When it comes to the economy, confidence is key.
However, the banking sector has threatened to disrupt how most folks feel about their financial stability.
A decline in spending slows retail sales and that, in turn, triggers a market reaction that spills back onto consumers.
At the same time, inflation-adjusted income is going down, interest rates are going up and Federal Reserve Chair Jerome Powell says turmoil in the financial sector will cause banks to tighten their lending standards, making it even harder to access the golden dollar.
All of this leaves consumers with less access to cash to cover the rising cost of food, housing and other expenses.
As households feel increasingly squeezed, that weighs on their confidence in the overall economic picture.
Surveyed Americans imply they would need an average net worth of $750K to feel “financially comfortable,” and more than several million to feel “wealthy.”
At the end of the day, it’s not so much how many dollar bills you have, it’s what you can buy with those dollars that really matters.
Any money earning less than the rate of inflation loses purchasing power over time.
Fewer consumers are planning to buy a home or car or spend money on other big-ticket items like a major appliance or vacation.
That decline in spending paired with rising interest rates alone could easily push the economy into a recession in the near term.
Wall Street has been debating whether the country is heading into a recession for months, although many economists expected it to occur in the second half of this year.
Still, thanks in part to a strong labor market, the economy has remained remarkably resilient, dodging the inevitable major downturn on the horizon so far.
Much remains to be seen if we will continue to do so, and partly it comes down to consumer confidence.
Folks are scared. They were just put through a global pandemic that they were greatly lied to about. They were distributed unearned money from the government which aided them in complying with the government’s wishes.
The household savings rate skyrotted to an all time high only to tumble to an all time low in a record period of time… Followed by record high credit card debt holdings.
Every dollar they have and earn is worth significantly less than it was just a short time ago. On the path we are on, most contemplate if they’re going to make it or lose it.
It’s a very uncertain time for many Americans, many who deserve better than this from their Government. Not in handouts, but in proper management which is greatly lacking.
I cannot emphasize enough that you MUST be self sustainable. You MUST be able to earn a living for yourself and your dependents without counting on others.