Economists echo stagflation warnings as Musk takes aim at IRS

(Originally published Feb. 18 in “What in the World“) Nobel prize-winning economist Joseph Stiglitz has added his voice to those warning that Trump’s policies risk throwing the U.S. economy into stagflation.

With U.S. President Donald Trump’s tariffs likely to aggravate inflation, his capricious policies are simultaneously likely to deter corporate investment, said Stiglitz, who advised former President Bill Clinton. That view is echoed by former Pimco CEO Mohamed El-Erian in an op-ed for the Financial Times.

With persistent inflation likely to keep interest rates high, investment anemic, and the government bureaucracy being haphazardly dismembered by Elon Musk’s un-elected shock troops (who are now laying siege to taxpayer records at the Internal Revenue Service), more companies could tip into bankruptcy: delinquencies among U.S. corporate borrowers rose 24% at the end of 2024 from the year before, to $28 billion in bank loans.

The combined fears of inflation and slower growth have made gold one of the hottest investments of the Trump Administration so far. While the benchmark S&P500 stock index has climbed less than 2% since Trump’s inauguration, gold has surged more than 7%.

Real estate, on the other hand, isn’t so hot. With U.S. mortgage rates at eight-year highs, demand for housing fell to its lowest since 2020, while supply of housing rose to its highest since 2020, which portends a glut.

Trump’s government layoffs are also imperiling key scientific research, particularly into the prevention and treatment of disease, according to the American Association for the Advancement of Science.

The eastern United States, meanwhile, is in the grips of the polar vortex, which has buried the northeast in snow and has sent deadly floods to Kentucky, Tennessee, Virginia, and West Virginia.