Unemployment weakens a government; inflation kills it

How many charts had we – economists and analysts, myself included – presented to show that the American economy’s health outpaced that of Europe? And how many official inflation indicators had we copied and pasted, proving, quarter after quarter, that price pressures were slowly but surely easing? Why, then, did American media, which prides itself on being sophisticated and forward-thinking, fail to inform their own citizens that the situation in the United States was considerably more favorable than what we endure in Europe? Those of us who remember the inflationary episodes of the 1970s know well that inflation goes hand in hand with upheaval and turmoil.

In truth, the rise in real wages (adjusted for inflation) had almost no psychological impact, because – in the U.S. as well as in Europe – the public pays little attention to official indices published by government agencies. If there is one macroeconomic takeaway from last week’s U.S. presidential election, it’s that inflation is experienced cumulatively, day after day, month after month, grocery trip after grocery trip. Political analysts must understand that citizens don’t care about official indices or those from the U.S. Bureau of Statistics; they form their opinions on the cost of living through their own shopping experiences and don’t feel connected to what experts insist is true. A consumer, therefore, is not an economist.

Another valuable takeaway: outside of a severe economic crisis or depression, inflation affects everyone, while unemployment impacts only a fraction of the population. For example, despite the 2008 mega-crisis, 90% of Americans still had their jobs.

We must collectively recognize a new reality that challenges certain dogmas: Western citizens would prefer slower growth if it meant controlling inflation.

In other words: price stability takes precedence over employment!

A third lesson for future candidates in upcoming elections, as echoed by multiple American analysts dissecting their recent election results: inflation is blamed on the President and the Government, while growth and unemployment are seen as phenomena beyond their control, tied to cycles and global trends.

The U.S. economy was doing exceptionally well: 3% growth over the last nine quarters and massive inflows of international liquidity into the country! Ultimately, this was credited to the Musks, the Bezoses, the big and small entrepreneurs – not the administration.

Meanwhile, inflation? That was entirely blamed on Biden and his allies. Take note.