Ed Butowsky, managing partner at Chapwood Capital Investment Management LLC, joins Fox News to discuss the impact of Stagflation on American Families.
In a recent report in the LA Times finds more drivers in California are calling for help from AAA requesting gasoline because they have simply run out while on the road. This coincides at the same time that gas prices have spiked up again, the national average for a gallon of gasoline is $3.82 – almost a dollar higher year over year.
The fact that drivers in California are trying to squeeze every last drop of gas out of their tank adds to the ripple effect that is occurring in the economy today with regards to inflation – enter stagflation. Ed points out that the US is entering a very tough economic time known as stagflation.
What is Stagflation:
Stagflation is a situation when the inflation rate is high and slow economic growth. Recovering from stagflation is rather difficult as the actions designed to lower inflation could potentially worsen economic growth and vice versa. There are two potential reasons why stagflation occurs:
- Firstly, stagflation can occur when productivity of the economy is limited because of an unfavorable supply shock, such as the recent increases in the price of oil. The rise in oil and ultimately gas prices slows the economy by making production more costly and less profitable.
- Secondly, stagflation can occur when the economy is experiencing stagnation and inflation as a result of central banks in the US and around the world allowing excessive growth of the money supply as well as stagnate growth of goods and labor markets.
The current economic policies in place do not appear to be helping, and therefore these economic conditions will continue. Moreover, as the government continues to print money the cost of goods, not just gasoline, but also prices at the grocery store and many others will go up ultimately costing us more money.
Its unknown as to the future impact of rising gas prices on american families. The average gas prices are above $4 per gallon in 5 states, and with the current economic state have the potential to rise over $5 per gallon. As long as the government continues to print money how high could gas prices go?
When looking back in history gas prices have been known to spike and than precipitously drop back to within nominal range. However, Ed believes with the growing demand for oil from countries like Brazil, Russia, India, and China (known as the BRIC countries) the price of a barrel of oil will not go down. The US government has to find ways to alleviate the struggle at the pump.
While current economic indicators are trending in the right direction are these factors reliable? Ed explains that while the stock market is trending upward in the positive and should continue the unemployment numbers are troublesome. While the workforce has not moved in the recent jobs report, the number of unemployed who have found jobs is trending in the positive. However, this number does not reflect the number of unemployed who have stopped looking for a job. The work force in this country is significantly challenged. The economic conditions in this country have to change and for the better to help American families.
A word about Ed Butowsky:
Ed Butowsky is the managing partner of Chapwood Investment Management and is an internationally recognized expert in the investment wealth management industry. Ed is also a frequent guest on other networks such as CNN, NBC, ABC, Fox News, Fox Business, and Bloomberg to name a few.
Check out some of our other articles:
- What’s happening in the world of finance?
- How to inflation proof your portfolio
- Why are financial advisors running scared?
Tags: deflation, economy, finance, financial, gas prices, inflation, manager, market, markets, money, News, oil, stagflation, stagnation, Wealth