Just over a month ago, economists were so frightened of a potential recession they refused to call it by its name. The dreaded R word kept the financial punditry quaking in their boots on news shows—which feels a bit quaint now that we’re seeing signs of a possible stagflation on the horizon. Despite sounding like Yosemite Sam’s reaction to setting his drawers on fire, stagflation is just about the worst possible economic condition. As a portmanteau of “stagnant” and “inflation,” this kind of recession hits us with the triple threat of sluggish economic growth, rising inflation, and high unemployment rates. Until stagflation hit the United States in the 1970s, many economists did not believe this kind of economic crisis was possible. Since recovering from the 1970s-era stagflation, the U.S. has never experienced (or come close to experiencing) another bout—although stagflation in the Japanese economy in the 1990s proved that this phenomenon is not unique to America.  To better understand what stagflation is, how it develops, and what we can do to protect our finances, I spoke to Kevin Matthews II, former financial adviser and founder of the financial education firm BuildingBread. Drawing on his economics degree from Hampton University and his experience teaching over 400,000 investors, Matthews has been raising the alarm about possible stagflation since March. Here’s what he shared. Recession vs. stagflation While no one jumps for joy over a recession, anyone older than the age of 20 has likely lived through more than one. Recessions are relatively common and follow a predictable pattern. According to Kiplinger, since the end of WWII, the U.S. economy has experienced a recession about once every 6.5 years, with an average recovery time of 11.1 months. This means that economists, despite their apparent terror about mentioning the word, understand recessions. “ We’ve gone through recessions before,” Matthews says. “We have answers to recessions.” Stagflation, on the other hand, isn’t normal. The U.S. economy is facing the first significant threat of stagflation since the 1970s. Unfortunately, “stagflation does not have a clear answer,” according to Matthews. “It’s worse than a recession.” This concern was echoed by economist Adam Posen of the Peterson Institute for International Economics. In a speech on April 15, 2025, Posen forecast that the U.S. economy has a 65% chance of entering a recession. But the worse news is that the situation could become a stagflationary recession, which he believes the Federal Reserve is unprepared to handle. Pulling the economy in opposite directions Matthews describes stagflation as the economy moving in two different directions at once. On the one side is inflation, where goods and services cost more money. On the other side is a slowing economy, where high unemployment leads to lower discretionary spending. This contradicts the traditional economic belief that inflation and unemployment are inversely related, as described by the Phillips curve. According to this economic theory, higher unemployment coincides with lower inflation and vice versa. Which is why the stagflation of the 1970s came as a surprise—and why economists still disagree about what exactly causes it. But this time around, we know exactly why we’re facing a potential stagflationary recession. It’s because of Trump’s tariffs. “This is definitely an anomaly” Even though stagflation is already rare, Matthews regards our current situation as a “weird and unique case.” “In the 1970s, the stagflation was partially oil related,” he says. “OPEC, which included a bunch of different countries, banded together to economically harm the U.S.” The oil embargo wasn’t the only driver of the 1970s economic crisis, but it was part of the reason consumers felt the effects of stagflation from 1973 to 1982—especially the long lines at the gas pump Grandpa is always going on about. In 2025, it’s Trump’s tariffs that are causing both inflation and stagnation. “ This is very much a man-made problem,” says Matthews. “In theory, we could just not have tariffs and things would go back to normal.” Unfortunately, in addition to the unforced error of Trump’s tariffs, our economy is also grappling with the chaos of how the tariffs have been implemented. “Things keep moving so quickly,” Matthews says. “Tariffs are paused then unpaused. They go from 10% to 20% to 104% to whatever it is by the time this day is over. Consumers and businesses can’t plan their purchases.” In other words, even if the president immediately called a halt to the tariffs—which would probably end the specter of stagflation—the uncertainty and chaos we’ve already experienced would still affect the economy. “At a time like this, people don’t want to invest in the United States,” Matthews explains. “Companies don’t know where to build or invest or hire.” The Fed’s on/off switch With Federal Reserve chair J