If you are fortunate enough to have stock market investments, you are enjoying an unprecedented streak of continual wealth growth — a streak that began in 2012 by the way. But only about 50% of Americans own a piece of the stock market and most of them own a very small piece. In fact, 10% of Americans own 84% of the wealth in the stock market.
In contrast, two-thirds of Americans have credit card debt — amounting to about $1 trillion. Banks raise interest rates on people’s credit card debt as the Federal Reserve raises its rate as it did recently. The Fed has no choice — it’s legally required to raise rates to keep inflation in check as the economy overheats. And the economy is now at the overheated stage with near full employment and tax cuts pumping money into people’s pockets.
Since the economy has been improving steadily since 2012, the December 2017 tax cut threw stimulus into the mix at just the wrong time, according to former Federal Reserve Chairman Ben Bernake. Or, as the New York Times put it, “the Republicans’ $1.5 trillion tax giveaway to the wealthy and corporations… threw gasoline onto a very hot barbecue.”
The average credit card interest rate was already over 16%. Rising rates affect over 92 million Americans who are already carrying too much debt in what seems futile effort to maintain a middle-class lifestyle in the Trump economy. Their increased debt payments will more than wipe out any benefit they got from the Republican tax cut.
And hold on to your hats for the coming price inflation on televisions, clothing, bedsheets, air conditioners, and other imported goods now required to pay higher tariffs.