Carter thought deregulation would raise prices and foster a move to alternative energy. Instead we got shale oil and fracking. Unintended consequences.)
This post is right about some things, including the general solution to staglation, and wrong about others. Paul Volker was Fed Chair between 1979 and 1987, not 1973. The 1973 crash and recession were not caused by his actions, if you had to pick a single cause, I think Opec would be it.
The interest rates were wild in 1982. My dad said that no one would lend for a mortgage, and we ended up doing seller financing to buy my childhood home.
Also, not enough people talk about housing prices in high interest rate environments. Mortgage payments are the thing that tether housing prices, and act as a lever. We see it today with just an extra 4% with low housing volume and people reluctant to sell, because then they’d need a new mortgage at the new rate. People who would like to downsize don’t since their mortgage payments often ends up similar.
I remember my parents being excited about the opportunity to refinance their mortgage to something in the high teens. And now these days headlines act like the apocalypse is occurring when mortgage rates are in the 6-7 range.
If inflation is lower than the rate the federal reserve hikes rates to, you can ride out stagflation in money market funds and other types of income-generating investments. The real pain is when it doesn't. Stocks decline, cash declines, and there really is nowhere to hide. TIPS? I-bonds? Both are indexed to the CPI, which policymakers have loudly signaled they are okay gaming and manipulating for political favour.
You’re vastly underestimating the income and political effects of stagflation. Historically speaking, one doesn’t ride it out. It’s fixed fast or the system collapses.
I heard Volcker speak once, you could still see him remembering how hated he was for those years of the Volcker Shock on his face. Strained and a little sad.
As he raised the federal fund rate to 20%, Volcker became widely hated indeed. Businesses and consumers suffered because of his actions.
Politicians of course tried to take control of the Fed. They also tried to fire him. At one point he needed Secret Service protection. Here's an article from the 1980's about it:
Today's economy is all about politics. There are people who still hold out hope or confuse economic data with economist. Populism >>>> good policy. No one wants to be the next Volcker. So, this is likely going to stagflation. I hope I am wrong because this can be ripple effects all over the world.
There's a theory that changing regulation Q to uncap interest rates on savings accounts had more to do with ending stagflation than the fed funds rate hikes.
I'm not smart enough to fully evaluate if that's true, but it was an interesting theory to me at least.
So uh, I'm the first person in my family to break the cycle of poverty. I have nobody I trust to follow advise with money. I do all the 'standard' boring investment strategies (401, index funds, roth, etc). I don't bother with crypto (scams). What does one do if stagflation is coming? Float more cash? Buy real estate?
U.S. dollar loses value, property depreciates (no one can afford payments) and equities have their P/E ratios slammed (and we are at all-time historic highs...)
So the solution historically has been stable goods. Gold is the historic standard, but probably Bitcoin now as well. Possibly foreign stocks/currencies. But since everything is so interlinked now with pensions and 401ks that the financial world is far different place than the 70s. If you really want a safe bet, it's that there will be a fair bit of volatility and every asset class will have more risk with spikes up and down. All of this depends heavily on how the U.S. responds along the way.
Basically anything but hold cash, at least until interest rates are forcibly pushed to the moon to try to break out of stagflation. Assuming you can avoid selling whatever you've bought until the other side.
[EDIT] If you think we're in for a long period (decades) in which nobody will do what's needed to break out of stagflation and we're going to head the way of various inflationary South American economies over the past century, I guess look at Europe? IDK, it'll be bad everywhere if that happens.
This time won’t be like the last. The point of such episodes is to destroy capital. A rational response would be to de-lever before everyone else. Focus on the meaningful and the productive in the near-term, disregard promises about the future.
If you’re aggressive, issue long-term, fixed rate debt and buy whatever you think everyone else will view as personally meaningful or currently-productive, provided someone didn’t beat you to it.
Arguably we’re 40 years into the “cash is trash” trade so everyone is in a little bit of suspense what happens next.
Bogleheads [1] gives better financial advice than HN. Every time I peruse some threads there, I learn something new about personal finance I didn't know about.
Gold, make sure your debts are low, trim expenses now. Start thinking long term, what things will you need 5-10 years from now that will only be much more expensive or hard to get.
That depends - if you are good at timing the market you would sell your stocks at the peak, put it into cash for a year or two and then buy long term low risk, high interest rates bonds that cannot be called... Too bad I don't know anyone who can time the market. (I'm not confident that stocks will start falling before the bond rate peaks, even though that is my guess).
My guess is that real estate will not do well in general. However there are always exceptions, but I don't know if the exception is in Dallas Texas (random big city), or Chaseley North Dakota (random place not even a town, cannot support even one store)
Real assets like precious metals, commodities, real estate should do well during stagflation. I think crypto (mainstream ones, not fringe) should be doing well too IMHO, despite the skeptics.
Well there is another issue: trust in the dollar is waning, so central banks have been buying gold. If Trump messes too much with the fed's independence, this can only get worse.. One source theorizes that his admin. is doing this not so much to lower interest rates, but to get the fed to reduce interest it pays to banks for money they keep at the fed (a thing that started after the GFC). The idea is that then the banks would buy treasuries instead, which might reduce the debt payment burden on the government.
Anyway... gold is all about wealth preservation, not growth, so I don't know what to tell you. But it is up 44% over the last year.
Well if you were following sound financial advice and understand the economics from an Austrian perspective you'd likely be diversified into several equal buckets with one of those buckets designed to offset the losses. You do this when it doesn't matter because you can never time the market. No one can.
In the case of inflation/stagflation it would be physical assets that increase in value under such circumstances. Gold/Silver meet this, as do many other assets. Under such environments counterparty-risk must be carefully evaluated.
All of your mentioned standard strategies have opaque and significant banking counter-party risk. There are also details such as the YTM loophole where the assets you hold may not have been marked to market (when interest rates go up).
This is particularly true of any bonds, or bond backed securities, and the leverage involved in many such markets is next to impossible to discern, and as a result the average advice of passive investment breaks down towards losses in the near term but not long-term.
None of this is financial advice, just reiterating things people should already know about. The stock market's synthetic share problem coupled with dark pools, and the commodity market's (COMEX) fail to delivers and failure to loadout (physical delivery), are things to know about. Unspecified risk from bad actors.
Its all paper with substantial counter-party risk until you hold it in your hands.
Markets currently don't expect significantly higher inflation in the long term, as the "10 year breakeven inflation rate" ("The latest value implies what market participants expect inflation to be in the next 10 years, on average.") is fairly stable: https://fred.stlouisfed.org/series/T10YIE By my understanding, this is supposed to trend towards 2.0% when everything is hunky-dory; things are not perfect, but they look fine to me in historical perspective. Similarly for e.g. this 5-year forward chart: https://fred.stlouisfed.org/series/T5YIFR
> Raising rates to put stress on businesses and consumers is the only method known to work for ending self-reinforcing high inflation
Yes, and that's how we made sure that the inflation peak in 2022 didn't become self-reinforcing. And as far as anyone seems to be able to tell, it worked.
> It's what Paul Volcker did at the Federal Reserve in response to the stagflation that started in the early 1970's in the US and other countries, after OPEC raised oil prices. Volcker raised the federal funds rate in fits and starts to a high of 20% in 1981:
Right. Current circumstances are very different. Posting this much about what you "hope doesn't happen" comes across as fear-mongering, given the lack of reason to expect it to happen. The tariff discourse allows people to throw around large, scary-sounding percentages, but in practice the corresponding price increases are on average much smaller. And the employment situation in the US is still very good in historical terms. (There are valid concerns about the methodology behind the headline unemployment rate, but it's still the same methodology.)
> And the employment situation in the US is still very good in historical terms. (There are valid concerns about the methodology behind the headline unemployment rate, but it's still the same methodology.)
I should add: historically, increases in the unemployment rate have a tendency to accelerate and then produce a spike, which is then brought under control by some other mechanism, and tends to correspond with a recession. But this is just the normal boom-bust cycle, and seems rather unavoidable. The rate can't keep going down forever, and having it level out doesn't seem feasible, either. The magnitude of such a spike doesn't necessarily indicate the severity of economic downturn, either.
To the extent I come across as doubtful and concerned, it is only due to recent firsthand experiences buying food, clothes, and electronics. My perception is that prices are still rising in many product categories. Anecdotal evidence is not data, so I can't and won't make a prediction, but I think it's fair for me to express doubt and concern.
All I know for certain is that we'll find out as more data becomes available.
> the Federal Reserve would be forced to raise interest rates
That's just not happening, no matter what happens.
The President is obsessed with lowering rates, because it personally enriches him, regardless of how it affects the economy. The cronies he has in line to replace Powell and the SCOTUS seeming like they'll back his unlawful removal of the Fed governors he doesn't like, means the independence of the Fed is guaranteed dead in, at most, 2026.
The businesses that should be pushing back just... Aren't? 5 billionaires just had a foot-kissing session with Trump. Law firms are capitulating. Most education institutions are capitulating. Companies would rather bribe Trump with gold statues (Apple) for their own short-term kickback than speak up even a tiny bit to prevent a mid-term economic collapse.
I genuinely don't see the US avoiding a self-inflicted (global) depression anymore.
I've been saying this same thing for awhile, the problem is a lot of sentiment bots have been downvoting it out of view within 24 hours, taking karma as they go. Yesterday lost 10 points for a single post same subject, basically the same as yours.
There are a number of subjects now where its almost to the point where any discussion is fruitless because anyone talking is getting punished by third-parties, and moderation aint doing a thing about them.
Your right it will be real bad, much worse than before because most of the Volcker recovery was on the back of the global adoption of the petrodollar. The situation is the exact opposite today where you not only have petrodollar pools of money coming back domestically but also runaway government spending.
If you compare our modern economics with that of Argentina over the past 100 years, we seem to be following the same policy pitfalls. These things largely only happen because of excessive money-printing under fiat, certain government policy and regulation can cause it as well.
Last administration cooked the books on BLS numbers for nearly 2 years, issuing corrections and all that nobody paid attention to. They also redefined what a recession is during the last administration.
Trump is incompetent at best (a crony at worst), a bull in the legislative China shop, and revels in drawing attention to himself... so it shouldn't be too surprising people are on high alert during his tenure and news headlines get more attention.
Last administration cooked the books on BLS numbers for nearly 2 years
I'm going to need to see a citation for such a claim...
You do know economic data is not used only by "economists", right? Given that you seem to dislike the word "economic" data, focus only on the data part. Tell us how politicians/policy makers run the country without data? How do they know rates have to be increased/decreased if they don't have such numbers? Through wishful and magical thinking about focusing on the basics?
I think it's interesting that everyone's immediate reaction now-a-days is to assume incompetence or maliciousness, rather than curiosity at the root cause (very telling this attitude has even permeated a forum for supposed 'hackers').
A high-level is that 80% of the economy is very easy to track b/c it's not very volatile (teachers, for example).
What we have seen is a huge surge in unpredictability in the most volatile 20% of jobs (mining, manufacturing, retail, etc.). The BLS can't really change their methods to catch up with this change for classic backwards compatibility and tech debt reasons.
Part of the reason 'being a quant' is so hot right now is that we truly are in weird times where volatility is much higher than most people realize across sectors of the economy (i.e. AI is changing formerly rock-solid SWE employment trends, tariffs/electricity are quickly and randomly changing domestic manufacturing profitability, etc.). This means that if you can build systems that track data better than the old official systems, you can make some decent money investing against your knowledge.
I think this is a bad state of affairs, but I don't have a good solution. Any private company won't release their data b/c it's too valuable and I am reluctant to encourage the BLS to rip up their methods when backwards compatibility is a feature worth saving.
Is there really more volatility? My gut feeling is that government interventions have flattened it over recent decades. I’d like to see some real figures on this.
Manufacturing and mining are becoming much less correlated to the overall jobs market (likely, as you point out, b/c the government smooths the other sectors).
Can you actually prove volatility is higher now than in the past? There have been plenty of volatile changes in the workforce over the past several decades, this is not anything new to the job market.
> interesting that everyone's immediate reaction now-a-days is to assume incompetence or maliciousness, rather than curiosity at the root cause
I came across this claim last week regarding recent US jobs figures:
> "All jobs gains were part time. Full-time jobs: -357K. Part-time jobs: +597K"
If this claim is true, and I have no means to tell if it is, then - regardless of one's view on whoever is in power right now - do we really expect any elected representatives to be brave enough to say that out loud at a press conference?
Explain to me please why job numbers aren’t simply a matter of querying the Federal social security database? A longstanding process of polling businesses for what they want to report, followed by corrections up to one year later, has got to be a pantomime to fudge the numbers.
So the answer is payments per social security id are not reported to the social security Electronic Federal Tax Payment System (EFTPS), employers only report aggregate payments. And workers and employers only report payments by individual in W2’s in January.
Probably the only reason is because the BLS and SSA are completely separate, and SSA is probably antiquated and doesn't attempt to tag or organize their data along the same parameters as whatever the BLS defines. It likely neither has the staffing nor resources to provide those hooks and realtime anonymous aggregated data for other departments to consume.
A lot of people don't understand that collecting data is actually expensive and difficult when it doesn't involve surreptitiously stealing it via some piece of tech.
It's not without precedent, but the fact that initial job numbers have been consistently inflated over the last 3 years and that the magnitude of the downwards revisions is on par with 2008-2009 for two years in a row (and growing) is concerning.
That gives context, but lacks the final ~900K downward revision the article is about. If it had been shown, it would be the largest revision on the chart.
(reposting a version of my comment somewhere below)
The BLS (USA) does adjust the numbers every month (for two months after the initial release) and annually. Regardless if the numbers go up or down, this is fairly common with statistics and forecasting in general. When actuals come in, the forecast is adjusted closer to reality.
Anecdotally: It gets lost in the mix of headlines when those adjustments show that the initial projections were on trend, or "close enough the talking heads don't care enough". However, it gets "interesting" when it's off-trend; or confirms prior notable good/bad news. In this case, it confirms* what was suspected, mostly confirms what was reported. As actuals came in, the reality was worse than projected.
*"Confirms" use case here: job growth is poop right now.
The department of labor has a methodology that gives an early number that tends to get revised. They have been doing it the same way for a long time and it would not be controversial, except the business press with too little news to report makes a big deal about it with very little context. So its, like jobs increased 200k (not saying +/- 200k is the error bar). It would be good for everyone if people who are not professional economists paid less attention to this.
Not to be a Doomer but the last time I recall a revision around this magnitude was during the GFC[1].
Summary of the benchmark revisions The March 2009 benchmark level for total nonfarm employment is 131,175,000; this figure is 902,000 below the sample-based estimate for March 2009, an adjustment of -0.7 percent. Table 1 shows the total nonfarm percentage benchmark revisions for the past ten years.
People often get hyper-focused on a single cause, but there is a whole range of forces driving a sharp decline in jobs. All of this is visible, yet we are marching toward an economic crisis of our own making. I believe the best term for this is "gray rhino".
* Tariffs and Trade Uncertainty – Elevated tariffs and rapidly shifting trade policies are raising costs for manufacturers and discouraging hiring and investment (Investopedia; Atlanta Fed survey; CBO analyses).
* Automation and AI Displacement – Automation and AI, especially in low-skill occupations, are reducing new job creation and wages for some workers (academic studies in arXiv and PMC).
* Restrictive Immigration Policies – Tightened immigration and visa processes are straining labor supply, particularly in sectors that rely on immigrant workers (Axios, 2025 labor coverage).
* Small Business Strain from Economic Pressure – Tariff-related uncertainty is leading small businesses to slow hiring or lay off employees (Joint Economic Committee report, 2025).
* Offshoring and Outsourcing Trends – Technological advances are enabling offshoring and automation, substituting domestic labor with remote or machine-based alternatives (academic research in World Development, 2024).
if anyone else is curious, beyond all the political football stuff happening with the bureau of labor stats, Odd Lots did a good episode recently on the challenges with monthly jobs reports
Would also recommend the Moody's Talks podcast led by Mark Zandi, the Moody's Analytics chief economist. He's been more or less talking about this for months now and sounded the alarm much earlier than others about this prospect.
I second this. Probably my favorite podcast right now. Interestingly, I admire Mark's guts to make somewhat bold calls early, but I trust the co-hosts' (Marissa, Chris, and Dante) takes a bit more for some reason.
I do not think ADP goes back and adjusts the numbers from its previous reports. I think this is because ADP does not use sampling - ADP uses the actual data from the private companies for which it provides payroll services. With this data is pretty clear, among many other things, how many people were employed at this particular company in this particular geography at this particular time. ADP then aggregates all of this data in its report.
Right -- I guess I'm wondering if ADP figures were lower than BLS figures by a proportionally significant margin (enough to possibly confirm these new values). I haven't been able to find the figures myself.
Readit News
https://en.wikipedia.org/wiki/Stagflation
I sure hope not, because stagflation would be extremely unpleasant for everyone. Central banks like the Federal Reserve would be forced to raise interest rates, to put stress on businesses and consumers, so businesses find themselves unable to raise prices further and consumers find themselves unable to demand greater pay at work.
Raising rates to put stress on businesses and consumers is the only method known to work for ending self-reinforcing high inflation. It's what Paul Volcker did at the Federal Reserve in response to the stagflation that started in the early 1970's in the US and other countries, after OPEC raised oil prices. Volcker raised the federal funds rate in fits and starts to a high of 20% in 1981:
https://en.wikipedia.org/wiki/Paul_Volcker#Chairman_of_the_F...
It worked. Volcker's actions are widely credited with ending self-reinforcing high inflation. His actions also triggered a recession.
Stagflation itself triggered a stock market crash in 1973-1974. It took over 20 years, until 1993, for the US stock market to recover:
https://en.wikipedia.org/wiki/1973%E2%80%931974_stock_market...
Like I said, it would be extremely unpleasant, for everyone. I hope we don't end up with stagflation.
If we were to also raise broad based taxes, it would allow the Fed to cut interest rates, stoking long term investment, loosen up the housing market (which would allow more people to move), lower the Federal deficit, and improve the trade balance (as if that actually mattered).
Tariffs affect households unevenly [0], but I think it would be fair to characterize them as broad based taxes.
[0] Some good info here: https://budgetlab.yale.edu/research/state-us-tariffs-septemb...
What I'm saying is that these types of systems have "inertia" and can be exceptionally long lived in their 'bad' state, regardless of the policies used to try to get them out of that state.
And obeying the Constitution
And a lot of other things that are never going to happen
It will take a decade to dig out of this hole
And then there will be 11 million people "disappeared" from labor market
They are on a crime-spree, you don't do this much damage without malice
Look at what they are doing to the WhiteHouse Oval Office, Rose Garden, ballroom, look at the BILLION dollars stolen from nuclear missile maintenance for a personal jumbo jet, etc. etc.
Trump's inconsistent tariff and policy flip flopping means no one trusts the US to behave rationally and predictably.
The fact that the US population elected him a second time means that the US as a whole can't be trusted to behave like rational adults.
Decades or centuries of reputation has been thrown away. That can't be changed just by a new face saying "sorry we want to take it back".
I think one danger for western countries is having governments that just move from one bad policy of one kind to a bad policy from the other end of the political spectrum. Look at what’s happened recently with resignations at the highest levels of government in multiple countries. And in America, if Trump gets replaced by someone who is put forth as a reaction to him, are they going to really do any good? Even if they had great policies, they’d be in danger of being undone a few years later. There isn’t the same guarantee of consistent forward progress that a country of China seems to be enjoying.
Although raising interest rates tamped down inflation on the demand side, we don't give enough credit to Carter for attacking the supply side by deregulating energy markets.
Carter typically doesn't get credit because prices didn't really ease until he was out of office. However, it looks like energy prices wouldn't have decreased if Carter hadn't deregulated the oil and gas industry, which allowed domestic producers to become competitive. (Ironically, Carter thought deregulation would raise prices and foster a move to alternative energy. Instead we got shale oil and fracking. Unintended consequences.)
I knew that, but my puny little brain somehow didn't catch it as I was writing my comment.
Deleted Comment
Also, not enough people talk about housing prices in high interest rate environments. Mortgage payments are the thing that tether housing prices, and act as a lever. We see it today with just an extra 4% with low housing volume and people reluctant to sell, because then they’d need a new mortgage at the new rate. People who would like to downsize don’t since their mortgage payments often ends up similar.
Politicians of course tried to take control of the Fed. They also tried to fire him. At one point he needed Secret Service protection. Here's an article from the 1980's about it:
https://www.latimes.com/archives/la-xpm-1987-04-05-fi-492-st...
When has it not been? It's how we actually determine the allocation of resources
I'm not smart enough to fully evaluate if that's true, but it was an interesting theory to me at least.
https://cepr.org/voxeu/columns/what-really-drives-inflation
Deciding that stagflation is coming and changing you asset allocation based on a solicitation of opinions from random people is probably a bad idea.
If nothing else you should look for academic papers on ways to estimate expected inflation instead of asking for opinions here.
https://fortune.com/article/buffett-how-inflation-swindles-t...
So the solution historically has been stable goods. Gold is the historic standard, but probably Bitcoin now as well. Possibly foreign stocks/currencies. But since everything is so interlinked now with pensions and 401ks that the financial world is far different place than the 70s. If you really want a safe bet, it's that there will be a fair bit of volatility and every asset class will have more risk with spikes up and down. All of this depends heavily on how the U.S. responds along the way.
[EDIT] If you think we're in for a long period (decades) in which nobody will do what's needed to break out of stagflation and we're going to head the way of various inflationary South American economies over the past century, I guess look at Europe? IDK, it'll be bad everywhere if that happens.
If you’re aggressive, issue long-term, fixed rate debt and buy whatever you think everyone else will view as personally meaningful or currently-productive, provided someone didn’t beat you to it.
Arguably we’re 40 years into the “cash is trash” trade so everyone is in a little bit of suspense what happens next.
[1] www.bogleheads.org/forum
My guess is that real estate will not do well in general. However there are always exceptions, but I don't know if the exception is in Dallas Texas (random big city), or Chaseley North Dakota (random place not even a town, cannot support even one store)
Anyway... gold is all about wealth preservation, not growth, so I don't know what to tell you. But it is up 44% over the last year.
https://www.amazon.com/Investing-Amid-Low-Expected-Returns/d...
In the case of inflation/stagflation it would be physical assets that increase in value under such circumstances. Gold/Silver meet this, as do many other assets. Under such environments counterparty-risk must be carefully evaluated.
All of your mentioned standard strategies have opaque and significant banking counter-party risk. There are also details such as the YTM loophole where the assets you hold may not have been marked to market (when interest rates go up).
This is particularly true of any bonds, or bond backed securities, and the leverage involved in many such markets is next to impossible to discern, and as a result the average advice of passive investment breaks down towards losses in the near term but not long-term.
None of this is financial advice, just reiterating things people should already know about. The stock market's synthetic share problem coupled with dark pools, and the commodity market's (COMEX) fail to delivers and failure to loadout (physical delivery), are things to know about. Unspecified risk from bad actors.
Its all paper with substantial counter-party risk until you hold it in your hands.
Markets currently don't expect significantly higher inflation in the long term, as the "10 year breakeven inflation rate" ("The latest value implies what market participants expect inflation to be in the next 10 years, on average.") is fairly stable: https://fred.stlouisfed.org/series/T10YIE By my understanding, this is supposed to trend towards 2.0% when everything is hunky-dory; things are not perfect, but they look fine to me in historical perspective. Similarly for e.g. this 5-year forward chart: https://fred.stlouisfed.org/series/T5YIFR
> Raising rates to put stress on businesses and consumers is the only method known to work for ending self-reinforcing high inflation
Yes, and that's how we made sure that the inflation peak in 2022 didn't become self-reinforcing. And as far as anyone seems to be able to tell, it worked.
> It's what Paul Volcker did at the Federal Reserve in response to the stagflation that started in the early 1970's in the US and other countries, after OPEC raised oil prices. Volcker raised the federal funds rate in fits and starts to a high of 20% in 1981:
Right. Current circumstances are very different. Posting this much about what you "hope doesn't happen" comes across as fear-mongering, given the lack of reason to expect it to happen. The tariff discourse allows people to throw around large, scary-sounding percentages, but in practice the corresponding price increases are on average much smaller. And the employment situation in the US is still very good in historical terms. (There are valid concerns about the methodology behind the headline unemployment rate, but it's still the same methodology.)
I should add: historically, increases in the unemployment rate have a tendency to accelerate and then produce a spike, which is then brought under control by some other mechanism, and tends to correspond with a recession. But this is just the normal boom-bust cycle, and seems rather unavoidable. The rate can't keep going down forever, and having it level out doesn't seem feasible, either. The magnitude of such a spike doesn't necessarily indicate the severity of economic downturn, either.
To the extent I come across as doubtful and concerned, it is only due to recent firsthand experiences buying food, clothes, and electronics. My perception is that prices are still rising in many product categories. Anecdotal evidence is not data, so I can't and won't make a prediction, but I think it's fair for me to express doubt and concern.
All I know for certain is that we'll find out as more data becomes available.
That's just not happening, no matter what happens.
The President is obsessed with lowering rates, because it personally enriches him, regardless of how it affects the economy. The cronies he has in line to replace Powell and the SCOTUS seeming like they'll back his unlawful removal of the Fed governors he doesn't like, means the independence of the Fed is guaranteed dead in, at most, 2026.
The businesses that should be pushing back just... Aren't? 5 billionaires just had a foot-kissing session with Trump. Law firms are capitulating. Most education institutions are capitulating. Companies would rather bribe Trump with gold statues (Apple) for their own short-term kickback than speak up even a tiny bit to prevent a mid-term economic collapse.
I genuinely don't see the US avoiding a self-inflicted (global) depression anymore.
As opposed to the current economic environment and that of the past 5 or so years, which absolutely nobody thinks is unpleasant.
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There are a number of subjects now where its almost to the point where any discussion is fruitless because anyone talking is getting punished by third-parties, and moderation aint doing a thing about them.
Your right it will be real bad, much worse than before because most of the Volcker recovery was on the back of the global adoption of the petrodollar. The situation is the exact opposite today where you not only have petrodollar pools of money coming back domestically but also runaway government spending.
If you compare our modern economics with that of Argentina over the past 100 years, we seem to be following the same policy pitfalls. These things largely only happen because of excessive money-printing under fiat, certain government policy and regulation can cause it as well.
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Wasn't a news story then, but is now b/c trump.
At least, this allows Europe to rise, again.
A high-level is that 80% of the economy is very easy to track b/c it's not very volatile (teachers, for example).
What we have seen is a huge surge in unpredictability in the most volatile 20% of jobs (mining, manufacturing, retail, etc.). The BLS can't really change their methods to catch up with this change for classic backwards compatibility and tech debt reasons.
Part of the reason 'being a quant' is so hot right now is that we truly are in weird times where volatility is much higher than most people realize across sectors of the economy (i.e. AI is changing formerly rock-solid SWE employment trends, tariffs/electricity are quickly and randomly changing domestic manufacturing profitability, etc.). This means that if you can build systems that track data better than the old official systems, you can make some decent money investing against your knowledge.
I think this is a bad state of affairs, but I don't have a good solution. Any private company won't release their data b/c it's too valuable and I am reluctant to encourage the BLS to rip up their methods when backwards compatibility is a feature worth saving.
Manufacturing and mining are becoming much less correlated to the overall jobs market (likely, as you point out, b/c the government smooths the other sectors).
https://fred.stlouisfed.org/graph/?g=1Mc3I
This is despite being a relatively flat % of employment since 2010 (after a long period of decline).
https://fred.stlouisfed.org/graph/?g=1Mc4f
As mentioned, there is also the weirdness of SWE's going from 'better than the overall market' to 'worse than the overall market'.
https://fred.stlouisfed.org/graph/?g=1Mcer
Retail employment is also dislocating.
Those are just the examples I can think of with no research, I'm sure there are others.
I came across this claim last week regarding recent US jobs figures:
> "All jobs gains were part time. Full-time jobs: -357K. Part-time jobs: +597K"
If this claim is true, and I have no means to tell if it is, then - regardless of one's view on whoever is in power right now - do we really expect any elected representatives to be brave enough to say that out loud at a press conference?
I don't :/
The lag is because it is based on employer submissions that are quarterly or annual.
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(edit - see for instance Aug 2024: https://seekingalpha.com/news/4142722-why-was-there-such-a-b... )
Such simple statistics and data gathering should be simple for a federal organization.
The BLS (USA) does adjust the numbers every month (for two months after the initial release) and annually. Regardless if the numbers go up or down, this is fairly common with statistics and forecasting in general. When actuals come in, the forecast is adjusted closer to reality.
Anecdotally: It gets lost in the mix of headlines when those adjustments show that the initial projections were on trend, or "close enough the talking heads don't care enough". However, it gets "interesting" when it's off-trend; or confirms prior notable good/bad news. In this case, it confirms* what was suspected, mostly confirms what was reported. As actuals came in, the reality was worse than projected.
*"Confirms" use case here: job growth is poop right now.
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* Tariffs and Trade Uncertainty – Elevated tariffs and rapidly shifting trade policies are raising costs for manufacturers and discouraging hiring and investment (Investopedia; Atlanta Fed survey; CBO analyses).
* Automation and AI Displacement – Automation and AI, especially in low-skill occupations, are reducing new job creation and wages for some workers (academic studies in arXiv and PMC).
* Restrictive Immigration Policies – Tightened immigration and visa processes are straining labor supply, particularly in sectors that rely on immigrant workers (Axios, 2025 labor coverage).
* Small Business Strain from Economic Pressure – Tariff-related uncertainty is leading small businesses to slow hiring or lay off employees (Joint Economic Committee report, 2025).
* Offshoring and Outsourcing Trends – Technological advances are enabling offshoring and automation, substituting domestic labor with remote or machine-based alternatives (academic research in World Development, 2024).
[1] https://en.wikipedia.org/wiki/Michele_Wucker#Gray_rhinos
[2] https://en.wikipedia.org/wiki/Grey_swan
April 2025 interview: https://podcasts.apple.com/us/podcast/some-of-americas-most-...
August 2025 interview (after BLS head statistician was fired): https://podcasts.apple.com/us/podcast/bill-beach-on-how-trum...
Some notes and a transcript: https://www.crisesnotes.com/bloomberg-odd-lots-podcast-trans...