Transcription
A little over a week ago, I told you that the United States Fed admitted that we were in a K-shaped economy. And based on the comments, I realized that I need to give you a little bit more information.
There were two things that most of you said in those comments. One was, "Duh, we've always been in a K-shaped economy." And the reality is, I know it feels like it, but that's not necessarily true. The Fed has only admitted to specifically being in a K-shaped economy one other time, and that's postco, but there were other times in history when the Fed has admitted that we have something similar to a K that is bifrocated. Those other times in history were around the time of the Great Depression, the 1970s stagflation environment during the dotcom bust, and right around the time of 2008.
But you have to pay attention when the Fed is admitting the middle class is being squeezed out. Let me give you a little more context around this phenomenon. When we're in a K-shaped economy, economists like myself, we have to look at other economic indicators or hidden economic indicators to figure out what's going on. Right now, one of the big things is to look at certain retailers, McDonald's, Walmart, MX, Costco, Chipotle. There have been some studies that show that they're seeing major changes in consumer behavior.
There's another term that I want you to keep in mind because it identifies this change in behavior. Income elasticity of demand. What does it mean? Income elasticity of demand just basically says that consumer behavior changes as income changes. It doesn't always equal income goes up, people buy more. No, actually income can go up and certain products actually fall out of demand and other products go into demand.
This is how when I told you way before the Fed admitted that there was a K-shaped economy and I told you what to do in your business and I told you that you may need to change your business model to not necessarily service that middle customer, service ultra wealthy and people who are going to be feeling the squeeze. When you're in a K-shaped economy, income elasticity of demand, it says that more affluent customers will gear towards value like Costco and even mid-tier restaurants like Chipotle. I know you think that Chipotle is fast food, but it's not. It's actually fast casual and they're seeing some changes in consumer behavior. Wealthy people are going to Costco and wealthy people are going to Chipotle right now.
The other thing that it says is that inferior products will thrive. Dollar General is seeing some changes in consumer behavior. people are buying the generic branding. So remember as you are pricing your products either go high where luxury those people are just not affected at all or go low and look for value inferior products pricing the middle they are completely getting squeezed and the banks are admitting it the Fed is admitting it and the retailers are admitting it. So no it's not always been like this not always been as evident as it is today.
So you already know I'm going to go in depth in my newsletter. I'm going to give you some prompts that you can run through AI with very specific wording that will help you to change how you navigate your business in a K-shaped economy. So, comment newsletter down below. You get last week's newsletter plus this week's newsletter with these very valuable prompts. This why it pays to pay attention in school, y'all. Y'all ain't think y'all was going to use economics 101. newsletter down below.