Why Rate Cuts Caused the Stagflation Trap
The core mistake in the stagflation trap was cutting rates while fiscal policy remained expansionary and supply constraints still existed.
That created:
More demand
No new supply
Rising wages
Embedded inflation psychology
Once inflation expectations became entrenched, the Fed had to reverse course aggressively. The result was high inflation, weak growth, and collapsing real returns.
Early cuts can lift markets firstbut policy mistakes eventually send the bill.
Source: X post https://x.com/RosannaInvests/status/2007125966053949944
