Stagflation is the economic risk that everyone is going to be talking about in the days and weeks ahead.

Here's a simple breakdown on the topic:
1/ There's a lot of talk right now about the risks of stagflation.

@Business published an article titled "Stagflation Is All Anyone in Markets Wants to Talk About Now"—it's serious.

This thread provides a simple framework for understanding stagflation and our current situation:
2/ Stagflation is pretty scary.

The "stag" refers to economic stagnation—low growth and high unemployment.

The "flation" refers to inflation.

Putting it together, "stagflation" is an economic condition defined by the presence of low growth, high unemployment, and inflation.
3/ For most of history, economists believed stagflation was an effectively impossible condition.

Accepted economic theory—the so-called "Phillips Curve" developed by William Phillips—suggested there was a clear inverse relationship between inflation and unemployment.
4/ The theory suggested that with economic growth comes inflation, which in turn should lead to more jobs and less unemployment.

It had generally played out that way in macro theatre over the years, so no one questioned it.

But this all changed in the 1970s...
5/ Triggered by the oil crisis of 1973—when an OPEC oil embargo sent oil prices skyrocketing and pinched consumers—the US experienced a recession with rising prices.

Inflation hit 11% in 1974 and GDP fell for 5 consecutive quarters, with unemployment reaching 9% in 1975.
6/ For economists and the public alike, this is a big, scary problem.


Well, prices are rising but household incomes are not—consumers can't afford the same amount of goods or services as before.

Quality of life can decline precipitously.
7/ It creates a big headache for economic policymakers, as their typical toolkit for reducing inflation—namely increasing interest rates—is likely to further exacerbate the growth and unemployment challenges.

They get caught between a rock and a hard place—with no easy outs.
8/ Economist Arthur Okun developed the Misery Index—the sum of unemployment and inflation—as a measure of the pain experienced by the American public.

The index reached 20% in the 1970s—a tough time for America.

With the history as context, let's come back to the present...
9/ Prior to the onset of COVID in 2020, the combination of a historically low U.S. unemployment rate and a Federal Reserve struggling mightily to hit its 2% inflation target resulted in a Misery Index of just 5%.

But as we all know, a lot has changed since March 2020:
10/ The global economic lockdowns (and roving lockdowns since) sent unemployment skyrocketing.

In the U.S., it hit almost 15%, but the impact was global.

Despite reopenings and a better-than-expected recovery, unemployment has remained stubbornly high—sitting at ~5% in the U.S.
11/ Further, several shocks to the system—including the supply chain disarray (see thread below)—are creating an environment of rising inflation.

Even Fed Chair Jerome Powell—ever the optimist—was forced to call the inflation "frustrating" in a recent speech.
12/ Comparisons to the 1970s are abound—in particular given the surging energy and commodity prices that were a driving factor of the first documented bout with stagflation.

With natural gas, crude, and coal prices all spiking simultaneously, the comparisons don't feel way off.
13/ Market observers remain mixed on the severity of stagflation risks.

Bridgewater co-CIO Greg Jensen called out rising prices that choke growth as a key risk to which most investors are overexposed.

A consensus appears to be forming that some degree of stagflation is likely.
14/ But the persistence and degree of the stagflation is a clear point of debate.

@jimcramer declared the stagflation fears overblown.

@Nouriel sees persistent mild stagflation as the likely outcome.

The economic data and insights of the coming months will be key.
15/ Several underlying factors to keep an eye on in the months ahead:

Supply Chains—easing of the blockages or continued disarray?

Energy & Commodities—price stability, softening, hardening, or volatility?

Fiscal & Monetary Policy—continued strong support or scaled down?
17/ What comes next is anyone's guess, but developing an understanding of the basics is a great place to start.

Follow me @SahilBloom for more breakdowns on business and finance.

I also cover these topics in my newsletter. You can subscribe below:
18/ For more on stagflation, check out the articles below:……

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More from @SahilBloom

14 Oct
5 threads to get you up to speed on the global economy:
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11 Oct
By now, you've probably heard that the U.S. debt ceiling is causing quite a bit of drama in political and financial circles.

Here's a simple breakdown of its history, purpose, and why you should (or shouldn't) care:
1/ In recent weeks, the so-called “debt ceiling” dominated the news.

There was fear-mongering—and congressional grandstanding—but few have a real understanding of what it all means.

This thread is my attempt to provide a (very) simple framework for understanding the situation:
2/ First, a short history lesson.

The United States debt ceiling was formally created as part of the Second Liberty Bond Act of 1917 during World War I.

It was an important step.

Prior to 1917, any debt issuance by the government had to be specifically authorized by Congress.
Read 19 tweets
10 Oct
On World Mental Health Day, let us all remember to be there for each other in times of need.

Just because someone seems ok, it doesn’t mean they are—you never know what’s going on behind someone’s eyes.

We all go through our own struggles, but we don’t have to face them alone.
The best part? It’s really quite easy.

Reach out to a friend. Ask them how they’re doing. Listen to them.

The smallest gesture of support and love can go a long way.
In my baseball days, I had several teammates who suffered from depression.

Some of the best baseball players in the country, playing on a grand stage, but suffering alone.

There was no outlet for support—the NCAA needs to do better to provide resources for its student-athletes.
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10 Oct
Disney World celebrated its 50th anniversary on October 1.

Disney’s incredible commitment to storytelling is evident in the details and intricacies of the park.

THREAD: Storytelling principles and secrets of The Most Magical Place on Earth:
Storytelling is a superpower that's on full display at Disney World.

The park—which covers 43 square miles (2x the size of Manhattan!)—can teach us a lot about enhancing our own storytelling.

This thread breaks down the principles and secrets that make Disney World so magical:
Imagineering is the engine.

The Imagineers—a group of artists and engineers—meticulously design every aspect of the storytelling experience.

The key principles:
(1) Suspended Reality
(2) Multisensory Experience
(3) Details Matter
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Let's cover each:
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⚡️Exciting Announcement⚡️

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Read on for more: Image
The Room Where It Happens was born of the realization that the most interesting, insightful conversations have historically always happened behind closed doors…

Until now.

TRWIH is a business, technology, and investing podcast and show—but most importantly, it’s a community.
In each episode, we’ll be joined by an amazing guest as we explore the ideas, trends, and models shaping the future of business and tech.

This isn’t an interview podcast.

This is a place for casual, real-time exploration providing an inside look into how insights are created.
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4 Oct
The rapid demise of Ozy Media is a story for the ages.

Here's a breakdown on the situation and lessons:
1/ Ozy Media was founded in September 2013 by Carlos Watson and Samir Rao.

Watson had an incredibly impressive story—born to a working class Jamaican family in Miami, he would go on to attend Harvard and Stanford Law School before working at McKinsey and Goldman Sachs.
2/ He later entered the media world and had a semi-successful television career, at one point co-anchoring an MSNBC show and appearing regularly on Morning Joe.

But in 2013, he joined forces with his former Goldman colleague Samir Rao to found Ozy Media.
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