The Stagflation That Defined the 1970s Could Be Making a Comeback

Stagflation is a situation where there is simultaneous slow growth, high unemployment, and significant inflation. The term, which essentially means a stagnant economy, is a combination of the words ‘stagnation’ and ‘inflation.’ During a period of stagflation, wages are down and inflation is up, so purchasing power goes down, resulting in a stagnant economy.

The last time the U.S. experienced stagflation was in the 1970’s when oil price spikes combined with slow growth produced the toxic combination. While a lot has changed in the last 50 years, some economists believe stagflation could soon make a comeback.

Full Video Transcript Below:

J.D. DURKIN: The highest inflation in four decades has led some to compare today’s conditions to those of the 1970s. But back then – “stagflation,” or a combination of the words “stagnation” and “inflation,” was a major problem for the U.S. economy. Stagflation is a term used to describe an economy where there is slow growth, high unemployment, and significant inflation, meaning stagflation is this perfect storm where prices go up, currency is becoming devalued, and there’s no real economic growth. 

The term is synonymous with the 1970s, when people lined up for hours, when job losses were high and people waited hours for gas. During a period of stagflation, workers are getting paid less money, and things are more expensive, so purchasing power goes down – resulting in a stagnant economy.