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 the quality of life has improved massively over time, but for some reason people don't want to believe
that. 20 years ago I came across a book by Stephen Moore and Julian Simon called It's Getting Better All the Time which examined the 100 greatest trends of the last 100 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 author 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 that we've experienced in terms of medicine, hygiene, access to food and shelter, safety for wars, and much more, had improved massively over time. In, 18144% of people died before their 5th 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 at the comments section of my videos, I'm occasionally surprised to see how angry and negative some people are about the economy.
They'll 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 1%, 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 labour 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 that they've been about the economy in 30 years. Tik Tokers, 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, USGDP 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's no history of a similar divergent looking back through economic statistics O Let's dig into why people are so gloomy about the economy and so pessimistic about the future 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 500 is up more than 27% year to date. There's 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 Tik Tokers 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 the people at the lower end of the income
distribution. As the widening inequality that we've seen for decades reverse direction during the pandemic in pretty much all advanced economies, a wider swathe 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's always been the case. The thing that's unusual is just that the 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 that they're dissatisfied with the economy, and when they look towards 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 that they've been in decades about young 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 the people are being cautious and worrying that an economic boom is about to turn to a bust. But if that was true, it would be quite a break with the past, too, as the highest percentage of US adults expecting better lives for the next generation was 71%. And that happened in 1999 at the peakofthe.com bubble. So if people are being cautious now, they certainly weren't
cautious back then. Gilad, Aide at The Atlantic conducted a poll last December asking over 1000 Americans how they felt about the economy. Only 20% of respondents said that the economy had improved over the last year, and 44% 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% 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 study 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 7% vantage points since 2019. Zakaria writes that while Americans may be troubled by the depolarisation and division in the country, an international audience sees that the debate for 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 facade of unity is presented. Gilad Adelman 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's irritated that housing prices are rising, there's 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 either, 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 people, not Gen. Z Tik tokers. This is quite surprising as older people are asset owners who will have benefited from asset price inflation. Adelman 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's 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 the video a few months ago, and it drew all sorts of angry comments with people accusing me of making it up. But it's 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 they're hiring. 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're 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% of American adults experienced some form of depression. By April 2020, that proportion had jumped to 28%, and in 2021,
the figure rose to 32%. 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're only a year or two away from a society where film makers, 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's 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? And how will the Roomba react to seeing you do this? You kind of knew it was a mistake giving the vacuum cleaner your Wi-Fi password. What were you thinking? According to you Gov, 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's 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 secretary, material 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've 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 that 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 is left. It suggested 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% over the past 100 years. This figure's even more shocking when you consider how much the global population has grown over
that period. Over the last 20 years, the proportion of the world's population living in extreme poverty has more than halved. The share of the world's 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, are worried about what the future has in store for us, it's 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've 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's been made over time, and there's no good reason to believe that that will change
anytime 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's very little we can do about it individually. If you're 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 friends, family, and loved ones, and work hard on improving your situation rather than focusing on the things holding you back. Thanks for tuning into this week's podcast, with particular thanks to my supporters on Patreon whose support makes this whole thing happen. Have a great week and I'll talk to you again soon. Bye.