Wall Street concerns growing of a regression to 1970s-style stagflation

The United States economy has been teetering on the precipice of disaster since the COVID-19 pandemic, and especially since the arrival of President Biden to the Oval Office. Inflation has been at all-time highs, as have interest rates, with no end in sight. No matter how many times Biden whispers his 'Bidenomics' plan is working.

It has not gotten better into the year 2024. Consumer price index reports from December and January came in above estimates, which have fueled more fears inflation might be here to stay for some time. Wall Street, who usually remains cool, is even worrying now about a regression into stagflation akin to that of the 1970s.

Economist Vance Ginn says they have not been paying attention, because this is no surprise.

"The Federal Reserve balance sheet remains at twice what it was before the pandemic...there is a lot of money sloshing around in the economy," he says. "That is contributing to this potential for higher inflation...and it will likely keep going up because they cannot get their act in order."

The issues that plagued the country back int he 1970s are not all that different from today. There were spikes in oil prices, rising unemployment, and high consumer price indexes. That resulted in the Fed raising interest rates to almost 20 percent.

While not as bad as then, there are parallels with today. But the big shots on Wall Street have just been asleep at the wheel.

"They are not facing a reality most Americans are...since 2021, when Biden took over, average weekly earnings are down 4.4 percent...that is another problem not reflected by the increase in the stock market," he says. "They did not consider it because they were benefitting from the high prices."

But they are wide awake now that their pocketbooks could be impacted.

"This would mean reductions in stock prices...stagflation is directly reflected with what is going on in the stock and bond market," he says. "Now they are seeing an overprices stock market...well above any historical averages."

Given the amount of national debt, which rises by over $1 trillion every 100 days, and congressional overspending, it is not outrageous to say those 1970-like numbers are on the spectrum of possibility.

The latter of those issues, congressional overspending, has been the biggest cause of this entire saga. There is only one way to fix that problem, too, and the big wigs of Congress will never like it.

"They need to rein in spending...they should cut out that excess spending from the pandemic. Let's get back to a sense of normalcy. That would help with inflation and economic growth," he says. "If we can remove the uncertainties, there would be a lot of room to grow, plus get rid of inflation and stagnation."

The Fed has signaled an interest rate cut at some point by midsummer.