Economics — Finance
How U.S. Income Inequality Will Increase With New Lending Changes
It’s not a recession… until it is.
One of the most common ways people have been keeping up with inflation has been by relying on their credit cards or other loans. Despite this, there has been a subsidy that many have been enjoying and have long forgotten about, their student loan. Many Americans are staring at October in their calendar wondering how they are going to make ends meet, because this is when the first payments are due after the end of Covid-19 relief.
However, it’s not just student loans that people are having a problem with. Lately people have been starting to fall behind on their credit card and loan payments.
There is no wonder why people are leaning on their credit lines with inflation and cost of living as high as it is. However, what it’s leading banks to do is raise the requirements to allow people and businesses to take on a line of credit because many creditors are beginning to default.
The only way around this is for the Fed to lower interest rates, which Wall St Banks have been pressuring the Fed to do. But the trick is that will make inflation go up, which means more pain for everyone. It really is a pickle.
From the perspective of the Wall St banks, they would prefer a lower interest rate so that the likelihood of a default decreases and they can ramp up their lending businesses again. Though it will never be like the overleveraged heydays in the past.
As we can see, for the U.S. inflation had fallen to 3% in June with an interest rate of 5.08%. In general, interest rates should be above the CPI (inflation rate) to prevent it from jumping.
Yet for August, even though the interest rates remained high, inflation has began to…