Hey Peter Navarro here with this week's podcast and sub-stack for the markets, the automatic destabilizers

of a stag inflationary economy.

Hi, Peter Navarro here with this week's economy and market wrap for the week ending November 17th

2023 and yes after a surprise sharp rally over the last three weeks that tallied up almost $3 trillion in

gains for stocks. The S&P 500 gapped up on Monday on good inflation news but

otherwise remained flat for the week.

So what's next?

To answer that question, let's talk a little bit about stag inflation and the concept of automatic stabilizers over the course of the

business and stock market cycles.

Remember here that stag inflation is simultaneous inflation and either slow growth or

recession. stag inflation is not the norm as one rarely sees both

inflation and recession at the same time.

This is because recession usually quickly tame any inflationary pressures.

An economy free of stagflation tends to stay in expansion until it begins to

overheat. That's when central bankers come in to tap on the breaks by raising interest rates.

If the dose of monetary policy is just right, the economy will continue to expand,

albeit at a slower rate and inflation abates.

If rates rise too fast or too high, the result is a

recession and inflation falls far more quickly. In either scenario, there are so-called automatic stabilizers on the fiscal policy side that usually help an economy recover, often very quickly.

With these fiscal policy automatic

stabilizers as an economy slows and unemployment rises, government

assistance programs kick in.

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