Browsing: recession

Other reasons that can best explain the origins of stagflation include falling productivity when an economy experience falling productivity. This could be because workers becoming less efficient. The consequence of this will be falling productivity and rising costs. Structural unemployment is another cause in cases where there is a decline in traditional industries.

This creates a tendency for unemployment to rise while productivity falls. Zimbabwe, during its lost decade from 2000 to 2010, experienced this kind of stagflation.

More generally and more contextually, stagflation comes from supply shocks. These result from supply chain disruptions. Where demand for goods and services increases or is unchanged, the result is rising prices and lower productivity.

Stagflation is not desirable in an economy because citizens of a country are generally happy when prices are low and the economy is booming.…

McKinsey’s report notes that the wages of consumers are steadily being eroded. Wages in the largest economies reportedly flatlined; in other words, no significant change in their levels was recorded. Prior to the pandemic, the same wages were said to have increased, giving workers the upper hand in negotiations. The pandemic, however, drastically altered that state of affairs. Wages in developed markets post the pandemic are also related, but the advent of inflation has checked that growth and, in some instances, set the trend backwards.

In the United Kingdom, there have been reports of wages being lower year on year.

The culmination of these factors is that the outlook for global economic growth will be lower this year than last. McKinsey expects central banks to increase interest rates more assertively to deal with inflationary pressure. The risk of recession is becoming more and more prevalent.…

If it so happens that the said stimulus package is financed by increasing the money supply. It may have unintended and unpleasant consequences.

Economists have a phrase that means the same as “in a perfect world”. Economists will often say “ceteris paribus”. In a perfect world, government expenditure would have been all that is necessary to fix the lingering economic problems confronting the world post-COVID. However, reality would beg us to consider that government expenditures of money that they did not have to jump-start economies that were in a prolonged period of stasis would invariably lead to inflationary pressures. The United States has been grappling with the problem of inflation throughout 2021.

Its inflation figures are the highest they have been in decades. The fascinating thing about this current brand of inflation is that it is multi-faceted. Granted, it began when governments decided to spend their way out of an …

Economists define a recession as a subdued growth that lasts at least six months and goes for another 18 months while depression can last up to a decade. The global economy was already heading to a recession even before the outbreak and spread of COVID-19.

What has followed is global market players and governments pumping millions of dollars to contain the spread of the virus that has Wuhan city and its epicenter. The US and Europe have already announced setting up of special kitty to treat, contain and mitigate the effects of the virus both as a disease as well as the economic heat that comes with the disease.

China, the second-largest economy in the world and Italy- Europe’s third-largest economy and 8th globally- have been severely affected by cities like Rome remaining ghost-towns as economic and commercial activities come to a halt. There is a growing fear that the …