HUNTSVILLE, Ala. (WHNT) – With the recent rise of some prices and the failure of certain commercial banks, many people may be left with questions about our current economy.
Jeff Johnson, an assistant professor of economics at Athens State University, sat down on Leadership Perspectives to answer some of those questions and try to explain some of what’s going on now with inflation and banks failing.
Johnson discussed the banks like Silicon Valley and Signature which recently failed, and what that failure really means for most people.
“For the average person, it’s not going to mean a whole lot to them. The banking industry after the great depression, the federal government wanted to protect the banking industry and the consumers,” Johnson said. “So they put in place the FDIC insurance. So for anybody who’s got deposits less than 250,000, your money is insured.”
The professor went on to explain that the failure of regional banks like the two listed above shouldn’t push consumers to withdraw their money, because even in instances where banks fail, they aren’t technically out of business. Many times the FDIC steps in to run accounts and make sure transactions continue while trying to find a suitable partner to take over those accounts.
Johnson added that withdrawing money can actually put banks in trouble since they rely on those funds for loans in order to make money.
As for inflation, Johnson tried to keep it simple.
“They could have just named it prices go up, but we had to give it a term, and so they call it inflation,” Johnson said.
With the state of our economy inflated, Johnson talked about how creating jobs could be seen as an issue. As more jobs are created, wages go up meaning prices will go up too.
Job cuts have also been a highly discussed topic recently, and Johnson discussed it as a result of our economy post-lockdown.
“What happened after COVID was we had a lot of remote working, and working away. There was a lot more shopping online and buying online, and so a lot of these tech companies had built up to meet those two new trends. And at the time inflation wasn’t an issue so they had kind of projected that these trends were going to continue at a pretty brisk pace and so they hired to meet that,” Johnson said. “And then when inflation hit and interest rates go up, the economy starts slowing down so now they’ve got too many people and those growths are not going to be met. So it’s a combination of we’re getting prepared for the new economy with inflation, but we also kind of over-predicted what was going to happen.”
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For more of Johnson’s discussion with News 19’s Steve Johnson about banks, inflation, the stock market, and our economy, you can watch the full interview in the video player at the top of the page.