 What is unavoidable is stagflation. I think that most likely what we're going to have is a period of stagflation. Stagflation is your base case scenario. Why is that? Stagflation. Everyone and their uncle, especially if they're invested in the stock markets, is talking about it right now. Now, what is it? It's obviously two words combined into one. One is stagnation. The other is inflation. Stagnation here means economic stagnation, which is a slowdown, along with a general lack of jobs and inflation is a general rise in prices of goods and services. Now, till the mid-1960s, economists believed that it is simply not possible for economic stagnation and inflation to exist side by side. Why? Because if there was a general slowdown, what would happen? Companies would produce less and if they produced less, they would sack people or at least pay lower wages and workers just to have a job would agree to take home lesser pay. If they took home less, what would happen? They would have to cut down on their expenditure. Now, the companies which sell goods and services, they would have a pile of goods in their go downs, which they would have to sell by slashing prices so that more people could afford them. But once they've got rid of their stocks, they would not want to produce more because lower prices means less profit, so they would invest less and that would generally cause a drop in prices. So, if unemployment went up, demand would drop and if demand dropped, companies would have to reduce prices. That would cause inflation to drop. That was what was believed to happen every time there would be a slowdown. But from the mid-60s and especially from the mid-70s after oil prices shot up, there was a general rise in inflation and at the same time, since cost of inputs went up, companies produced less, the sacked people unemployment went up and inflation shot up, unemployment shot up simultaneously. And that period is called the period of stagflation. People are saying it's coming back right now because across the world inflation has risen and as inflation rises, unemployment is also showing signs of rising, especially in the developed world. Now, how did the developed world deal with stagflation in the late 70s and in the 80s? They did it by increasing interest rates and cutting down on employment because there was a new breed of economists. So, now the ruling mainstream economists in the world who believed that the real problem which causes stagflation, which causes inflation is workers, their wages. When their wages go up, what happens is that they start spending more and there comes a time when everyone is employed. And when everyone is employed, what happens? Workers demand even more wages. Poor companies cannot afford it anymore. So, what they do is that they have to pass it on to consumers. They raise prices. When they raise prices, workers demand even more wages because they can't buy the goods because prices have gone up. Now, companies start to cut back. So, inflation rises and that causes companies to cut back and sack people. Unemployment rises. And how did governments deal with it till the 80s? They basically gave unemployment benefit because there were people getting unemployed. They fixed minimum wages saying, telling capitalists that look, you cannot pay less than this because if you do that, people will not consume and the economy would start to stagnate. And central banks lose in this purse strings. They flooded the economy with money, with easy money so that companies could borrow and invest and consumers could borrow and spend. But since businesses are forced to hire people at a minimum wage, they say it's not worth it. There's no profit to be made. So, they begin to contract. And workers, since they're getting unemployment benefit, they say we don't need to work at all because we're getting free money. So, consumption continues because of easy money, credit flow, but the economy contracts and unemployment continues to be hired because workers naturally don't want to work anymore. So, stagflation continues. So, what did the new mainstream economists prescribe? They said increase interest rates and cut down on government spending, remove minimum wages because you need to cool the economy down. You need to reduce demand. There's too much demand coming from workers. They need to consume less so that inflation goes down and the economy comes back on track. Note our profits don't come into the picture at all. Economists seem to believe that it is absolutely okay for profits to be made at any rate at any time in the economy. There should be no limit on it. Remember, inflation can also be curtailed by telling capitalists that there's a limit beyond which you cannot have profit margins. There is a basic wage you have to pay. The costs have to be shared by workers and by capitalists. So, if wages are curtailed, so will prices be. So, profits will be limited. But that is never going to be a prescription from mainstream economists ever. Profiteering must be allowed. Why? Because stagflation actually helps big business. It is a system by which big businesses prosper. They continue to control their market. They continue to have pricing power. They continue to push prices up to consumers because they control the market. So, their profits increase even when the overall economy slows down. Now, you would say mainstream economists, free market economists should love that. They actually tend to support big business, right? But here's the problem. What happens when inflation goes up is that the financial sector which rules capitalism today is affected. Why? Because financial assets become less valuable. Think about it. You get a stock market return of 10% on an inflation of 7%. You are left with 3%. You get a stock market return of 5%. But inflation is just 1%. You are left with 4%. So, for the financial sector, for finance capital, inflation is the biggest thing to target. Even if it means more unemployment, a slowdown that the poor become poorer, the lifestyles and the living standards of the working class is affected. That is why they tell governments and central banks cut down spending, increase interest rates, bring inflation down so that financial assets can once again continue to give the same real returns. That's the show today. Keep watching NewsClick. Like us, subscribe to us and do share this video.