The American dream is fading: Rising interest rates and inflation hit vulnerable Americans hard

In a US economy characterized by the duality of its momentum, those at the forefront are moving ahead vigorously, while others have been left behind under the burden of rising interest rates, inflation and reduced monetary support since the pandemic. james mackintosh in his opinion column for wall street journal, Throw light on this dynamic and its implications.

“Those left behind are facing serious problems, with low-income consumers hit hardest by powerful forces: higher interest rates, inflation and pandemic-era support cuts,” he said.

Macintosh Explained how high interest rates selectively affect; People with better credit scores who refinanced during the pandemic or took out loans at near-zero rates were not hit as hard as people who are seeking loans now and don’t qualify for long-term fixed rates .

“The tightening of rates by the Federal Reserve caused credit card rates to skyrocket, from a post-pandemic low of 16% to nearly 23% for borrowers who don’t pay in full each month,” he said.

Regarding companies, lower rated companies continued to issue short-term bonds in 2021, while investment rated companies remained locked in at lower rates for a record time. This has created a scenario in which highly indebted companies, particularly those affected by the decline in demand such as office building owners i work from homeThey face even more pressure.

Buying a home and vehicle has become doubly challenging due to the combination of high prices Rate of interest Mortgage applications have increased to their lowest level since 1995. “Those who have already achieved the American dream are doing well, but for those who are yet to achieve it, it is becoming further and further away,” McIntosh explained.

Inflation has disproportionately affected low-income families, with the costs of food, energy and rent rising significantly. Although employment has been abundant and wages for entry-level jobs have grown faster than higher-paying positions, the past year has seen wage growth stagnate, hitting the incomes of low-income consumers the hardest. .

The columnist said, “The combination of high prices and high interest rates has been toxic for many low-income consumers, especially young people.”

Similarly, excess savings accumulated during the pandemic have also been wiped out, hitting low-income consumers hardest, who quickly depleted their savings. This is reflected in the stock prices of companies whose customers are in this disadvantaged position, such as discount stores and fast food brands.

Macintosh He also highlighted how, despite these challenges, the problems of those on the “slow road” have not slowed the economy overall, noting that overall consumption continues to be driven by more affluent consumers and businesses. Is.