Stagflation is Coming!?

I have been reading many articles stating that the US is at risk of stagflation—a term used to describe a period with high inflation and stagnant growth. As someone who spends a lot of time studying economics and finance, I feel like these hit-piece articles fail to educate the reader properly, creating unnecessary fear and angst—my goal today is to fix that.Since stagflation is the combination of two economic principles, I will address each one of these separately.InflationInflation is the measurement of price increases. Most people believe that inflation occurs because the government prints money without anything backing the value of the newly minted currency—this is sometimes correct. The truth is that many things influence inflation, but the main driver of inflation is spending.Let’s assume that we give every US household $1,000,000 today—what do you think will happen? Spending will increase substantially before manufacturers can increase their production capacity. The law of supply and demand states that as demand increases or supply decreases, prices increase. By giving money to everyone, we will both increase demand and reduce supply which will cause short-term price spikes.StagnationThe thing that drives economic growth is spending—the more spending, the more growth. Spending money at a retailer gives them money to hire employees, which in turn allows the employee to spend. To have a stagnant economy, consumers and the government would have to curtail spending.With consumers spending near all-time highs and the government planning on spending trillions of dollars over the next few years, stagnation is highly improbable in the foreseeable future.So now you know.