Economic Stress: Americans Face the Impact of Inflation and Debt

A seasoned economist has warned that inflation and higher borrowing prices are severely pinching American individuals and businesses and that the misery is far from over.

According to Stephanie Pomboy, who spoke to Fox Business on Friday, consumers are having to make concessions on their discretionary spending because housing, healthcare, energy, and food are taking up a larger portion of their budgets.

In the end, she said, consumer spending has continued to grow overall in recent months, while retail sales have barely changed.

The founder and president of Macro Mavens claimed that increased debt expenses are causing a “migraine” for firms. According to her, interest costs for S&P 500 corporations have increased 71% in the past year to reach their highest level since 2008.

 According to several Wall Street analysts, corporate earnings hit a bottom last quarter and will climb by double digits the next year.

Pomboy responded, “Nothing I look at suggests that.”  She cited factors such as the strain on consumer spending, the scarcity of labor, and strikers who raise expenses for businesses by achieving settlements and rising pay.

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Inflation Surges and Interest Rates Rise

Pomboy has been making pessimistic forecasts for a while. She issued a warning in March that the breakdown of a “everything bubble” may entail a 30% decline in stock prices and an economic disaster akin to 2008.

This summer, when inflation soared to a 40-year high of 9.1%, the Federal Reserve decided to raise interest rates from almost zero to north of 5.25% today, which is a 22-year high. By encouraging saving over spending, hiring over investing, and raising rates, higher rates can reduce upward pressure on prices.

They can, however, also reduce demand, boost unemployment, drive down asset prices, and trigger a recession.

Paul Krugman, the economist who won the Nobel Prize, is among the experts who have suggested that the fear of inflation has subsided. They think the Fed can prevent the economy from suffering a hard landing by controlling price rise. Other professionals are not persuaded.

 The retired banker and economics expert pointed out that substantial government spending has offset the stricter monetary policy of the central bank.

 Heller declared the current level of government expenditure “unsustainable” and forecast that it will end soon. He predicted that a recession might start at the tail end of this year or early in the following one.

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Source: MSN