Why Americans are incredulous about the strong economy

Growth Is Up. So What’s Up With the Economy?

I don’t think we should minimize that strength. America’s economic performance since the end of the pandemic has substantially outpaced the rest of the developed world and has also very substantially bested the performance of the Chinese economy. Inflation is still elevated, but is well below the post-pandemic peaks; meanwhile, unemployment is extraordinarily low despite substantial increases in interest rates. Consumer spending is high, businesses are investing—it’s really been an extraordinary recovery.

I wonder whose blog in 2020 and early 2021 predicted this would happen? Yup…you’re reading it. Things are playing out exactly as I said they would. The US is pulling way ahead of the rest of the world, especially post-Covid, thanks to large-cap tech, consumer spending, innovation, etc. Such consumer spending is not just attributable to the stimulus checks either–things like home remodeling or luxury lifted trucks that a $1,000 check is an immaterial amount by comparison. The money is coming from somewhere–be it higher wages, home equity, stock appreciation, debt, etc. The rich and upper-middle class are the main drivers of US economic growth and dominance, contributing disproportionately to consumer spending. But in fairness, I was wrong about inflation, but so was almost everyone else, save for Peter Schiff and the usual guys who make the same hyperinflation prediction every year.

From the April 2021 post Convergence to the global hegemon, the US has continued to pull ahead of European countries and emerging markets:

Same also for the disparity between US and China dollar-adjusted and real economic growth and asset appreciation relative to the rest of the world. Emerging markets, Europe, South America, Middle East, Russia, etc. will continue to lag as money pours into the strongest and safest of economies, those being China, the US, Japan, and a handful of others as everything else lags, and also Silicon Valley, Seattle,

And from that same article, “The US dollar will remain strong in spite of massive stimulus and other spending.” Sure enough, the Yen made a 3-decade low against the dollar today. The DXY US dollar index is close to historic highs and is very strong:

But what can explain the disconnect between objective the strength of the US economy, compared the public’s perception of the economy, which is more negative? Why is Biden getting no credit for the strong economy, when a strong economy is almost always a positive?

There is the widespread perception that the government is underreporting inflation for politically motivated reasons, or that the calculations are inaccurate. ‘Real’ GDP, which came in at almost 5% for the most recent quarter, possibly ignores or overlooks hidden forms of inflation, meaning that the actual GDP should be lower. As discussed in my article The trinity: enshitification, tip inflation, and shrinkflation there are forms of inflation that may be unaccounted for by the ‘official’ stats, such as shrinkflation, tipflation, recurring services, or planed obsolescence. People are paying and spending more, indirectly, without prices having to actually go up that much or at all.

Recurring services are a major drain on personal budgets. Companies had the epiphany that they can make more money and minimize sticker shock by selling their product cheap, or even give it away, and then earn back the difference (and more) by making their product a service. For example, if a new refrigerator originally costs $1,000–and then it’s discounted to $500 but there is also a mandatory $100/month ‘refrigerator service charge’, which every year increases by $10/month–is this inflationary or deflationary? The fridge is nominally cheaper initially, but after five months it costs more. Rent-a-Center is the future of America, or at least was a trendsetter.

The second factor is social media. Social media is a portal to the worst of humanity. I am not surprised people think things are getting worse. Negative stuff is always going viral on Twitter–stuff like looting or shoplifting videos, fight footage, or public freakouts. The ubiquity of smart phones and social media means occurrences of unrest that decades ago would have been ignored, are recorded, uploaded, and go viral. It’s like the 24-7 news cycle but on steroids and magnified. Everyone is now a reporter, and footage is promoted by algos.

Twitter underwent a major overhaul after Elon’s takeover and bears almost no resemblance to its prior state during the Dorsey-Agrawal era, having become the digital-equivalent of Fox News, but with much more virality, popularity, and influence. It’s not so much about propaganda in a top-down manner, but rather affecting sentiment. Let’s say you want to affect sentiment towards Biden in a negative light. This can be done by recommended footage on Twitter of him falling or slipping on stairs, at scale to millions of users, and to users who just signed up as the default choice of content and accounts to follow. Pre-Elon it was the opposite: recommended content tended to cast ‘the right’ in a negative light.

Twitter users by default are shown and recommended the most divisive and negative but viral of content and accounts. Viral content of America’s alleged societal collapse and invectives about how half the country is either evil or insane, is par for the course. And after being inundated by this content every day for years, of course, we can expect it to have some effect on the American psyche towards increased pessimism and distrust of authority figures and institutions, particularly against the left.

As I said, liberals are bad at coordinating. Letting Twitter fall into the hands of Musk was a grave unforced strategic error that basically forfeited a major organ of propaganda to someone who openly holds values antithetical to the left. It’s not just the divide between the far-left and the mainstream/neoliberal-left, but also that liberal elites are bad at coordinating. My belief is that elites perform their jobs without much enthusiasm and see their roles as perfunctory, and pay little mind to long-term things like strategy. They want the status and pay of being elite, and will even compromise their values for this.

Had liberal finance elites coordinated by outbidding Musk, who didn’t even want the site and tried to renege on the deal, Twitter would not have lost advertisers, so not only would elites retain control of a major arm of propaganda, but also not lose money in the process. This also leaves a major opening for the right by coordinating better than the left.