Wednesday, March 27, 2013

Stagflation will Add to Cyprus, Eurozone woes

Contra to the mainstream meme that the world has been faced with deflation*, stagflation has been the current problem. 

*the definition of inflation and deflation has been mangled to mean alot of different things.

That’s according to Zero Hedge (bold and italics original)
Even more bad news for Cyprus, which now has not only a depression to look forward to but a depressionary stagflation to boot. Bloomberg has ranked countries based on their risk of stagflation based on the following methodology: First, the average real Gross Domestic Product and average Consumer Price Index was calculated for each country from 2012 to 2014. Then the Stagflation Score was determined by multiplying average real GDP by average CPI if the average real GDP was negative or by dividing average real GDP by average CPI if the average real GDP was positive. The lower the score, the greater the risk of stagflation. The winner, or loser at the case may be? Cyprus was found to be most at risk of stagflation with a Stagflation Score of -4.733, followed by Portugal (-2.671), Italy (-2.133), Spain(-1.745) and Greece (-1.366). Switzerland was ranked least at risk with a score of (7.560), followed by China (2.612) and Japan (2.446).

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If stagflation becomes a real menace, then this will impact the “risk ON” phase of global financial markets.  And gold and commodities will recapture the public’s attention

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