What are we afraid of? There is reason to worry about both stagnation and inflation — the dreaded “stagflation.”
The best arguments against stagflation comes from looking at the cash currently held by companies and by households. They suggest that if there is a danger ahead, it is of economic overheating.
That might well bring stock market disappointment with it, and could be very dangerous. It’s not stagflation.
And for the time being, families aren’t experiencing any particular difficulty paying their debts (in aggregate — there are many tragic exceptions), because of interest rates that remain historically low. This is nothing like 2008.
All of this suggests that the “stag” part of stagflation is unlikely.
John Authers Bloomberg 4 October 2021
The median American household would need 32.1% of its income to cover mortgage payments on a median-priced home, according to the Federal Reserve Bank of Atlanta.
That is the most since November 2008
WSJ 3 October 2021