May 24, 2024: It’s the (perceived) economy, stupid!

“It’s the (perceived) economy, stupid!”

Another week, another set of mixed headlines on the economy.

What really stood out to me, though, was a survey from The Harris Poll that showed a majority of Americans believe America to already be in a recession and the economy shrinking. 

Now, strictly speaking, America is not in a recession as tech stocks surge, the market hums, and unemployment remains low. 

HOWEVER (you knew that was coming), as has been noted in this newsletter numerous times, topline numbers are not telling the whole story. When it comes to the economy of the household in America, that economy is indeed shrinking. Shrinking quite a bit. Should there be a more general recession this year or next, it won’t be because a stock bubble bursts per se, such a market downturn would merely be a lag measure.

Rather, the lead measure of the recession will be found in the millions of nano-recessions being experienced in the present by individual households across the country. So, while pundits and politicos alike sing the economy’s praises and the Biden administration appears to remain unruffled (though not insensitive to the needs of its base), Carville’s Law of what matters in an election may need updating with Tim’s Corollary: It’s the (perceived) economy, stupid!

Europe ups the diplomatic pressure on Israel

It was a rough diplomatic week for Israel as the IDF continued operations in Rafah and discovered additional bodies of hostages taken on October 7.

Spain and Norway joined Ireland in recognizing a Palestinian state, the ICC issued arrest warrants for both Benjamin Netanyahu and Hamas leaders, and the ICJ issued a ruling demanding an end to the IDF’s Rafah operation and a reopening of the Rafah border crossing to get aid into Gaza.

To its credit, the Biden administration continues to stand by the legitimacy of Israel’s anti-terror operations, albeit somewhat belatedly considering this state of affairs is likely only possible because of the administration’s months of equivocating. Still, the US is exploring sanctioning the ICC in response to the warrant for Netanyahu, which will set up a real test of just who runs the rules-based international order: the US and its allies or international organizations? Both the ICC and US are taking risks here that could seriously undermine their international legitimacy if they misread global opinion.