"The vibes in the economy are … weird. That weirdness has real effects."
When we think about things like inflation, financial conditions and monetary policy, it's best to frame them through people. And people are, of course, silly and messy. |
 | | HeeJae Kim |
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People are the economy. It's a simple concept, but it's one that we often forget about. The world is so noisy right now — it's full of catastrophe and chaos, and it sometimes feels like there's a never-ending stream of bad news. Over the past few years, wealth inequality has deepened and polarization has exacerbated divides. |
I grew up in Kentucky and moved to Los Angeles after graduating from college. Financial education has always been a core focus of mine, and it frustrates me that people are living, breathing, economic entities, and yet there is so little education on what that means. |
That gap in education — the differential between things happening and us understanding why they are happening — is the cause of a lot of strife and anger. |
We don't really experience the economy in G.D.P. growth — we experience it in food prices and gasoline costs. But metrics that define good and bad often don't reflect many people's lived realities, and that divergence between what we are told versus what we feel can create cognitive dissonance. |
Some experts are saying that we aren't in a recession right now because the labor force participation rate has been holding steady, but how long will that last? Others are saying we are in a recession because G.D.P. growth cratered, but is G.D.P. a fair representation of our economy? |
We're confronted with countless questions and very few answers, and, as I argue in my essay for Times Opinion, that's why narrative and expectations are so important. The way people feel ends up dictating how they act, and the economy is simply a series of these actions. We are all economic entities. |
At the end of the day, economic institutions like the Federal Reserve are focused on maintaining credibility. But there are more tools that we can use to address people's expectations, even if some of these tools are imperfect. If we're not careful, we can get stuck in corrals of economic data and indicators that limit how far we can see to either side of us. We need to understand clearly the scope of the problems we face — and metrics can't always encompass that. There are qualitative and quantitative parts to metrics: how people feel about them and what the numbers themselves actually mean. |
As I write in my essay, we are now in a "vibe-cession" of sorts, "a period of declining expectations that people are feeling based on both real-world worries and past experiences." And if we don't fix things soon, we might reach a tipping point with very real consequences. |
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