Hoo-boy. We think we know the devils of inflation and slowing growth. Tightening monetary policy and loosening monetary policy are, respectively, the accepted (mostly) treatments. I believe there is sufficient historical evidence that such efforts, when applied judiciously, can nudge the economy in the right direction. “Nudging”, as opposed to “shoving”, is a key to success.
Now we have the specter of stagflation rising before us. Ugh. That’s a devil we don’t know how to deal with. Patience, responsible monetary policy, responsible consumer and business behaviors are important, but that (in my opinion) has been limited in supply, lo, these last twenty years. Okay, maybe closer to countless than twenty, but that’s a conversation for Dr. Pangloss’ Bar and Grill.
I thought someone during the Nixon administration coined the term “stagflation”, but not so. Iain Macleod, a former Chancellor of the Exchequer in Great Britain, did that in 1965 when describing the British economy. A quick look at the internet – Iain Macleod – Wikipedia – reveals the gentleman to be an interesting character who helped lead England through some challenging, dynamic, interesting, and important times. I think I’ll spend some more time reading about him, although I don’t know when…my “to-be-read” stack has become more daunting than exciting. This is a rare condition in my life, and not one I enjoy at all. Maybe I should turn off the TV, but I think we covered that a few months back.
Back to Stagflation.
My only first-hand experience with it was during the Nixon Administration. My personal experience was limited because I was a goofy, self-centered teenager more concerned with girls and cars than the troubles of the world, but perhaps that is the way it should be for all teenagers. Sometimes we use this space for wishful thinking, in case you need reminding.
The 1970s were hard times for workers of all skill levels in America. Construction workers, from Joe Lunchbucket to engineers in Seattle, and everyone in between, were knocking on doors looking for any work. It just wasn’t there.
A Little Historical Perspective
Then came 1973 and the Arab oil embargo. Then Mr. Nixon responded by imposing wage and price controls, imposing import surcharges, and ending the gold standard. Eeeeek. The economy got worse. By my measure, it didn’t get much better until Paul Volcker took the reins at the Federal Reserve and gave us a bitter dose of disinflation. It also gave us a double-dip recession that hung around for about two years. Since then, we have had close to fifty years of growth since. There were, of course, recessions along the way.
Lest you think I am trivializing recessions, here is a little research. Since 1973, there have been six recessions in the US:
- Oil Crisis: 1973-1975, Sixteen months
- Regan’s Recession: 1980, Six months & 1981-82, Sixteen months
- Gulf War: 1990-1991, Eight Months
- Dot Com Bubble: 2001, Eight Months
- Global Financial Crisis: 2007-2009, Eighteen months
- COVID-19: 2020, Two months
- 2022: Not officially a recession, but over a 25% drop in the S&P 500
Now don’t despair. I am not trying to upset you, but I am trying to give us a little historical perspective. And DO NOT think I am predicting a recession. I haven’t a clue. Actually, that’s not true. I have lots of clues. I got ‘em from different economists and market analysts, and they vary from “the best of all possible worlds” to “the apocalypse is upon us”. I believe neither.
I do believe that there will be a recession and/or a market downturn in the future, but it is completely unknown as to when. As you know, I can say that on any day of any century, past, present, or future.
So, what to do?
Stay on the plan. If you are afraid of market downturns, make sure you have enough cash to fund your retirement needs and wants for at least a time period equal to those we talked about just a few paragraphs ago. If you have 20+ years before retirement, be prepared to hold your nose and wade through the stench of bear markets. History suggests it is the wisest path.
A word of perspective
Both my parents were born in 1928. The Great Depression defined their childhoods and formed a financial outlook that lasted their whole lives. They were stereotypical parents of baby boomers. WASPS, southern democrats, conservative, Southern Baptist, Dad earned the dollars, and Mom managed the household. They raised three boys during the 60s and 70s. We (the sons) grew our hair long and listened to rock & roll; our parents were distraught. Kids across the nation protested on college campuses against their government. There were church bombings, political assassinations, riots in the streets, and a breakdown of moral values. America was going to H— in a handbasket, and we were doomed.
Hope Is Not a Strategy
Times changed, attitudes changed, and a new day dawned. The great American experiment in a Republic survived … and then thrived. Picking up the newspaper (or the virtual equivalent thereof) is not a happy occasion these days. But those who tell you, “Things have never been this bad before,” are just wrong in every way. I have a friend who likes to tell me, “Hope is not a strategy.” He’s right, you must have a plan and some discipline to boot, but I often reply to him, “Yes, but it is the only way to live.” You be of good cheer and positive outlook. We are in this together, you and me.
PS. Word of the month: Nadir
This one was a recent WORDLE word, and I was surprised that neither of the people in the room when I solved the puzzle on the SECOND try had heard of the word. And yes, the main reason I selected this as the word of the month was so I could boast about the one and only time I solved WORDLE on the second guess.
October 2025
