The choice of the United States and Israel to attack Iran came to refute in the most emphatic way the narrative of Donald Trump about cheap energy and low cost of living in the country, which he repeated many times in order to succeed in winning the presidential elections.
Instead of relief, Americans are faced with explosive price increases, an energy shock and constant pressure on incomes, in a development that threatens to turn into a broad economic crisis.
Indeed, the economist Peter Schiff warns that the American economy is heading toward a full scale financial upheaval, as the latest data show that inflation not only persists, but is dangerously accelerating.
Reality is shaping a harsh landscape, war, energy and inflation now function as communicating vessels, effectively canceling key economic commitments and creating a clear economic boomerang for American citizens themselves.
Inflation shock
The data for February reveal a worrying acceleration of prices. Imports increased by 1.3% and exports by 1.5%, which, according to P. Schiff, corresponds to an annual inflation rate approaching 19.6%.
The U.S. Bureau of Labor Statistics confirms that these are the largest increases in recent years, with the most worrying element being that price hikes have spread across the entire economy. This means that inflation is not temporary, but is acquiring permanent and structural characteristics.
Energy shock before the peak
The situation becomes even more dangerous due to the surge in energy prices. Schiff emphasizes that these data were recorded before the full impact of the rise in oil prices was reflected, which has already reached 50% since the beginning of the war.
Increases in natural gas and fuel prices intensify the pressure, leading to chain price hikes in transport, production and consumption. Energy acts as a catalyst that spreads inflation throughout the economy, intensifying the crisis.
Economic pessimism and collapse of expectations
The deterioration of the economic situation is now also reflected in society. According to a poll by The Wall Street Journal, only 25% of Americans believe they can improve their standard of living, while nearly 70% believe that the “American dream” has died or never existed.
This trend reveals that economic pressure is turning into deep social pessimism, with citizens feeling that they are losing control of their economic reality.
The long standing problem of wages
Behind the price crisis lies a deeper problem concerning the structure of the economy. Data from the Federal Reserve show that only 51.9% of national income goes to workers, a percentage reminiscent of levels from the 1930s.
At the same time, corporate profits are growing faster than the economy, which means that growth is not translating into increased incomes for the middle class. Wages remain stagnant, while prices rise, leading to a continuous loss of purchasing power.
The housing crisis
This imbalance is clearly visible in the housing market. The average American household can afford approximately 2,093 dollars per month for housing, while the average mortgage payment reaches 2,259 dollars.
This difference reflects a harsh reality, a large portion of citizens cannot cover basic needs without financial pressure. This situation affects not only the present, but also the ability to build wealth in the future.
Trump’s promises and reality
Donald Trump had pledged cheap energy and a reduction in the cost of living. However, developments show that reality is moving in exactly the opposite direction.
The energy crisis, inflation and pressure on incomes form a picture that effectively cancels key pre election promises. What was presented as a plan to strengthen the economy is evolving into an economic boomerang with immediate consequences for citizens.
The Fed in a historic deadlock
Within this environment, the Federal Reserve is faced with a difficult equation. Schiff warns that without aggressive interest rate hikes, inflation will continue to accelerate.
However, such a move carries serious risks for the economy, as it may lead to recession. On the other hand, inaction may trigger even greater price increases.
It is a deadlock without easy solutions, highlighting the limits of monetary policy.
www.bankingnews.gr
Readers’ Comments