What is a stagflationary debt crisis? This is what economists think we are headed for.
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“Stagflation” was a term coined in the 1970s for a period of simultaneous economic stagnation and price inflation. Ordinarily, inflation is driven by strong economic growth, but in stagflation, prices are getting higher *and* we’re producing less.
A debt crisis is any situation where large entities (banks, countries, mortgagers en masse, etc.) become unable to pay their debts. This usually happens when those entities borrow aggressively during times of economic growth, not anticipating what will happen during a recession. Debt crises are often brought on by economic downturns and can help to intensify/prolong them.
So putting it together, a “stagflationary debt crisis” is a debt crisis brought on by a period of stagflation. Inflation actually tends to make debts *easier* to pay off (the nominal value of the debt stays fixed while other sources of income increase), but this may be a case where the general recession in economic activity is enough to outweigh that.
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