American Power Extra: Two Americas

with one of our experts designed to go deeper into the energy, military, and geopolitical stories driving the news. If you're looking for more context, more history, and a better understanding of forces shaping global events, you're in the right place. Take it away, Matt.

Some of you may remember this, but in 2004, John Edwards ran a presidential campaign on the

“idea that there's literally two Americas, and some of you will remember that.”

And he was not wrong at all about that. And we're seeing that today more than ever, because today the two Americas more specifically the two American economies are breaking apart. And if you haven't heard this before, you're about to learn. Yes, there are two economies operating in the United States at the exact same time.

There's our economy, and then there's the other economy, which if you are watching this or if you're me, you're not a part of that other economy, most likely. And if you are, I guess, congratulations.

“But depending on which economy you live in, you may not recognize the other.”

In the first economy, you know, the stock market can be your near or at record highs, billions

of dollars are pouring into artificial intelligence, data centers, technology, corporations spending enormous amounts of money, investors who own stocks and businesses, appreciating assets. Now they can look at their balance sheets and say, man, America is doing great. They might even call it the golden age, but then there's the other economy.

The economy that 98% probably have us live in, there's that economy. The economy where you go by groceries, where you go make a car payment, the economy where

“you pay rent or a mortgage, the economy where you have to go fill up your car, where you”

swipe a credit card, because there's not enough money left between pay checks and that economy is telling an entirely different story. The latest GDP report says that the U.S. economy was still growing, although very slowly in the second quarter, one and a half percent. That's not great, consumer spending increased, investment increased, exports increased

on paper, America's not in a recession.

An employment isn't disastrous, you know, the rates like 4.1 percent claims aren't terribly

high, so someone looking at these numbers could reasonably ask, you know, what is everyone complaining about? But that's where the sort of statistics stop and the story starts, because GDP measures how much economic activity America produces, it doesn't tell you who is benefiting from that activity.

So imagine you had a town of, say, 10 people, one person in that town makes an additional

$10 million this year, while the other nine don't get a raise at all.

An inflation is rising, which means they're literally getting a pay cut. Now technically, you know, the town just became much richer by a lot. But nine out of those 10 people are actually poorer. That's the problem with looking at, you know, aggregate, combined, you know, economic numbers and assuming that they just described some financial condition of an average American,

that's, that's not a thing. Just look at household debt.

know, auto debts, one and three quarter trillion.

I think the Federal Reserve is telling us that the link with sees on those on both of those items are elevated and climbing. That doesn't look like a population swimming in excess cash during some golden age to me. It looks like millions and millions of Americans are increasingly using debt as a bridge

between what they actually are and what life actually cost.

“And then you have to add housing to that.”

Do we even want to talk about housing, higher treasury yields, you know, are translating into higher mortgage rates and higher car loan rates and just financing of anything is more expensive throughout the economy and who's financing this stuff, you know, it's the bottom, I don't know, 95% or more, a family doesn't care that the Dow Jones went up, you know, if the monthly payment on the house is significantly more, who cares about

the Dow Jones, they don't care that some tech company added a $200 billion investment,

you know, some market capitalization, they can't spend market capitalization at Walmart. And this is where the separation between, you know, America's two economies becomes really

“important because there is a lot of money flowing into the capital intensive side of”

the economy, it's artificial intelligence and it's semiconductor and it's power generation, data centers, cloud computing, probably, you know, all that stuff, all that stuff. And those investments do create economic activity, you know, they buy things, steal transformers, you know, turbines, they hire people, they contribute to the GDP, they also consume an enormous amount of electricity which drives up other people's bills as well.

But if you had a trillion dollars flowing through investment markets, it doesn't distribute

“itself across the 340 million Americans, that's not how it works.”

Now, if you own the companies supplying that boom, then, yeah, I'm sure you're thrilled if your retirement account is largely invested in those companies, I'm sure you're benefiting from that as well, or if you own the land someone wants to build on. But if you're a single mother paying $1800 a month in rent, driving a 12 year old SUV with a $700 payment and buying groceries on a credit card, I don't know, all that investment

probably feels like something happening in another country. And now we have another obvious pressure point and that's energy. We've seen oil prices, gas prices, diesel prices, and as I've said before, those prices don't just stay at the pump, they trickle throughout the economy, make everything more expensive. So you can have investment doing great in one corner of America, while families are simultaneously

getting squeezed by just buying gas, just trying to pay rent, or maybe they're health insurance,

that may be the most important, you know, economic story in America right now.

“We keep fighting over whether the country's economy is good or bad, and we should be fighting”

over who it's good for and who it's bad for, at least recognize it right, because America increasingly looks like an economy where owning a lot of assets matters even more than working. If you're fortunate enough to have stocks real estate or businesses, inflation actually increases the value of the things that you own, but if you're like most Americans who live entirely

“from wages, inflation attacks the thing that you sell for a living, and that is your time.”

You're always selling your time to earn a living, and unlike some billionaires stock portfolio,

you only have so many hours of your time to sell, and that is why you can show somebody a chart that proves maybe GDP increased, and they will tell you the economy is terrible. They're not denying the chart. They're talking about their economy.

“On their side of the street, they're not talking about the economy on a Wall Street.”

Wall Street experiences America through asset prices, Washington experiences America through

statistics, corporations through earnings, but households, they experience through monthly payments, and that is the scorecard that counts in households. How much did I make, and how much is left, and how much did I have to borrow to get through the month, and until those numbers improve, politicians can talk about economic victories till the cows come home, which we have very few of.

But the Americans aren't going to believe them, like it's not a thing because you cannot convince somebody that they are prospering based on what you read on a GDP report. When they're standing in line at a grocery store, trying to figure out if they need to put stuff back. So now America absolutely does not have an economy.

It has two economies, it has an ownership economy and a paycheck economy. And right now, those two economies are getting farther and farther apart. Folks, the American Power Podcast, you can hear it, download it, Apple Spotify, anywhere you download a podcast. You can see it.

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