Supply chain chaos could trigger 1970s-style inflation: Stephen Roach

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Economist Stephen Roach warned that the United States may conflict with inflation in the 1970s.

The former Morgan Stanley Asia chairman worries that the impact of soaring energy prices on China’s troubled supply chain will be a turning point.

This week, crude oil prices exceeded US$80 per barrel for the first time since 2018, and then fell to US$70 in the mid-term.

“In the past year and a half, we have indeed encountered supply chain problems. They have affected many commodities, such as inputs semiconductor There are vitality And China’s power-related shortages,” Roach told CNBC.”Trading country” on Wednesday.

Last year, when China tried to cope with the Covid-19 shutdown, he began to warn about China’s supply chain problems.

“A supply chain failure far from stagflation”

Roach, a senior researcher at Yale University and a major authority in Asia, said: “We are a supply chain failure away from stagflation.” “Unfortunately, this seems to be working.”

Stagflation refers to the pressure to push up prices during periods of slowing growth.

“This is worrying about the overall economic outlook and raises serious questions about the wisdom of central bank policies-especially the Fed’s policies,” he said.

Roach is critical of the Fed’s historical loose monetary policy and questioned the need for excessive stimulus measures in the context of rapid and possible long-term inflation.

“Possibility to continue [supply chain] The transfer of bottlenecks from one region to another is surprisingly reminiscent of what we saw in the early 1970s, and it shows that inflation will remain at these high levels for longer than we thought,” Roach said.The Fed has begun to retreat Recently, it is believed that these pressures will quickly subside. “

He believes that if stagflation becomes a reality, it may coincide with the peak holiday consumption season.

“The impact will be mainly through the price level,” Roach said. “We need to look more closely at the potential risks.”

His latest prediction comes after he warned “trading nations” that the United States and China are At the beginning of the cold warAccording to Roach, this relationship is still controversial because China’s “common prosperity” promotes It seems to balance wealth.

“The real risk is this potentially huge change in policy strategy,” Roach said.

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