Humility might be the best medicine in times of economic hardship. Economist and former Pacific Investment Management Company (PIMCO) CEO Mohamed A. El-Erian published an admonition about the American economy amidst the Iran war in Project Syndicate (1).<\/p>\n
\u201cWhile much of the world braces for the fallout of the Iran war, the U.S. might be tempted to tout its relative economic strengths, not least its energy independence,\u201d he wrote in a recent article for Project Syndicate. \u201cAgainst this backdrop, what the U.S. needs from its policymakers is not hubris, but humility and decisive action aimed at protecting those who need it most.\u201d<\/p>\n
Historically, the U.S. has managed to rebound from the toughest of economic trials. According to data from the International Monetary Fund (IMF), despite the economy contracting during the Great Recession, it still averaged an annual GDP growth of 1.48% from 2007 to 2020, when compared to only 0.59% for the eurozone (1).<\/p>\n
The IMF also found that the COVID-19 pandemic\u2019s economic disruption did not derail the U.S. for long, as \u201ca robust recovery meant that growth averaged 3.27% in 2021-25,\u201d which, again, outpaced the eurozone\u2019s 2.63%, El-Erian reported.<\/p>\n
While the U.S.\u2019 energy independence helps the country avoid the supply shortages that are afflicting Asia and Europe, while weathering the higher energy and borrowing costs spilling over from the Iran war, that doesn\u2019t mean the economy is immune to war.<\/p>\n
\u201cEven if the US economy continues outperforming its peers, it will not necessarily remain insulated from the war\u2019s adverse effects,\u201d El-Erian wrote, citing higher energy and borrowing costs as added pressures to the cost-of-living rise Americans are already facing.<\/p>\n
According to the Bureau of Labour Statistics, the Consumer Price Index (CPI) increased by 2.4% over the past year (2). This makes it the sixth consecutive year of the Fed missing its 2% target.<\/p>\n
Mark Zandi, chief economist at Moody\u2019s, told CNBC he doesn\u2019t expect inflation to decelerate, saying that inflation is \u201cstubbornly high, especially for necessities,\u201d adding that \u201cof course, this is all before the fallout from events in the Middle East\u201d (3).<\/p>\n
Read More: 5 essential money moves to make once you\u2019ve saved $50,000<\/a><\/p>\n With higher energy prices likely to lead to increased price hikes, it\u2019s clear that the U.S. isn\u2019t guaranteed to stay ahead in terms of its economy during the war.<\/p>\n What began as a surge in gas prices in the first three weeks of the war \u201cwill soon be translated into higher costs for a wide range of goods, from semiconductors and fertilizers to airplane tickets,\u201d El-Erian said (1).<\/p>\n As inflation increases alongside the risk of financial instability, Americans are seeing the impact in their daily lives.<\/p>\n For example, The Guardian spoke to a librarian from Massachusetts whose husband, who works a delivery job using his own vehicle, has had to take on extra work, sometimes working 12 to 14 hours a day. They also spoke to an Indianapolis bank employee who shared that recent increases have caused him to totally reshape his financial plan for the future, and who, at present, is opting to use public transport and drive his own car less (4).<\/p>\n As the conflict in the Middle East continues, it\u2019s important to evaluate your finances accordingly and make lifestyle changes to adapt \u2014 even in the short term \u2014 to the higher cost of living. Take public transit, downsize your home or add an extra source of income to ride out these uncertain economic times.<\/p>\n Join 250,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines<\/a>.<\/p>\n Project Syndicate (1<\/a>); Bureau of Labor Statistics (2<\/a>); CNBC (3<\/a>); The Guardian (4<\/a>).<\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"Humility might be the best medicine in times of economic hardship. Economist and former Pacific Investment Management Company…\n","protected":false},"author":2,"featured_media":562353,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[28,155,105849,249049,101,123169,801,249050,249048,2830],"class_list":{"0":"post-562352","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-dave-ramsey","10":"tag-economic-disruption","11":"tag-economic-hardship","12":"tag-economy","13":"tag-energy-independence","14":"tag-iran","15":"tag-mohamed-a-el-erian","16":"tag-project-syndicate","17":"tag-u-s"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/562352","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=562352"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/562352\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/562353"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=562352"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=562352"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=562352"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}