Former Obama advisor reveals the impact of Middle East crisis for low-income Americans
The war in West Asia is beginning to have direct consequences on American consumers, as many are already having to deal with high gas prices. As a result, low-income households in America may have to struggle more than they already do to make ends meet. Earlier, President Donald Trump had assured people that these high gas prices were only temporary, but as per former Presidential advisor Mohamed El-Erian, the shock might be too much to take for those on the edge financially.
Speaking in an interview on Fox, El-Erian stated that low-income households in America were already victims of two significant shocks. The first is high prices of essentials, which has been the case since the pandemic, and the second is a fear that their jobs would be slashed thanks to artificial intelligence. High gas prices were the last thing such people needed to worry about, but that’s what they’re getting.
“The low-income household first faced higher prices, and that goes all the way back to 2021. Secondly, they are uncertain about the labour market. They are hearing a lot of question marks. What will AI do to my job?” El-Erian stated, before adding, “The third thing they also have to deal with now is another energy shock. And gasoline, it may be a small part of your budget, but it is a crucial part of your budget.”
El-Erian, who was an advisor to former President Barack Obama, said that no one was sure where the tipping point would be for such households, but not getting close to it was definitely the objective. “We don’t know where the tipping points are, but we don’t want to get too close to them,” he added. The former advisor also penned an article in the Financial Times recently, in which he shed light on stagflation concerns.
Stagflation is perhaps one of the worst things that can happen to an economy. It is characterised by low GDP, high unemployment, and high inflation. Unfortunately, the US is dangerously close to that point. The February jobs report completely destroyed any confidence that the January report might have provided, as the US economy shed 92,000 jobs, with the rate of unemployment growing to 4.4%.
Gas was one of the few things that saw a price drop in recent years, but the war in Iran shot those prices up. For America, a long and drawn-out war smells trouble, as the economy will only inch closer to a stagflation-like scenario. “Data released earlier showed the personal consumption expenditures price index — the Federal Reserve’s preferred measure of inflation — rose to 2.9 per cent in December, its highest level since March 2024. Meanwhile, core producer price inflation, a measure of input prices, rose to 3.6 per cent, well above the consensus forecast,” El-Erian explained.
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