We are in stagflation, says economist John Adams

For the past two years, Australian economist John Adams has been predicting that the “future is going to be very bad”. In 2018, he spoke of an “economic armageddon” that awaits us.

On 2 August, in an interview with analyst Martin North on digitalfinanceanalytics.com, Adams spoke about “stagflation” that is occurring before our very eyes.

In economics, stagflation or recession-inflation is when inflation rate and unemployment are high, while the economic growth rate slows. It presents a dilemma for economic policy, since actions intended to lower inflation may increase unemployment.

“Stagflation is accompanied by rise in prices,” Adams explains to North. “Although the mainstream media is insisting that we are in deflation, I find that it is misleading. In the next few months we are going to prices not rising. And this will be accompanied by an increase in unemployment at least until December.”

“The cost of building a house has not gone up in 20 years but the cost of land has gone up, but that has been taken out of the CPI. That’s why I believe it is a housing bubble. There is a systematic underreporting of inflation”

Adams explains that the CPI or Consumer Price Index for 2020 too is misleading as “there are a number of one offs” in it. “Free childcare for instance was taken into consideration but this is a temporary measure and therefore it does not make sense to include it in a measure of state of economy. Parents are back to paying for childcare now. The CPI also took into consideration the reduction in fuel prices. This happened in February and March due to a decrease in demand for oil worldwide. But now we are going to see a surge in oil prices,” said Adams.

ABS also made specific changes to account for COVID-19, said Adams, which is distortive of the impact. “Going forward I believe we will see prices going up. Consider this—the cost of building a house has not gone up in 20 years but the cost of land has gone up, but that has been taken out of the CPI. That’s why I believe it is a housing bubble. There is a systematic underreporting of inflation. That is why I say we are in stagflation.”

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