Over the weekend, Quin Hillyer succinctly dismantled President Joe Biden's myth that the post-pandemic recovery is worth bragging about. Indeed, as Hillyer outlined, job recovery has remained anemic in comparison to similar supply shocks, and whatever gains were fueled by debt spending have been…
Over the weekend, Quin Hillyer succinctly dismantled President Joe Biden's myth that the post-pandemic recovery is worth bragging about. Indeed, as Hillyer outlined, job recovery has remained anemic in comparison to similar supply shocks, and whatever gains were fueled by debt spending have been largely erased by the cost of inflation.
But as banks downgrade their estimates that the Federal Reserve will force the nation into a recession, a greater risk than job losses threatens Main Street and Wall Street alike. It's not just Uncle Sam that seems to be running out of credit to spend. The masses have accumulated nearly $1 trillion in credit card debt, driving consumers toward a credit crunch as the Fed raises rates to offset the highest inflation in 40 years.
But the federal government did two crucial things to wipe away the purchasing power of those dollars. First, through lockdowns, the government generated pent-up demand from households that would have twice the cash to spend on vacations, restaurant dinners, and shopping sprees once commerce returned. Second, the government blew out the money supply, increasing it by a third in just three years and directly causing the worst inflation crisis since the era of former Fed Chairman Paul Volcker.
The result? Nearly 2 in 3 are now living paycheck-to-paycheck, and another two-thirds of that $2.7 trillion savings glut has dried up. For those with high credit scores, the coming credit crunch will really only hurt when it comes to finding mortgages, which, at an average of 6% for a 30-year fixed rate, now cost more than twice the price of mortgages issued prior to the Fed's rate hike campaign. But for consumers stuck with high balances and subpar credit scores, interest payments will soon outpace inflation by orders of magnitude.
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