Are you getting confused by the words "stagflation" every time you read financial news? Today, a chart will help all brothers understand this issue clearly.

First, here’s the most straightforward definition: stagflation is a deadly combo where the economy hits a double whammy—stagnant growth plus runaway inflation at the same time.

On one side, the economy is completely flatlining: consumption and investment dry up, factories close down, unemployment rises, people have no money in their pockets and dare not spend;

On the other side, prices are skyrocketing: money in hand is losing value day by day, everything gets more expensive, but wages don’t increase.

The worst part is, there’s no easy cure for this disease:

Normally, when the economy cools down, the central bank cuts interest rates and loosens monetary policy to stimulate spending and investment, which heats up the economy;

When prices are soaring, the central bank raises interest rates and tightens monetary policy to curb inflation, encouraging people to save rather than spend, which brings prices down.

But with stagflation, both actions become dead ends: raising interest rates to fight inflation crashes the economy; cutting rates to boost the economy causes prices to skyrocket.

The analogy in the chart is spot on: it’s like someone with a high fever and chills at the same time—covering up with a blanket might cause a fever, but using an ice pack makes them shiver; they’re caught in a dilemma with no good options.

This isn’t the first time this has happened. The most classic example is the U.S. oil crisis in the 1970s. OPEC imposed an embargo, oil prices soared, and production costs for companies skyrocketed, forcing prices up; high oil prices drained consumers’ wallets, shrinking spending, factories had no orders and had to lay off workers, unemployment soared, and people had even less money to spend. Prices kept rising, trapping the economy in a vicious cycle. The U.S. was tortured by this stagflation for a whole decade.

So why is everyone talking about the risk of stagflation in the U.S. again?

Look at recent data: the impact of rising global energy prices is back, U.S. PPI (Producer Price Index) is rising faster than expected, and inflationary pressures are hard to contain; meanwhile, the U.S. economy was already weak, the labor market soft, and business pressures increasing. When oil prices go up, consumers’ purchasing power gets cut again, and spending cools further.

Previously, markets were betting on when the Federal Reserve would cut interest rates. Now, they’ve flipped and started pricing in stagflation risk. The expectation of rate cuts has been pushed from March to June this year without certainty, and the style of the capital markets has completely turned around.

Finally, a honest word for all brothers: during a stagflation cycle, it’s crucial not to chase hot topics or hype recklessly. Assets that can withstand the cycle, maintain steady cash flow, and have real pricing power are the true safe havens.