In financial and economy world two terms are often be used as such Recession and Stag inflation by the financial professionals and the economists to elucidate the state of economic affairs both in domestic as well as in global perspective. In last three years in particular global economists and the financial analysts are most surprisingly not sure to which economic predicament the global economy is heading for, recession or towards the stag inflation? At initial years of global financial trouble particularly in the USA, the nerve center of global economy all experts and policy makers were clamoring with a prediction of grave economic recession under the haunting specter of the Great recession memory in late 30,s particularly on seeing the growing doldrums in the USA economy having mounting debt spiral, unemployment and inflation etc. But some of them suddenly started to predict the stag inflation misgivings considering the fast changing economic scenario in the USA presumably the emerging affinity of the malaises of USA economy much with the stag inflation. For every financial professional it is most pertinent to understand the differences between the terms recession and stag inflation. Though it is quite difficult to make a clear and water tight distinctions between these two economic terms like the capital and revenue expenditures vis a vis the capital and revenue receipts in all practical sense all because the economical consequences of both are almost identical in nature as such high inflation, low consumption, low capital investments, closure of industries and enterprises, retrenchment etc. But core distinction between recession and stag inflation lies on their time of duration as well as the recession precedes the stag inflationary peril.
When the structural gamut of a nation or global economy started contraction because of many internal economic misnomers mostly for the faulty long term financial policies of a nation or on global perspective initially starts to blink for short term in the shape of recession. Therefore in recessionary exposition economy does not counter all the prescribed dangers of economical set back and it has the special characteristic of intermittent recurrences in a certain span of years and is always manageable to contain within a short time by some stop gap fire fighst by the policy makers. Per contra stag inflation not only having a most devastating lingering for an indefinite period in a domestic or in global economy but also a sacrosanct evidence of the complete structural collapse for a domestic or global economy with no immediate reprieve. One most notable thing to note in the course of said deliberation that present human civilization has never experienced stag inflation at all in it”s thousands year economic history and only one solitary instance of stag inflation often cited by the global economists that of late 70,s USA stag inflation is actually a recession misconstrued as stag inflation. Had it been the stag inflation then USA economy could not had recovered within four years just like great recession.
That for better understanding the core distinction of recession and stag inflation, it is at first to see the nature and characteristic of recession. Recession is the short term recurring high fever of economy just like the biological recurring high fever being precursor of a critical disease for the reason of internal physical and structural high disorders in a human body mainly for astute disharmony in the blood cells. Similarly recession like recurring high fever is cyclic in nature for manifold disorders in a nation or in the global financial system likewise the high national and domestic debt, excessive printing of monies, high income inequality, huge corruption etc. Just like biological fever if these financial disorders are addressed swiftly and are treated properly then the fear of any recurrence of recessionary flare can be contained permanently but just like bodily fever if it is suppressed in temporary manner by administering the financial parasutamol instead of addressing the causes of said high fever then in ultimate said highly disharmonized and defective economy suffers structural devastation and complete destruction thus giving birth of stag inflation towards which present global economy is heading for without any delusion.
The most convincing reason for said assumption lies in the past history of several domestic and global recessions from 1930’s to 2008 and thereafter. Global or domestic policy makers and governments or global financial institutions all time had tried to douse the flames by pouring bucket of waters but the fire remain seething and flourished multiplies by the ceaseless conscious fire fights of most undoing in nature by the policymakers and the governments particularly of all big economy in the world save China in the narrow interest of all mighty corporate world. As a natural corollary global economy is courting stag inflation first time in the history of human civilization and most surprisingly and by miracle all the global economists are now not under the delusion of short term recessionary maze.
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