Nothing Makes Sense Anymore

What has this come to?

The stock market is soaring.

Consumer sentiment just hit record lows.

Both are true simultaneously.

That’s the US economy right now.

The two speeds

Corporate profits are up. Earnings keep beating expectations. The S&P is near all-time highs.

At the same time — credit card delinquency rates are rising. Savings rate just fell to 2.6%. That’s pre-crash bubble territory. Reminiscent of 2005.

Higher oil prices increase profits for big energy companies. They reduce disposable income for everyone else.

Real GDP has grown far faster than median wages for decades. The gains from productivity aren’t showing up in paychecks. They’re showing up in corporate earnings and asset prices.

The US economy is increasingly dependent on the spending of the top 1% and top 10%.

How the divide actually happened

In the mid-1970s the poorest 50% of Americans earned 22% of national income.

By 2024 the top 1% earn nearly twice as much as the bottom 50%.

This didn’t happen accidentally. Rise of big tech monopolies. Decline of trade unions. Less progressive taxation. Reduced worker bargaining power. These structural shifts moved income from labor to capital over decades.

Housing made it worse. Rising prices made homeowners wealthier than ever. Younger households are increasingly locked out entirely. House prices remain near record multiples of income.

The divide isn’t just income. It’s asset ownership. Those who own things kept getting richer. Those trying to acquire assets kept getting priced out.

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The AI investment question

The US is currently spending more on building AI data centers than on public transportation.

The FT reported that only Amazon can realistically expect a positive return on hyperscale AI investment. Oracle and Meta appear to be generating negative returns — and that assumes zero costs.

The big hyperscalers need $7 trillion in revenue over the next three years to justify current spending.

Nobody has a clear answer for where that revenue comes from.

The Shiller CAPE index is near dot-com crash levels. Cisco was the world’s most valuable company in March 2000. It took 25 years to recover its former value.

The deficit problem that compounds everything

The US is running recession-level deficits during a period of relatively strong growth and low unemployment.

Normally governments run deficits during downturns. Running them during expansions is genuinely unusual and unsustainable long-term.

Rising bond yields are making that debt more expensive to service. The fastest-growing component of government spending right now is interest payments on existing debt.

Demographic pressures make this worse. More older people means more pensions and more healthcare spending — automatically — for decades ahead.

Foreign investors are becoming less willing to hold US bonds. If that trend continues the cost of financing the deficit climbs further.

The honest summary

The US economy is not collapsing.

Growth has outperformed Europe. American firms dominate global technology. Investment remains strong.

But underneath the headline numbers a structural divide keeps widening.

Stock market wealth soaring. Consumer sentiment abysmal.

Corporate profits rising. Millions of households running down savings to cover basic expenses.

Asset owners enjoying enormous gains. Housing and healthcare increasingly unaffordable for everyone else.

Rising GDP and soaring stock prices are real.

They just don’t tell you how ordinary people are actually living.

And right now — for a lot of ordinary people — the answer is not well.

I can only write limitedly on Medium

So I had to leave out the deeper parts, this was just the surface, the plot thickens ➻ HERE

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