The Government created the bifurcation of the American Economy
This may seem a bit harsh, but I believe that during Covid and the stimulus that was created to "save" the economy, the bifurcation of the US economy deepened.
The stimulus created lots of checks going out:
to pay people not to work
help pay rent
pay for people who had kids to support them
For a small moment in time (about a year) those at the bottom of the financial pyramid felt what it was like to have a little cushion in their lives. However, this put the economy on the path to where we are today with high inflation.
This extra money chasing the same (or reduced) amount of goods has led to a run-up in prices. {We will not go into gas prices here as that has a separate set of issues.}
At the same time, when prices were rising, the FED and the US Government had to "take away the punch bowl" to stop inflation. This has put those at the bottom of the pyramid in a very difficult situation. They were just getting used to having that cushion, and now it is gone.
The economy seems to be doing just fine; people are going out to eat, flying around the country, and have jobs (lowest unemployment in a long time, if not ever). But normal people are struggling.
The Bifurcation of the Economy
This is the bifurcation. We have two economies: RICH and POOR, and it is not good. Add to that, the low interest rate environment allowed a lot of people to do very well and set themselves up during Covid.
Consumer Spending Trends
Where will they stop their spending? Walmart says that they are buying cheaper lunch meats and 1/2 gallons of milk. Gap, Target, and Kohl's are having trouble. People at the bottom are reducing their spending, and they are in a world of hurt.
Impact on Landlords
Landlords, be wary as they are going to have a tough time paying their rents, especially those rents that are up over 30% in the last couple of years.
If you have to pay $5/gallon gas and increased food prices, it is hard to have $$$ "left over" for rent. Hopefully, the economy will cool off and prices will mitigate, or else the Government will feel that they are once again "forced" to help.
Remember, "Nothing is so permanent as a temporary government program" - Milton Friedman.
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