Banging on about the current world experience of stagflation in this blog, (amongst other in the inflation tag line) it appears only rarely in the mainstream press, and even the blogosphere.
Whatever it is that we are experiencing, framing the landscape is critical for setting investment strategies for investors and companies, and fiscal and monetary policies.
Consider the current investment landscape. If you are twenty years old, you need to know where to put your money for risk returns. If you are fifty, you need to know where to put your money for capital preservation. Indeed, in some issues written in this blog, sovereign diversity is one of the key issues whether through migration to growing countries (such as Mexico) for employment if you are young, or placing some of your savings elsewhere if you are older.
To confuse analysis of what is written, there are arguments raging about, inflation, chained inflation, headline and core inflation, CPI and RPI, and of course my favourite, stagflation. And all mean something different.
Inflation, chained inflation, headline and core inflation, CPI and RPI are all manipulated by the government for budget boosting reasons. So ignore them – other than a vicarious interest into what the majority of the investors are doing.
Stagflation means (Wiki) the inflation rate (if it wasn't manipulated) is high and the economic growth rate slows and unemployment remains steadily high. And that has been my position for some time. But I have added deflating assets and also wage growth sub (true) inflation on the essentials.
And it is inflation in the essentials that is critical as written about here. Food, water, shelter, health and education services, and important – energy costs.
However there are some other inflation derivatives. Biflation for example. According to Wiki, first coined in 2002 by Dr F Osbourne Brown, it means there is a rise in the prices of commodity / earnings based assets (inflation) and simultaneous fall in the price of debt based assets (deflation). Further:
“With biflation on the other hand, the economy is tempered by increasing unemployment and decreasing purchasing power. As a result, a greater amount of money is directed toward buying essential items and directed away from buying non-essential items. Debt-based assets (mega-houses, high-end automobiles and other typically debt based assets) become less essential and increasingly fall into lower demand. As a result, the prices for them fall due to the decreased volume of money chasing them. The decreasing costs to purchase these non-essential assets is the price-deflationary arm of biflation.”
Okay, got that. And it does seem as though some of these criteria for biflation is being experienced today as well. But not exactly spot on. For example, mega houses and the assets of the uber rich (very high end brands) are doing very well. It is the assets of the middle classes and poorer demographics that are deflating in the OECD countries. So there is another element missing in biflation.
So I have invented a new term, which encompasses both stagflation, and biflation, with the chasm of the polarisation of wealth, and called it “triflation”. Representing both aforementioned inflation derivatives but includes the effect on the economies from trickle down policies that is polarising wealth.
Which as I have written elsewhere, ultimately gives rise to trickle up austerity, and then the next phase is “miflation”. Another invented term to encompass what is being experienced today for the 99%.
That is when the masses, impoverished through trickle down policies that give rise to stagflation and biflation, that in turn leads to trickle up austerity, eventually migrate to another country (again Mexico comes to mind) for food and essential services security.
You read it here first.
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