Let's talk about Trump's K shaped economy turning into an E shaped one.... - Belle of the Ranch

[TexasTowelie]

Well, howdy there Internet people. It's Belle again. So, today we're going to talk about Trump's K-shaped economy turning into an E-shaped one.

Okay. So, since January, we've started to see a change in the economy, and a new term is starting to show up in economic circles. That prompted this question. What's an E-shaped economy? Economists make up new terms and just expect us to know what they mean. When you Google it, it defines it as an economy that features affluent consumers driving growth, a struggling lower income group, and a strained middle class. That sounds like the status quo to me.

Okay, so for months we've heard and talked about the K-shaped economy, which simply put means that the rich are getting richer and the poor are getting poorer. So the rich keep spending and they're the upward directed part of the K and the poor slow their spending representing the downward part. In this version of the economy, a large portion of what's left of the middle class in this country behaves like the rich.

What's being called an E-shaped economy occurs when that portion of the middle class realizes they aren't actually rich and starts behaving like their middle class.

So instead of two parts of the economy existing, one going up and one going down, there are three. The rich at the top part of the E keep spending because, well, they're rich. The middle class becomes the middle part of the E and they start pulling back, looking for deals and slowing on spending. Sometimes they get called the Costco economy. Those at the bottom continue being at the bottom and typically end up taking on more debt.

Now, one thing I want to point out is that I don't think we actually have enough data to say this is what's happening for sure right now. It looks like it is from a couple of months of data, but it isn't set in stone yet. We can see the start of a trend maybe, but it's not ironclad.

It's important to pay really close attention right now if you're following the economy because we have inflation ticking up, unemployment ticking up, and uncertain economic growth. If the middle class is pulling back on spending, we might be closer to stagflation than we think. The reduced spending could create more pressure to shed jobs and lower economic growth. If that combines with inflationary pressure on prices from the tariffs, market uncertainty, and higher gas prices due to operation Epstein Fury, our best case scenario would be for us to go into recession for 6 to 12 months instead of lingering in stagflation for an extended period of time.

Trump's promised Golden Age has proven to not be an unprecedented economic boom for the average American. It's kind of only been a Golden Age for the rich and politically connected. Well, and it's a Golden Age for economic vocabulary where the average American has to learn about economic terms that haven't been necessary to understand in about half a century.

In a piece of historical trivia that hopefully isn't foreshadowing, the stagflation of the 70s and 80s was kind of set by a Middle East conflict and ensuing oil supply disruptions.

Anyway, it's just a thought. Y'all have a good day.