Hidden Forces Moving From an Income-Driven to a Credit-Driven Cycle | Bob Elliott
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Oct 7, 2024 In this engaging discussion, Bob Elliott, co-founder and CEO of Unlimited, delves into the Federal Reserve's strategic shift from fighting inflation to fostering labor market growth. He and Demetri Kofinas explore the potential shift from an income-driven to a credit-driven economy, fueled by increased borrowing. They also analyze China's economic situation and the implications of its stimulus for global markets. Additionally, they dissect the role of labor strikes and the importance of effective asset allocation in a changing economic landscape.
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Income-Driven Cycle
- Analysts often misinterpret the current economic cycle by viewing it through a credit-driven lens.
- This cycle is income-driven, fueled by wage growth and spending, not borrowing.
Velocity of Money
- The velocity of money, representing how quickly money changes hands, is financing the current expansion.
- Increased spending from higher wages drives income, which fuels further spending, increasing velocity.
Household Balance Sheets
- Household balance sheets are strong overall, with high net worth driven by asset appreciation.
- However, this is bifurcated, benefiting asset owners (boomers, older millennials) while younger cohorts struggle.