Cognitive Dissonance
In May of 2006 at the height of the housing bubble, then Fed Chairman Ben Bernanke gave a speech at the Federal Reserve Bank of Chicago’s 42nd Annual Conference on Bank Structure and Competition.
https://www.federalreserve.gov/newsevents/speech/bernanke20060518a.htm.
In the Q&A session he commented—”Rapid appreciation in house prices has made homeowners feel wealthy and has powered consumer spending, helping the economy move solidly ahead.”
Just this past week on 60 Minutes, Trump touted how great the economy is doing, basing this claim on how well the stock market is doing, and people’s 401Ks.
When pressed by the reporter that people at the grocery store do not feel that way, Trump responds that she is wrong and prices since Joe Biden are down.
While I am not here to praise nor defend former President Joe Biden, nor current President Trump. Nor am I here to point fingers at Democrats or Republicans. What I am claiming is that there is truly a divide between the elite and the rest of America.
I recall from my college undergrad days in Psychology class, a term called: “Cognitive Dissonance.”
Per Grok:
“Cognitive dissonance is a psychological theory describing the mental discomfort or tension people experience when they hold two or more contradictory beliefs, values, attitudes, or ideas simultaneously—or when their behavior conflicts with their beliefs. Coined by psychologist Leon Festinger in his 1957 book A Theory of Cognitive Dissonance, it suggests that humans are motivated to reduce this discomfort to maintain internal consistency and psychological harmony.”
As alluded to in previous post, the reason for the Zohan Mamdani Mayoral victory in the largest city in the country was the economy.
While our beloved congress was getting paid their salaries during the longest government shutdown in US history, the reality is that everyday middle-class Americans were not receiving their paychecks for their work.
While President Trump is out there touting how great things are, prices are down, economy and stock market are stronger than ever, tariffs are making us rich, etc.
The reality is that while yes, the stock market is at an all-time high (solely due to the federal reserve easy monetary policy and printing of money), topic for another day.
The truth of the matter is that Americans and the economy are struggling.
Living paycheck to paycheck….
Struggling to find employment…..
Maxed out on credit card debt, defaulting on auto and student loan debt…
Unable to purchase a home….
And our groceries are higher than ever before.
The Stock Market Effect, just like The Housing Effect, is an illusion that makes people feel rich and spend, when they have a ton of equity in their homes or their 401Ks are at all time high. The reality is that our primary home is not an ATM or checking account, and our 401Ks cannot be accessed without fees, taxes, and penalties.
This is truly a K-shaped economy….
There is an old expression that states, “Don’t piss on me and tell me it’s raining!”
In 1992, James Carville, Bill Clinton’s campaign manager coined the phrase and said it best…
“It’s the economy stupid!”
I leave you with this example of “Cognitive Dissonance,” an oldy but goody classic.