Opinion polls consistently show that Americans think their personal financial condition is very good, but that the economy as a whole is terrible. Paul Krugman is struggling to make sense of this apparent contradiction. Can we help him out?
The sense of personal well-being is based on savings and asset prices. The value of homes, in particular, has soared, so if you are an owner, your net worth has gone up substantially. The stimulus has helped, too. You never had it so good.
But opinions regarding the economy as a whole are not based on asset prices, or wage increases, or the low unemployment rate, but on the day-to-day experience with inflation. Most Americans have not been through an inflationary period before, and they don’t like it.
Finally, the media, including left-leaning TV networks, have focused exclusively and simple-mindedly on the evils of inflation. You never hear anything about the low unemployment rate, or on the fact that debtors are actually gaining from inflation. Every day, the story is the same–poor Americans can’t make it with rising prices.