How to Avoid Stagflation

Inflation is typically a sign of a strong economy, but controlled inflation can create a downward spiral that can destroy the economy for years or decades. An excellent example of this is japaned in the 19 nineties and two thousands. In 19 91, the japanese government spiked rates to curb inflation, popping their economic bubble. This plunged japan into a low growth, high inflation environment for the next 20 years - called the lost decade. Raising rates too high too quickly could cause an irreversible debt crisis. When we raise interest rates, bond yields, the interest paid to bondholders rise. Since treasury bonds are simply debt that the us. Creates, raising interest rates means we