THIS IS VERY CONCERNING

The US economy might be heading towards stagflation, and the consequences could be disastrous.

Let me tell you how:

Since the US-Iran war has started, oil prices are going through the roof.

In just 5 days, US oil prices have moved from $70 to $82, an 18% increase.

If we use this data since the last CPI data was released, US oil prices are up nearly 32%, or $19.6.

As per some estimates, every $10 increase in oil prices causes a 0.2% rise in inflation and a 0.1% drag on GDP.

Right now, the US CPI is at 2.4%, while last quarter's GDP was at 1.4%.

If accounting for the oil price increase, CPI is now at 2.8%, while the GDP has dropped to 1.2%.

This means inflation is about to run hot again, while economic growth will shrink, a scenario that's called "stagflation."

And this is the worst-case scenario for an economy.

During stagflation, if the Fed:

Does tightening Inflation will cool down, but economic growth will get worse.

Does easing Economic growth will get better, but inflation will go up even more.

Now, the only hope here is that the US and Iran reach a negotiation here, which will allow the oil tankers to move easily.

This will result in more supply entering the market, and oil prices will fall, causing future inflation to cool down while economic growth rises.

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