Anyone thinking we are simply facing a repeat of 2020-style deflation is badly mistaken. Stagflation hits hard Fed can’t flood economy this time.

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The idea that we’re facing a simple deflationary crisis like the one we saw in 2020 is nothing short of foolish. During the pandemic, the Federal Reserve could just step in and unleash trillions in liquidity, keeping the markets afloat. But today’s situation is far more complicated. This is stagflation, a deadly mix of rising prices and a slowing economy. And the Fed is boxed in, its ability to steer the ship has been severely limited.

Fed Chairman Jerome Powell has already admitted it. The economic impact of tariffs is far larger than expected. This isn’t just about rising prices. It’s about a full-blown slowdown in growth as higher costs continue to cripple production and consumer spending. Powell said it clearly, tariffs have likely resulted in higher inflation and slower economic growth. These are the kinds of admissions that should worry anyone paying attention.

The real economy is already showing the strain. In March, U.S. industrial production dropped 0.3 percent. That’s a reversal from February’s modest gain of 0.7 percent. Even more concerning, the capacity utilization rate slipped to 77.8 percent, below the previous month’s 78.2 percent and below expectations. This tells us factories are not operating at full capacity. When businesses can’t even use their existing facilities to their full potential, you know something is wrong.

Manufacturing production also slowed, rising just 0.3 percent from February. That’s way below the previous month’s 0.9 percent rise and in line with a broader trend of slowing production. On a year-over-year basis, industrial production has only grown by 1.3 percent, down from 1.44 percent previously. This is the kind of stagnation you don’t want to see in a healthy economy.

And let’s not forget the reverse repo facility, a key gauge of market liquidity. In the past few days, the reverse repo facility plunged by $34 billion, bringing the total to just $54.8 billion. This is the lowest level we’ve seen since April 2021. When that facility runs low, it signals that the easy money the Fed pumped into the system is drying up. And with it, the lifeline for leveraged bets and inflated asset prices is disappearing fast.

This isn’t just about inflation or growth anymore. It’s about the survival of leveraged bets that are starting to unravel. The combination of stagnant growth and rising prices is a toxic cocktail that will leave many investors and businesses exposed. As the Fed loses control over both inflation and the economy, the risk of a full-blown market correction is growing.

The economy is on the brink. The Fed’s tools are running out. And the combination of inflationary pressures from tariffs and a slowing economy is setting the stage for a massive crash. This is no longer a question of if, but when.