My definition of stagflation (and a question)

Discussion in 'Economics' started by Smart Money, Mar 1, 2009.

  1. Ok, I've not run across a book outlining the causes of stagflation, but I think I've figured it out on my own:

    "Stagflation is caused when the cost for a necessary good or service inherent in the production or the supply chain (such as energy or transportation) is artificially elevated by an outside entity that is relatively immune from the effects of supply and demand on pricing. The net result is that that elevated costs inherent in the good or service must be passed on through the production or supply chain. The consumers reaction to this is to decrease consumption or purchases where possible."

    Ok, thats my definition.

    So I think that passing a proposed law that places big taxes on carbon footprints will generate stagflation because the price of necessary goods will rise as the higher energy cost works its way through production, so the people will try to cut consumption where they can.

    In light of this, my question is...what were good investments to be in during the stagflationary period of the 1970s? I remember that precious metals did well. What else?

  2. BabyDrew


    Good investments in the '70' about computers, chips, software, pc's?
  3. Stosh


    Here in Fort Worth, Texas, real estate went up in price like crazy in the latter part of the 70's. Partly, I suppose because construction had been at a standstill in the mid 70's. There were many shocks to the system during the 70's. Nixon's wage and price controls, OPEC oil embargo, Viet Nam War, Nixon resignation, materials shortages, Iranian revolution and hostage taking, Carter years, Cuban boatlift, and others. But looking back it was a great time to buy stocks....the Dow was around 800 in the late 70's. Stosh