by Jeffrey A. Tucker, Brownstone:
Just how much mental and psychological trauma exists in the country and world today cannot be quantified, and I would not trust any studies that tried. But this much is clear. We have lost our footing in knowing something that scientists long believed we could know: whether and to what extent an economy is growing and prospering or going the opposite way.
Everyone seems just to be winging it these days. Ever since lockdowns utterly broke reporting, it’s been hard to tell up from down.
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The substantial hits taken by major financial indexes over the last two months seem to have triggered a shift in public sentiment from indifferent to gloomy. Probably this has nothing to do with the vast wealth held in invested retirement accounts.
Each refresh of the page seems to deliver more bad news.
This has in turn affected the willingness to spend and the outlook generally.
And yet there is something strange going on. Inflation in real time is genuinely down from its 4-year trend and showing the best numbers since 2020. Even the CPI reflects this. The jobs outlook for the private sector is slightly improving.
Why has consumer sentiment suddenly taken a dive? It’s odd because there is a paucity of evidence for a sudden shift, unless tariffs are to blame, which seems doubtful (to me).
One possible theory: the public has a form of economic post-traumatic stress disorder, a clinical name for what was once called battle fatigue and shell shock. It is what happens to the human spirit in the face of something unexpected, terrible, and ultimately traumatizing. There are stages of recovery that move from denial, anger, bargaining, and depression, with acceptance as the last stage.
That might be where we are. For years now, the national media and government agencies have claimed that all is well. Inflation is cooling. Job growth is strong. The recovery is upon us. Countless media articles have bemoaned the gap that separates real data and maudlin public perceptions. We are encouraged to believe that “shutting down the economy” is really no big deal, just something you do before turning it on again.
Stop complaining! You are rich!
It was the ultimate in economic gaslighting, something about which many of us have been kvetching for five years now.
In 2024, Brownstone Institute commissioned a closer look. The study found that the US had been in a technical recession since 2022 and with no real recovery since 2020. The authors got to this conclusion by looking at industry price data rather than the wild underestimates from the Bureau of Labor Statistics. It set that against a realistic output estimate. They show all their work. No one has ever taken issue with the study.
This is also the 5th anniversary of the greatest trauma of our lives, the lockdowns that wrecked millions of businesses, shut hospitals and churches, restricted movement, and decimated economic life by force. No one ever thought such a thing was possible.
It was a trauma for people on the level of wartime. Even now, people are reluctant to talk about it, just like granddad never spoke about his experiences in World War II.
Here we are today, desperately approaching finding normalcy again. With that has come a wake-up call concerning household finances. Real income is down. Savings are down. Bills are up. Cutbacks are necessary. They have been delayed for years as the mass media trumpeted the glories of the Biden recovery that simply did not exist or was otherwise a debt-fueled hologram.
