Prominent economist Mohamed El-Erian has issued a serious warning about the US economy. He fears a crisis among lower-income consumers. This problem could soon spread to the rest of the country.
The US economy is currently running in a “K-shaped” way. This means that the wealthy continue to thrive. Conversely, poorer households are struggling greatly. Many Americans are relying on high-interest debt to cover basic costs. This includes high credit card and auto loan balances. These individuals are dealing with high inflation and elevated interest rates. This combination puts huge pressure on their finances.
El-Erian worries this stress is becoming too great. He suggests this weakness could “contaminate” the whole economy. The risk of a recession is rising. The economist places the probability of a downturn at 25% to 30%. However, this is still not his main forecast. He still believes the US economy has strong foundational strengths. Still, the growing financial strain on low-income Americans is the most immediate danger. Policymakers must address this debt crisis now.
