In 2022, investor Michael Burry predicted that persistent inflation and a rising debt ceiling would affect the savings of American consumers. His forecasts now seem to be coming to life, according to Business Insider. In fact, JPMorgan Managing Director Bob Michele is on the same page.
Americans now have to cope with inflation woes and rising borrowing costs. They have started spending less and saving more. At the same time, they have gotten into serious debt with credit cards. Michael Burry said that would eventually lead to a slump in consumer spending and a decline in corporate profits.
JPMorgan’s Bob Michele stressed there was intense financial pressure on consumers and businesses, which also fuelled the banking crisis.
The expert reckons financial woes are not the only reason behind recent mass deposit withdrawals. This is also due to the fact that Americans have faced higher prices of food and essentials. Meanwhile, companies depleted their deposits because the interest rate on their debts has doubled and even tripled.
The poorest households that spend all their savings have been hit the hardest. Their remaining deposits were close to zero. This situation triggered banking turmoil, experts concluded.
