In markets, contagious exuberance can take hold from time to time, leading to investment frenzies followed by market crashes. Most people who are interested in markets and investing find this type of collective delusion fascinating. It doesn’t just show up in markets, however - collective delusions are everywhere around us. According to Pew Research, over time, more and more Americans believe that crime is a growing problem - they believe that this is more the case nationally than locally - but statistics show that crime in the United States (and especially violent crime) has plummeted since the 1990s. There are all sorts of statistics that show that the quality of life has improved massively over time, but for some reason, people don’t want to believe that. Twenty years ago, I came across a book by Stephen Moore and Julien Simon called It's Getting Better all the Time, which examined the 100 greatest trends of the last hundred years.

which showed that people were taller, healthier, poverty rates were lower, household incomes had not only risen, but household sizes had fallen, meaning that there was more money per family member than there had ever been before. There were many eye-opening charts in the book which showed that despite all the negative news that we read - that the overall quality of life was trending upwards globally. The authors showed that a greater percentage of the global population had access to education, nutrition and clean water than ever before. Statistics like global child mortality – a statistic that pulls together many of the improvements we have experienced in terms of medicine, hygiene, access to food and shelter, safety from wars – and much more had improved massively over time. In 1800 44% of people died before their fifth birthday and today that number has fallen to 3.7%. The improvements aren’t all in the distant past either, according to the World Health Organization, although the

global population has grown. The total number of under-5 deaths worldwide has declined from 12.8 million in 1990 to 4.9 million in 2022. When I look in the comments section of my videos, I’m occasionally surprised to see how angry and negative some people are about the economy. They will say that the dollar is in decline – but if we look at the dollar index – which compares the US dollar to a basket of America's trade partners' currencies, we can see that the dollar is, in fact, strong. Every major currency in the world has fallen against the dollar this year. The US economy has been booming – by almost every measure – in recent years. Most Americans are doing better than they were a year ago. Unemployment is lower, wages are growing, and inflation is declining. It’s not just the one percent either; the statistics show that Americans across ages and social classes are doing well. In a video earlier this year, I mentioned that

unemployment was near all-time lows. People wrote in the comments that this was because so many people had stopped looking for work, but that’s not true. The labor force participation rate has risen every year for the last three years. On top of that, there are more jobs available today than there are job seekers. These are tangible economic improvements that should be cheering people up, but that’s not what’s happening. Surveys show that Americans are the most pessimistic they have been about the economy in thirty years. TikTokers (who YouTubers look down on) have coined the term “the silent depression,” claiming that it’s harder to get by today than it was during the Great Depression. An idea that is entirely divorced from reality. During the Great Depression, US GDP contracted by 35%, international trade more than halved, and unemployment rose to 23%. In contrast, last week’s GDP report showed that the US economy

grew at a 2.8% annualized rate, and unemployment is at 4.1% - which is near its all-time lows. Up until a few years ago, Americans' economic attitudes mostly tracked what was actually happening in the economy. When things improved, surveys showed that people’s subjective experience of the economy improved too, and when there was a slowdown, people reported that things had gotten worse for them. Everything seemed to change in mid-2020. When the pandemic first struck, the economy tanked and sentiment collapsed with it – so far that’s totally normal. But the strange thing is that when the economy bounced back, sentiment didn’t. The relationship between economic statistics and surveys of public sentiment broke down entirely at that point – and this was totally new – there is no history of a similar divergence looking back through economic history. So, let’s dig into why people are so gloomy about the

economy and so pessimistic about the future today. Before we get to that, let me tell you about this week’s video sponsor – Surfshark. I have been using VPN software for quite some time, and Surfshark is an easy-to-use and affordable VPN app for Windows, Mac, Android, iOS, and more. VPN stands for virtual private network, and using one connects your computer or phone directly to a remote server, creating a point-to-point tunnel that encrypts your personal data, masks your IP address, and lets you sidestep website blocks and firewalls on the internet. This ensures that your browsing is private, protected, and more secure. This is most useful for people who access the internet from unfamiliar networks like at coffee shops or airport lounges. Surfshark doesn’t just protect your data. If you travel, you’ll notice that different content is available on streaming services in different

countries – in some countries, content is even censored. With Surfshark, no matter where in the world you are, you get to take the internet from home with you. Surfshark is fast, reliable, and they don’t collect or track your data. They also allow you to set up one account and use it on unlimited devices. Secure your privacy with Surfshark! Enter coupon code BOYLE for 4 months EXTRA at www.surfshark.com/boyle. Click the link in the description to sign up today. OK, so what do we mean by a good economy? Well, to start with GDP growth, the US economy has been outpacing other advanced economies, with some projecting that the US will grow by as much as 3% this year, when other leading economies are projected to grow by 1% or less. Next, the stock market has been booming - the S&P is up more than 27% year to date. There has been strong wage growth low

unemployment and declining inflation – which is getting close to the Fed’s 2% target. Labor force participation has increased, which means that even people who weren’t looking for jobs now are working because the employment environment has gotten so good. Even those TikTokers talking about “the silent depression” are earning money in a way that was not possible during the actual – or noisy depression as I now call it. These are all things that we should feel in our day-to-day lives – and to top it off, the people who have seen the biggest income and wage gains are people at the lower end of the income distribution – as the widening inequality that we have seen for decades reversed direction during the pandemic in pretty much all advanced economies. A wider swath of people across American classes in their day-to-day life are experiencing positive economic benefits, but despite all of this, the average man on the street still feels that the economy is in terrible shape.

Now, obviously, I’m not trying to say that everyone is thriving, and no one has anything to be down about. There are, of course, plenty of people experiencing misfortune, but that has always been the case. The thing that is unusual is just that average sentiment is so bad when the average American is doing better economically than they were in the past. According to Pew Research, large majorities of Americans say they are dissatisfied with the economy, and when they look toward the not-too-distant future, they see a country that will be worse than it is today. When they look to the past, 58% of Americans say that life for people like them is worse today than it was 50 years ago. Gallup reports that Americans are the most pessimistic they have been in decades about young people's chances of having greater material success in life than their parents.

58% of American adults think that it’s unlikely that today's youth will have a better life than their parents had. This is an 18-percentage-point increase in pessimism over the last five years. You might think that people are being cautious and worrying that an economic boom is about to turn to a bust – but if that is true, it would be quite a break with the past too - as the highest percentage of U.S. adults expecting better lives for the next generation was 71% in and that happened in 1999 – at the peak of the dot com bubble. So, if people are being cautious now, they certainly weren’t cautious back then. Gilad Edelman at The Atlantic conducted a poll last December asking over a thousand Americans how they felt about the economy. Only 20 percent of respondents said that the economy had improved over the last year and 44 percent said it had gotten worse. He found that while there was a partisan

split and Republicans were more negative about the economy than Democrats. Democrats were still very negative; only 33 percent of Democrats felt that the economy had improved. Interestingly, Fareed Zakaria reported in the Washington Post that despite all of the internal pessimism in the United States, international polls show that the rest of the world views the United States much more positively than they did five years ago. A survey conducted by King’s College London found that across 24 nations where trends exist, the share of the public who feel the US model should be followed has risen by seven percentage points since 2019. Zakaria writes that while Americans may be troubled by the deep polarization and division in the country, an international audience sees that the debate – where the nation's dirty laundry is constantly washed in full public view – is better than the alternative of repressing national problems – as can happen elsewhere – where a North Korean style façade of unity is presented.

Gilad Edelman at The Atlantic wrote that he expected to find that the economic frustration within the United States was driven by housing inflation, and so he gave his survey respondents a long list of factors to choose from as the metric that was dragging down the national economy. He found that it wasn’t the cost of housing - the runaway winner (according to his survey) was the price of groceries at the supermarket. He points out that for every person that is irritated that housing prices are rising, there is another person delighted that the value of their home has gone up. He learned that people weren’t actually upset that the generous benefits handed out during the pandemic had been withdrawn – as some people had claimed. Apparently, people with children at home were more positive on the economy than people without kids - which you wouldn’t expect if Americans were fuming over the expiration of the expanded child tax credit. I would have expected that some of the pessimism

was driven by excessive exposure to social media, but the survey found that those who reported getting their news from Facebook, Instagram, or TikTok expressed more positive views than people who didn’t. Those who read national and financial newspapers were also more positive than average. The most negative sentiment he found came from older people, not Gen Z TikTokers. This is quite surprising, as older people are asset owners and will have benefited from asset inflation. Edelman points out that grocery prices went up more than average inflation and that in contrast with housing or used car prices, few ordinary Americans benefit when grocery prices go up. Higher grocery prices are also something that Americans see week after week when they go to the stores. Higher used car prices are much less of an irritant as most people can postpone a car purchase if necessary, and it is a one-off event every few years. Now, most Americans are making more money - after

inflation than they were before the pandemic. I mentioned that statistic in a video a few months ago – and it drew all sorts of angry comments with people accusing me of making it up. But it is there in the data – and not just that, wages have risen the fastest for the lowest-paid workers. If people were coldly rational, Edelman points out they would recognize that their higher income more than offsets the higher grocery prices. One reason for the dissatisfaction may be that workers expect their pay to go up over time, so they think that it’s fair that they are earning more, and unfair that their grocery bills have gone up at the same time. There is reason to believe that the pandemic and the associated lockdowns might also have harmed the mood of the country too. Research from Boston University found that, prior to the pandemic, 8 percent of American adults experienced some form of depression. By April 2020,

that proportion had jumped to 28 percent, and in 2021, the figure rose to 32 percent. Other reasons for America's pessimism of late is the worry that AI will take everyone's job. If we listen to Silicon Valley, we are only a year or two away from a society where filmmakers, journalists, lawyers, and doctors are all put out of work by AIs. You'll be sitting at home penniless, worried about what will happen when you have to explain to the robot plumber who has just unblocked your drain that you can't afford to pay him. Will you be able to remove his battery pack before he puts you in cuffs and carts you away? How will the Roomba react to seeing you do this – you kinda knew it was a mistake giving the vacuum cleaner your wifi password… What were you thinking??? According to YouGov, 46% of people who use AI

tools at work are worried about AI taking their job. Among those who never use AI tools at work, 26% are concerned about this. While AI can be expected to transform many aspects of daily life, there has been a long history of labor automation, and historically, labor demand shifts away from jobs that can be automated towards new types of work where people work alongside the new technology. Workers becoming more productive doesn’t lead to job losses – it leads to more production – which also means greater availability of goods and services. One of the best examples of jobs being rapidly automated away is telephone switchboard operators. Around 350,000 women worked for telephone companies as switchboard operators up until as late as 1950. An additional million worked as switchboard operators at offices, hotels, and other businesses. The rate of growth of telephone networks in the 1920s led people to project that the phone companies would soon need to employ every American

woman of working age as a switchboard operator. When mechanical switchboards were installed, the number of women employed as telephone operators immediately fell by 50% to 80% - and wages for women in other occupations fell rapidly as employers were flooded with job applications. This didn’t last for long, however. Studies show little or no negative long-term employment effects at all. Laid-off switchboard operators quickly found employment like secretarial work and restaurant jobs, and while some of those jobs (like restaurant work) paid less, others paid the same or more. Automation typically increases worker productivity and reduces employment in a given field, but we have seen all sorts of jobs automated in the past without leading to mass unemployment; the same can be expected in the future. There are all sorts of things we can choose to worry about. The Doomsday Clock is a symbolic clock that represents how close we are to destroying the world with dangerous technologies of our own making. It warns how many

metaphorical “minutes to midnight” humanity has left. It is adjusted every year with the goal of warning the public and inspiring action. I suppose we could lie awake all night worrying about global events that are entirely outside of our control, or we could focus on taking action to improve our lives and the lives of those around us. There are all sorts of positive changes occurring in the world – despite all of the news we read about hurricanes and natural disasters, the number of deaths from natural disasters has fallen by 75 percent over the past 100 years. This figure is even more shocking when you consider how much the global population has grown over that period. Over the last twenty years, the proportion of the world’s population living in extreme poverty has more than halved. The share of the world population living in democracies increased continually over the last 250 years, and 80% of the population who live under an authoritarian regime today — live in one country,

China. The world’s population has greater access to education than ever before too. For those feeling down about the economy, frustrated about politics, or worried about what the future has in store for us, it is worth reflecting on the idea that there have been much more difficult periods in the past and that for most people in the world things have never been better than they are today. The reason these statistics have improved is not because people sat at home and worried about the direction society was taking. They have improved because it’s in everyone’s self-interest to improve the world, and when things got hard people applied their energy to making things better. Our capacity to reflect on the challenges we face and find solutions explains all of the scientific and economic progress that has been made over time, and there is no good reason to believe that will change any time soon. Economic statistics show that the US economy is doing just fine right now – and even if it

was not – if somehow the numbers are wrong. – there is very little we can do about it individually. If you are feeling pessimistic – one of the best ways to lift your mood is to go outside and exercise, contribute to your community, try to learn new things, engage with your friend’s family and loved ones and work hard on improving your situation, rather than focusing on the things holding you back. If you found today's video interesting you should watch this one next. Don’t forget to check out our sponsor Surfshark using the link in the video description. Have a great day and talk to you again soon, bye.

The Truth About the US Economy!

Patrick Boyle is a hedge fund manager, a university professor and a former investment banker. 

This channel is all about quantitative finance. By subscribing you will see videos explaining what is happening in markets right now, you will learn about financial derivatives, corporate finance and how traders use quantitative tools like statistics. You will see interviews with some of the most interesting people in the financial industry.  In addition, you will see some longer form documentaries on the history of financial markets.

To contact Patrick go to the website http://onfinance.org

DISCLAIMER:
This channel is not affiliated with any financial institution. The videos on this channel are for entertainment purposes only and do not constitute financial advice. Those seeking investment advice should seek out a registered professional. Patrick is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment.