The Economy We’ve Been Dealing With Ever Since COVID
- COVID created a bifurcated economy, with upper-income thriving while middle/lower classes struggle with falling purchasing power.
- Wage gap vs. income gap are distinct issues, as the 'K-curve' economy leaves the middle class shrinking.
- Reducing the Fed's balance sheet and lowering interest rates could provide economic relief for Main Street.
The Economy We’ve Been Dealing With Ever Since COVID
The economy is a complex and ever-changing beast, and understanding its intricacies can be a daunting task. In this episode of Tony Katz Today, Tony is joined with EJ Antoni, chief economist at Heritage, to break down the current state of the economy and what it means for the future.
One of the most striking aspects of the conversation is the discussion around the economy’s bifurcated nature. EJ explains that “this is another example of the kind of bifurcated economy that we’ve been dealing with ever since COVID. If we roll back the clock to twenty nineteen, you had an economy where both lower income as well as middle income and upper income folks were all doing better.” However, since COVID, the economy has shifted, and only the upper-income bracket has seen their incomes outpace price increases, while middle-class families and lower-income individuals have fallen behind.
This phenomenon is reflected in the recent surge in Disney’s stock prices, which has left many scratching their heads. EJ notes that “if you look at what the average American’s weekly paycheck can actually buy, and you look at what happened to that weekly paycheck again, what it could buy, in other words, adjusted for inflation, over the four years of Joe Biden, it fell about accumulative four percent or so.” This stark contrast between the wealthy and the middle class is a pressing concern for many Americans.
The conversation also touches on the topic of income gap versus wage gap, with EJ highlighting the importance of understanding the difference between these two concepts. He explains that “it’s interesting that there is certainly a difference between wage gap and income gap, and this idea of not the Bell curve, but what’s known as the K curve, and the idea that you can have rich growing, poor growing, the middle class shrinking, and that usually leads to unrest and things not being very good.”
The discussion also delves into the potential impact of President Trump’s nomination of Kevin Warsh to lead the Federal Reserve. EJ shares his insights on Warsh’s background and his potential policies, noting that “this is a guy who during the global financial crisis and the mortgage meltdown… he was the one saying to the rest of the people on the FED, he was there at the time, he was the one saying, guys, you’re making a mistake here.”
One of the most significant takeaways from the conversation is the potential for the Federal Reserve to reduce its balance sheet and lower interest rates, which could have a positive impact on the economy. EJ explains that “when the FED adds or subtracts from its balance sheet, that basically means the FED is going to be buying or selling assets… when the FED buys these things, it is creating money in the process.” By reducing its balance sheet, the Federal Reserve could put downward pressure on prices and lower interest rates, benefiting Main Street.
As the conversation comes to a close, EJ emphasizes the importance of understanding the complexities of the economy and the need for a more nuanced approach to addressing its challenges. If you’re interested in gaining a deeper understanding of the economy and its implications for the future, this segment of Tony Katz Today is a must-listen.
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