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Commodity Price Surge Deals Stagflationary Blow to World Economy

The world economy is facing a buildup in stagflationary forces as surging energy prices boost inflation and slow the recovery from the pandemic recession.

Oil’s climbed to more than $80 a barrel for the first time in three years, natural gas for October delivery traded at the costliest in seven years and the Bloomberg Commodity Spot Index rose to the highest level in a decade. 

The shock has already drawn comparisons with the mix of economic stagnation and oil-driven inflation spikes that dominated the 1970s. While many central bankers dismiss this as hyperbole, the concern is that more enduring price increases will feed into demand for higher pay, tipping the economy into a vicious cycle.

Bloomberg 28 september 2021

“Stagflation” remains a word not uttered in the polite company of the financial world.

During the 1973-74 bear market S&P 500 fell 45%.

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