I'm beginning to think of the Wall Street Journal as the Daily Mail of the financial press: They are constantly printing stories about big new trends that are either flatly false or based on the flimsiest possible cherry-picked evidence. Here is today's:
This chart isn't wrong per se. Interest debt has indeed gone up. But interest is a fairly small part of total debt, and every possible indicator suggests that household debt in the US is not a problem. Here is debt as a percent of disposable income:
It went down during the pandemic and then up afterward. It is currently lower than it was at the end of 2019 (9.8% vs. 10%). Here is household debt as a percent of GDP:
It's the opposite: it went up during the pandemic and then back down. It is currently lower than it was at the end of 2019 (76.2% vs. 77.7%). And if we want to back out mortgage payments, here are credit card balances:
Down during the pandemic and then up afterward. Total credit card balances today are precisely the same as in the final quarter of 2019.
There are a few specific indicators that are slightly troublesome—with an emphasis on slightly. The vast bulk of the evidence, however, shows nothing very worrisome at all. Excess savings from pandemic stimulus bills have been depleted, but that's entirely expected and says nothing about financial health. On that score, American families continue to do well.
Dems just got a much more competitive ticket. Expect the pro-MAGA, anti-Democrat spin out of the Murdochian press to grow more egregious in the coming weeks.
Yeah, it's going to be a lit shitstorm of racism and sexism the likes of which we have never seen. Right now the MSM is talking up Harris because she's the exciting new shiny thing to write about, but I'm sure we'll soon see the concern trolling about her ethnicity or her laugh or whatever return soon enough. Probably in a Maureen Dowd column.
per nytimespitchbot*, "kamala the kop, j.d . the justice warrior".
*i doubt kd is much a fan after mr balloon chastised him a coupla years ago, "what the hell happened to you?"
Lots of people are wedded to the "it's the worst economy ever" storyline. Don't be so shocked when the WSJ publishes stories that get the most clicks. It is a business, after all.
The people who are losing ground are wedded to the worst economy ever storyline, and that includes anyone living close to the edge that's been impacted by rising costs for everyday expenses and especially rents.
Anyone financially comfortable is still out spending and the stores are full. But those close to the edge are loudly making their discomfort known and they drop out of the middle class.
I hope Harris is able to foreground the problem of rising rent/housing costs more than Biden did. Granted, there's not a lot any POTUS can do in the short term to fix that -- it's largely a state/local issue -- but it's probably the biggest economic concern on people's minds these days. Trump says the key is more drilling or something, something. I'm sure Dems can do a bit better than that.
Kevin, I think your analysis is accurate but not necessarily dispositive politically, and the reason is our old friend "nominal accounting." For aggregate and trend tracking purposes I agree, we need to adjust for inflation. Individuals and households, though, tend to live in a nominal-payments world. So when nominal interest charges go up at the margin, a lot of people feel that, even if their incomes might go up enough to cover the increases without any problem. A lot of the economics I learned back in the day was focused on changes at the margin, and this is one case where I think it matters for the way people see their circumstances.
Publicity and propaganda and right-wing drumming (and outright lying) also matter for people who pay attention to that BS, so keep at it. And I think Jasper's right, so you'll have plenty of material to keep your debunking chops sharp.
Kevin, I think your analysis is accurate but not necessarily dispositive politically, and the reason is our old friend "nominal accounting.
People would certainly love to go back to 2019's price level. That's obviously never going to happen. Just like Ronnie "morning in America" Reagan couldn't take us back to 1978's price level.
So the question isn't, will some people continue to complain about inflation (by which most of them mean: the failure of prices to reset to those of five years go)? Some definitely will. I think the question is more: do overall national conditions strike enough people as being hopeful for Democrats to prevail? I would hope the gradually fading recency of the inflation burst would help on this. That was largely a 2021-2022 phenomenon. Inflation has been headed downwards for a good eighteen months at this point. Last month the headline number was essentially zero.
This is one reason I'm elated we've got a new ticket—one which I perceive as being a lot more competitive (I realize a lot of folks here disagree with me on that): what I mean is, national conditions seem pretty damn good. The country is at peace; crime is plunging; inflation is subdued; the job market is strong; the stock market seemingly sets a new record every other day. Even mortgage rates are starting to drift downwards. And unlike when Trump left office, four thousand Americans a day aren't dying of covid, and Americans aren't being barred from other countries (hell, foreigners are complaining we're headed there in excessive numbers!). So thank you President Biden for a job well done.
Anyway, by rights this should be a pretty winnable election for the Democratic brand. I hope and expect it will be. But yes, the right wing press will now be in panic mode. It's all hands on deck for MAGA!
I think of it as kind of a race between *noticing* price increases and getting used to the new levels. Anyone who didn't live through the 70s inflation bouts was probably pretty seriously shocked that prices can actually all go up noticeably at the same time because it just wasn't in their experience-- I'm in the camp that says we lived through a generation-long deflation into the early 2000s and between that and other crises haven't seen general inflation until the past few years.
Once people saw general price levels going up at what felt like a shocking rate, they focused in on a lot of individual prices too, which I think is why there's a lot of attention on what fast food costs now, per KD's next post. Those prices had been drifting up for decades, but for most people it was isolated and not something they bought often enough to get very peeved about. But then they noticed what it costs now. In nominal dollars, of course.
At a certain point though you get more or less used to new price levels, especially if they get relatively stabilized. That's what I hope will be happening over the rest of the summer and into the fall, in spite of the lazy and the Murdoch press's best efforts. Interest rates are set to be stable or slip down a little bit, it seems, and that leaves housing costs as the wild card here.
Between that and all the spending going on all over the country, the economic mood *should* be mellowing. No guarantees, though, especially with the voices of doom getting the Mighty Wurlitzer treatment. It was Biden's big gamble with the IRA and Chips and all, and I hope it peels off enough weakly-attached R votes to get a start on smashing MAGA.
& it's all rightwing press.
that's the problem
It seems that 40% of the population is Authoritarian, and 40% is liberal, and the 20% in the middle can be swayed to be more Authoritarian by scaring them.
Stop giving Authoritarians oxygen.
You didn't know the WSJ was a Murdoch paper? It's Fox news in print. I used to subscribe but I bailed when Murdoch took over.
Their straight reportage (as opposed to their whacka-doodle opinion pages) had generally been considered pretty reliable, and in some cases first rate. But that latter bit has been eroding, and in certain broad areas (the economy in general, foreign policy, climate change, politics) they seem to have caught up to their whacka-doodle opinion pages.
Tracking numbers via percent GDP may not be the best since most of GDP skews toward the wealthy. Granted that does vary a bit and tends to improve under Democrats.
I'm beginning to think of the Wall Street Journal as the Daily Mail of the financial press
the wsj's 2007 laffer curve tells you all you need to know about their commitment to the truth (or lack thereof)
2007: wsj laffer curve (courtesy brad delong)
Sigh. Kevin passed macro but failed micro. What’s OK at the level of the whole economy can be bad for households:
1) Treading water feels like shit. If my debt increases enough every year to eat my raise, then what good was the raise? This is a formula for everyone hating their lives.
2) You need more cash every year of your life if you’re gonna have a life that doesn’t suck. Houses are expensive. Kids are expensive. Retirement is expensive. Medical care gets increasingly expensive as you age. Staying the same is declining.
Treading water feels like shit.
republican policies are constructed to make sure people at the median sink slowly below the waterline while the c-suite laughs at them from the decks of their yachts.
Not to mention - while I see treading water here, I also see SLIGHT backsliding in the credit card debt chart.
Even if the pandemic drop and post-pandemic jump in CC debt levels evens out (the areas under/above the curve appear comparable, at least enough for this argument) - we should want the year-over-year trend to be 0% on average, not the 4-5% that it appears to have been (and be returning to). And that's adjusted for inflation, per Kevin's obsession (in this case it doesn't really matter and may even help somewhat).
So while I don't see any real change in trend, which does support the literal interpretation of Kevin's argument (that households aren't suddenly doing worse), what I do see is a longer term trend that is bad for households.
So things are still getting worse for households, they just aren't getting worse at a faster rate. Maybe.
@somebody123, I'm sure that you are familiar with the fact that the price of a house in the middle of the desert is different from an identical house in San Jose, CA. Same house materials, same furnishing, same everything except location.
House prices rise to meet the abilities of house buyers to pay. Prices usually rise, not on the absolute merits of the house, but rather on how much money can be extracted from the subset of people who want to live there.
If prices are rising, then there is a subset of people who are able to pay more.
I'm pretty sure that most things are priced like that, and I'm pretty sure that there are better ways to set prices.
Thank you Kevin for posting this. I've been hearing for a couple of years now that things are only better because everyone was in much greater amounts of debt. Actually, I've read various articles that point to things being OK and others saying things have never been worse.
Thanks for looking at this from several viewpoints and all of them basically saying that no, the good economy does NOT appear good because everyone is going into debt.
Can somebody explain these charts, because nothing in their visuals lines up with the accompanying explanatory text. Like, for the second chart, Drum mentions figures of 9.8% and 10% for points that appear on the graph to be approx. 0% and approx. -2%. For the third chart, he mentions figures of 76.2% and 77.7% for points at the chart that line up to be approx. 0% and approx. -3%. And in the final chart, he says two points are equal that appear to be close to 2% and 9%.
Am I totally misreading these or is this just sloppy work?
I think "change from previous year" is the magic phrase. The discussion is most often comparing absolute levels, where the graphics are showing percent change at each data point from the prior year's value. I'll take a wild stab and say theoretically it might be possible to derive one from the other, but I don't have a math PhD so I'll just take Kevin's word on his stats.
The charts show the change per year. From them you can see when amounts were increasing or decreasing. You could integrate and find the area above and below the line and determine if amounts are higher or lower after X number of years. Or you could do like Kevin no doubt did and just looked up the number for 2019 and the current number and then print them.
So, the charts show when things increased or decreased over the past 10 years. Kevin then displays the number in 2019 and compares it to the current number.