Inflation And the Side Effects

Inflation is increasingly evident to consumers. As more people turn to credit to cover everyday living expenses, credit card defaults are rising. New Federal Deposit Insurance Corporation (FDIC) data shows that U.S. banks are offloading billions of dollars in uncollectable debt. The FDIC's latest Quarterly Banking Profile report revealed that U.S. banks reported $21.3 billion in net charge-offs in the second quarter, driven largely by credit card delinquencies and troubled commercial real estate loans.

The new figures come as JPMorgan Chase, Wells Fargo, and Bank of America reported billions of dollars in net charge-offs for Q2. JPMorgan Chase reported $2.2 billion in net charge-offs, Wells Fargo $1.3 billion, and Bank of America $1.5 billion. This marks the highest rate of credit card charge-offs since the third quarter of 2011.

Banks now face the challenge of compensating for these losses through higher interest rates on loans while keeping interest rates on savings low.

Inflation has other significant consequences, including:

• Decreased purchasing power: As prices rise, the same amount of money buys fewer goods and services, reducing everyone's real income and purchasing power.
• Higher interest rates: Inflation often leads to higher interest rates, making it more expensive for businesses to borrow.
• Slower economic growth: Rising prices reduce consumer demand, which can slow overall economic growth and impact jobs and living standards.
• Rising asset prices: Inflation can increase the prices of assets like homes and stocks, exacerbating wealth inequality as wealthier households tend to own more assets.
• Recession risk from anti-inflationary policies: Efforts to curb inflation can sometimes lead to a recession.
• Strain on low-income households: Lower-income consumers spend a larger portion of their income on necessities and are less able to absorb the impact of rising prices.
• Core inflation focus: Policymakers and financial markets often emphasize core inflation, excluding volatile food and energy prices. However, lower-income households spend much of their budget on food and energy, making them more vulnerable to price spikes in these areas.

While the solution to inflation is complex and unclear, it’s evident that doing nothing is not the best approach. Many people leave corporate jobs and explore franchise opportunities as a more stable alternative.

Franchise opportunities are particularly appealing for those without prior business ownership experience. They offer the advantage of stepping into a proven business model with solid support.

Is it time for a change or a new direction? Call me today, and let’s explore options that might be a good fit for you.