Economics in the Modern Day

Economics is a subject that comes with more than enough to bore you to sleep if I’m being quite honest. From the charts, jargon, and formulas, becoming disconnected from everyday life can be easy. Yet an essential truth is that economics is everything, from your morning coffee order to finding a new role in the workforce. Economics breaks these interactions into a science where we learn how things are interconnected and create the outcomes we strive for, whether as individuals, households, companies, nations, etc.

I started Zacatzi Holdings to make these connections more straightforward. After years of working in various industries—from the military to sales to coordinating logistics—and studying economics, I have witnessed economic forces manifest in most daily activities. My goal is to break down economics in a way that feels practical, relevant, and with a modern approach that is easy to follow, whether you’re an investor, parent, small business owner, or just wanting to learn about the topic as we all try to make sense of the news.

This is the first in a series of articles that will bridge the gap between economic issues and households and show the importance of economics in our daily lives. I start with inflation, trade, and the Fed.

Inflation has been on the rise since COVID-19, and what feels like a lifetime ago, we started to see its effects around the end of 2021. But inflation doesn’t always look the same — today’s version is very different from what we just saw a few years ago. During COVID, we saw demand-pull inflation, which occurs when spending exceeds the limited supply. However, the current inflation we are experiencing is called Cost-Push Inflation, where businesses raise prices due to rising costs within their supply chain, such as the raw materials produced to create the good, or, most recently, the additional costs from importing those goods.

Let's start with what we saw in 2021 by comparing the two types of inflation. For many Americans, it means a stimulus check that was used to maintain the level of spending that we had become used to. With technology being an essential factor in modern times, many can work from home and find ways to reduce expenditure. Now, while places did shut down or even went out of business, the essentials were still there, and even new markets could open, satisfying the needs and wants that many of us have. However, the tradeoff with finding these new prices meant value had to be added, leading to inflation within some industries, and eventually to the goods and services we use daily.

In the present day, we see this inflation being transformed into the latter. Inflation has slowed, but prices are not returning to where they were before COVID. With global tensions rising and tariffs being a central topic in the news, the shift to Cost-Push inflation is expected.

So, what can a consumer do? This brings up another topic in economics: elasticity. Elasticity measures how sensitive demand is to price changes. For example, eggs have risen in price, yet many still include this item in their weekly shopping cart. Thus, it would be considered an inelastic good. Unlike a streaming service, which might increase its price, it would be considered an elastic service. Companies use the shifts in demand created through the elasticity of goods and services to see where they can raise prices, and what items might need assistance through a business cycle to prevent losing price-sensitive consumers.

Moving on from inflation, the job market is another key part of economics. Recently, you might have heard that unemployment levels are low, and they are. However, job security isn’t present for everyone who wants a job, nor are wages rising equally. The labor market operates like its own machine, where some sectors are booming and others are being laid off. Even workers moving across industries find higher pay or flexibility with their schedule.

But even in the current labor market, it can’t be seen as the big picture alone. It’s part of a broader economic policy that leads to the Federal Reserve, or the Fed. The Fed tracks employment data to decide whether to raise or lower interest rates. With fewer workers, wages rise as businesses compete for labor. And will use the data as a signal to raise rates and slow inflation. On the other hand, if hirings start to slow or layoffs increase, rates may be reduced to stimulate economic growth.

As I mentioned, the Fed works to stabilize both inflation and employment. It must be independent from the political system, with its core mission being the dual mandate. The dual mandate is price stability, keeping inflation under two percent, and maximum employment, allowing anyone who wants to enter the workforce to find a job.

The goals can and usually are challenging to achieve, and they never align with rapid changes in the real world. Inflation on the rise means interest rates increase, affecting hiring or borrowing costs. On the other hand, when unemployment is high, the Fed may want to lower rates, which stimulates the economy but comes with the harm of rising prices.

As mentioned above, having independence from the political side of government allows the central bank to focus solely on monetary policy. Congress created it in 1913, and the autonomy to act alone on the dual mandate enables the Fed to insulate itself from short-term pressure and focus on long-term economic growth.

In the present day, with inflation still elevated and the labor market still uncertain, tough decisions are being made. Should it cut rates to promote economic growth? Or stay cautious to prevent spikes in household goods? The answer isn’t clear, but it affects all consumers, from mortgage payments to savings accounts.

Whether it’s the prices of groceries, job stability, or the interest paid on a credit card bill, economics is involved with every transaction. These issues are not obvious, as consumer inflation, labor shifts, and rates are not abstract terms; they affect how we live, spend, and plan. By understanding the Federal Reserve’s role, the concept of elasticity, and the real-world impacts of supply and demand, consumers can make more informed decisions in their daily lives. Through Zacatzi Holdings, I aim to break down these economic forces in an approachable and relevant way, not to create anxiety but to inform and empower.