Iran War Pressuring U.S. Workers

The consumer price index rose 3.8% year over year in April 2026, up from 3.3% in March, according to the Bureau of Labor Statistics. The inflation rate is now at a three-year high. The main driver was surging energy prices driven by the war in Iran. In particular, gasoline prices jumped over 28% y-o-y! The chart below shows all the components of CPI and their changes annual % change. 

Source: CNBC and the Bureau of Labor Statistics. As of April 10, 2026.
 

The rise in inflation is squeezing American households whose wages have increased by only 3.6% over the same period, as shown below. Wage growth had been gradually declining over the past few years, but still outpaced inflation improving Americans' purchasing power. Now for the first time in three years, American workers' paychecks are lagging behind inflation--a casualty of the Iran war. Per Axios, workers are now "earning less in real terms which is a threat to the spending that has kept the economy humming." 

Source: Axios and the Bureau of Labor Statistics Click chart to enlarge.

Polls show rising bipartisan frustration with the rising cost of living and deep dissatisfaction with President Trump's policies. 70% of Americans now disapprove of his handling of the economy, which is significant given that Trump’s 2024 victory rested heavily on a promise he could better manage the U.S. economy than Biden/Harris, particularly with respect to the cost of living. But President doesn't seem to have gotten the message yet:

Supreme Inequality: SCOTUS Favors the Rich!

According to a January 2026 YouGov poll, 80% of Americans believe the rich have too much political and economic power. Indeed, both fiscal and monetary policies appear to favor the wealthy. For example, according to the Yale Budget Lab, President Trump's signature 'One Big Beautiful Bill Act' mostly favors the rich. And monetary policy? Well, even according to the Fed's own findings policy tools like quantitative easing ("QE") and ultra-lower rates have contributed to sharp increases in income inequality. And then, there's the 'Fed Put.' We've written in the past about compelling evidence showing the Fed has backstopped the stock market since the 1990s--because, who owns stocks?

Ok, so politicians and technocrats favor the rich, probably not that much of a surprise. But the Supreme Court? Isn't the judiciary supposed to be neutral? The NYT notes that "Supreme Court justices take two oaths. The first, required of all federal officials, is a promise to support the Constitution. The second, a judicial oath, is more specific. It requires them, among other things, to “do equal right to the poor and to the rich.” Commendable.

However, in a new study, "Ruling for the Rich," researchers from Yale and Columbia reveal some sobering truth about the nation's highest court. Economists Prat, Morton, and Spitz analyzed Supreme Court cases involving economic issues since 1953 and finds SCOTUS increasingly favors the wealthy. Based on the outcome of thousands of cases, they found "Supreme Court justices now rule for wealthy parties 70% of the time, up from roughly 45% seven decades ago." So, we went from a roughly 50/50 probability for SCOTUS cases in the 1950s to a point now where we could consistently make money betting on decisions (if allowed) on Kalshi! The study further finds a strong and growing partisan divide. Naturally. In the 1950s, "justices appointed by the two parties appear similar in their propensity to cast pro-rich votes. Over the sample period, [we estimate] a steady increase in polarization, culminating in an implied party gap of 47 percentage points by 2022. Republican appointees today side with wealthy parties 82% of the time compared to just 35% of the time for Democratic appointees.

The WSJ Editorial Board (unsurprisingly!) had issues with the paper's findings and the took time out of a busy news week to attack the study's methodology. While the paper's authors concede "there is a subjective component to classifying rulings as 'pro-rich'...they defend what they said was a transparent and replicable protocol" that is based on outcomes. The study's findings appear to "validate Justice Ketanji Brown Jackson’s June 2025 dissent, in which she wrote that “moneyed interests enjoy an easier road to relief in this court than ordinary citizens.”"

But what if the justices are just doing their jobs and aren't the real problem? Back to the two oaths the Supreme Court judges take. The first is to adhere to the Constitution and the second to be impartial amongst parties, regardless of economic status. What happens if those two oaths conflict? Per the NYT piece highlighted earlier..."at his confirmation hearings in 2005, Chief Justice Roberts mused about whether he would stand up for the powerless...“Somebody asked me, you know, ‘Are you going to be on the side of the little guy?’” he said. “And you obviously want to give an immediate answer, but, as you reflect on it, if the Constitution says that the little guy should win, the little guy’s going to win in court before me. But if the Constitution says that the big guy should win, well, then the big guy’s going to win, because my obligation is to the Constitution. That’s the oath.” This is particularly true among the conservative justices, who are more likely to be Originalists that interpret the Constitution based on its original intent rather than on the context of current times. Well, the Constitution was written (overwhelmingly) by elite property owners...so, what do you think the original thinking was? And how else is an Originalist majority on the SCOTUS supposed to rule?

NY State of Mind: Mamdani Edition

With just over a day to go before Zohran Mamdani is inaugurated as NYC's first Muslim mayor, CNN's chief data analyst Harry Enten has some good news for the Mayor-elect. First, new polling shows that his net favorability rating among NYC residents has rocketed from +14 in Sep to +38 now! That's the highest for an incoming mayor ever? 

Further, if Republicans were hoping to use him a boogeyman to bring Democrats down statewide...well it seems Donald is the problem not Zohran; Mamdani's net favorability rating statewide is +15 versus -30 for the President. And lastly, all the talk of NYC's vaunted billionaires leaving the city to escape marginal tax increase...seems to be just talk for now. The Kalshi prediction markets (which is basically truth for the billionaire class) has the odds of the city's richest residents decamping to tax-friendly havens at just 21%! In fact, if you believe the old adage "money talks, bullshit walks" then the opposite is already happening with the city's luxury apartment market surging a month after Mamdani's win, including residences on famed Billionaire's Row.

Of course, every politician has their honeymoon period. And these numbers are likely change over the next three months. For now though, it represents a lot of optimism among New Yorkers for a new era of politics and government--where America's most iconic city and its bastion of free market capitalism is run by an Ugadan-Indian-American Democratic Socialist.    

When Donald Met Zohran...

Yes, that happened! Yesterday, NYC Mayor-elect Zohran Mamdani met President Trump at the White House in a highly anticipated face-to-face that was covered extensively by the press, something the media-savvy President noted (see clip below). The two men, seemingly polar opposites, both ideologically and temperamentally, got along well shockingly well, despite the WH press pool's best efforts to stoke drama. Trump was genuinely warm and cordial, lavishing Mamdani with praise and even defending him against questions clearly designed to bait Mamdani. Moreover, he swatted down some of the racists attacks Republicans like Elise Stefanik were making against Mamdani, declaring "I want him to do a great job." Here's the Q&A session with reporters.

While the media was feverishly awaiting/hoping for a "slugfest" (ala the infamous Trump-Zelensky meeting), what they got was a remarkably affable meeting that left both rightwing and liberal media outlets shellshocked. Reporters were incredulously using words like "bizarrely chummy," "lovefest", and "bromance," to describe what they witnessed between a rising political superstar and a famously adversarial President. Here's a summary of the headlines spanning the political spectrum from the liberal Huffpost to the Mamdani-phobic NY Post:

(Click to enlarge)

It was all fascinating to watch and the President affectionately posted selfies on his social media account (even including a picture of Mamdani by himself!). Outlets like AP, CNN, and the Hill provided helpful key takeaways. 

Basically, the winners were:

1. Mamdani, who cemented his status as an important new political figure 

2. Trump, who found common ground with Mamdani on affordability which had contributed to his falling approval ratings

3. New York City, their shared love

The losers, for the time being, were:

1. The GOP overall, whose "hopes of running an anti-Mamdani scare campaign next year just took a big hit, straight from the president."

2. Elisa Stefanik, specifically, who is aiming to take Kathy Hochul's job as NY Governor. She meekly "agreed to disagree" with the President.     

History: NYC Elects Zohran Mamdani!

A historic night: Mamdani to become the first Muslim mayor of NYC, the youngest mayor in over 100 years (at 34 years old), in election with the biggest voter turnout (2+ million) since 1969!!! A Democratic Socialist in the financial capital of the world to boot! And it looks like, despite the tens of millions spent against him by the billionaire class, he will have an outright 50%+ majority win. Mabrouk beta!

OAN Asks the Hard Questions...Really?

One America News (OAN) is a family-owned, far-right, pro-Trump news channel popular with many in the MAGA base. President Trump also loves the network; so much so, that his administration plans to publish news from OAN on the Voice of America and other U.S.-run media. So, it is salient what plays on OAN.

On foreign policy, MAGA's views on Israel appear to be shifting after Netanyahu's pre-emptive attack on Iran that threatened to embroil the U.S. in another Mideast war. In a further sign of unease with Israeli policies that are at odds with MAGA's "America's First" tenant, OAN host Matt Gaetz (the controversial ex-Congressman and Trump acolyte) ran a segment titled: How Many Americans Do Israeli Settlers Have to Kill Before We Care? The report covered the killing of 20-year old Palestinian-American Saif Musallet in the West Bank that Gaetz called an act of terrorism. Gaetz also talks about broader attacks on Palestinians by Israel with U.S. tax dollars...so, OAN doing hard-hitting news now?

The Resistance Begins with Jerome Powell?

The Federal Reserve is, arguably, the most important financial institution in the world. It is responsible for managing America's monetary policy, monitoring and regulating the nation's banks, and maintaining the stability of the U.S. financial system (and by extension, the global financial system; because what happens in the U.S. never stays in the U.S.). But the Fed is also, by design, a staid and dispassionate institution; run by bland, competent technocrats. It's the last place you'd think to find fodder for The Daily Show. And yet, here was Jason Klepper recently doing an extended segment on Trump's beef with Fed Chair Jerome Powell. Klepper jokes that Trump's so angry with Powell, you' think he caught him with [Melania] at a Coldplay concert!! 

Trump's dissatisfaction with Powell stems from the fact he refuses to do the President's bidding and lower interest rates as demanded. Powell is strictly apolitical, which irks Trump no end. After all, Big Law, major media companies, and even the Supreme Court have effectively bowed to Trump. So why not the Fed Chair, who Trump himself appointed? Moreover, Powell has refused to step down before his term is finished next year and has steadfastly maintained he will fight any attempt to remove him. That sounds like a challenge, but Trump realizes that firing a Fed Chair (even if he had the authority to do so) is a huge risk for the economy. Fed independence is a core part of the U.S. financial system and Wall Street has come to Powell's defense. So, is Powell, of all people, the hero the Resistance has been waiting for?

 

DPI is the New IRR? Caveat Emptor...

For the past year, private equity managers have sought to prioritize returning cash to investors after higher interest rates stifled deal activity and exits. The drop in distributions has left many financial institutions that invest in private equity with less money to allocate to future funds. As a consequence, DPI, or distributions to paid-in capital, has replaced IRR, or the internal rate of return as the most important measure of private equity performance—at least for the time being. 

IRR has long been favored by the private equity industry to demonstrate its superiority over public markets. And justify the hefty management and performance fees (?). IRR is a cash-weighted measure of return that takes into account the time value of money, which ROI, or return on investment, does not; which is helpful when committed capital is called over different points of time. However, there are also some unrealistic assumptions underpinning the mechanics of IRR calculations that can make returns appear more attractive than they really are. That effect is compounded by how private equity funds mark their assets. 

The value of an asset is whatever someone is willing to pay for it. But in the absence of an active market for said asset, its value is whatever the fund manager says it is. Now, to be fair, fund managers do consult third-party valuation experts and their valuation processes are usually audited by well-credentialed firms at least annually. Still, as owners and experts on said asset, the fund managers' views carry a lot of weight. And it's not really in their economic interest to aggressively mark things down. So, even when public markets gyrate wildly, private equity valuations tend to remain relatively stable, as fund managers hold out hope for better times. In fact, this is actually an attractive feature of private markets for many investors, to chagrin of others. 

But what if you have to sell? Recently, amidst funding cuts by the Trump administration, the liquidity needs of major university endowments have increased. For example, Yale is reportedly exploring the sale of up to a third of its private equity portfolio. And Harvard tapped the bond market raise $750 million to meet short-term needs. Heck, if multi-billion dollar endowments (like Harvard and Yale with $50.7B and $40.7B of assets, respectively) start selling their massive private equity portfolios to generate liquidity, fund managers are not going to be able avoid price discovery for very long. And investors, long shielded by IRRs, may find actual realized returns, or DPI, are a lot skinnier than they imagined.

The Harvard Humble Brag

Last week Harvard rejected demands from the Trump Administration that threatens $9 billion in federal funding and its non-tax status. University president Alan Garber wrote in a message to the Harvard community: "No government — regardless of which party is in power — should dictate what private universities can teach, whom they can admit and hire, and which areas of study and inquiry they can pursue.” Harvard's defiant stance is very different from that of major law firms and other universities, notably Columbia, who quickly agreed to the government's demands.

That's made Harvard, or Hahvadh, popular again; with individual donations skyrocketing over the past week. Harvard is elite, it's also wildly rich...so naturally, both the Right and the Left have issues with it. Which has forced many Harvardians over the years to hide where they went to school from their less smarter, less richer, less capable non-Harvard peers. Because, apparently, things become awkward when you drop the "H-bomb." 

But now that Harvard finds itself at the forefront of the nation's political/culture wars, people all across the political spectrum have cover to speak about their personal connection to the esteemed university. Not to remind you how smart and capable they are. No, of course not. But to "helpfully" set the context for whatever for/against argument they want to make. But things can still be a little awkward. Take it away Ronnie... 

Chappelle Show, Chappelle Show...

Dave Chappelle was back...hosting the first SNL episode of 2025 (his fourth time overall). And he did not disappoint, riffing on the L.A. fires, Freak-Offs, immigrants, etc. in a trademark 17-minute monologue filled with hilarious but sharp commentary (most opening SNL stand-ups clock in around 7-8 minutes). Chappelle ended with words of empathy and compassion for displaced people..."whether in the Palisades or Palestine." Enjoy...

That's What She Said

The second Republican debate happened on Wednesday, if anyone even cared. With Trump, who has a nearly unassailable 40-point lead in the polls, absent again, it was a largely uneventful affair. Expect for maybe former South Carolina governor Nikki Haley's zinger about famously annoying candidate Vivek Ramaswamy, who shined in the first debate. On the topic of TikTok, Nikki snapped at Vivek with sincere disdain: “Honestly, every time I hear you, I feel a little bit dumber for what you say”. Burn.

But wait...here's what Nikki said about Vivek in a blurb for his 2021 book, Woke Inc. that helped put him on the political map in the first place: "His combination of honesty, intellect, and foresight are exactly what we need..."

Nikki apparently changes her mind a lot, but that's politics!

Orange is the New Trump

 

Former President Donald J. Trump was indicted by a Manhattan grand jury on 34 counts of election and business fraud. A spokesperson for Manhattan District Attorney Alvin Bragg said the office has contacted Trump's attorney to "coordinate his surrender" for arraignment on "a Supreme Court indictment, which remains under seal." Trump becomes the first ex-president to be charged with a crime. But he can still for President in 2024.

SNL Rookie Nails DJT!

Saturday Night Live, introduced a new Donald Trump and it is, by far,  the best impersonation of the former President yet. New cast member James Austin Johnson debuted his "the Donald" in this week's cold open and what a Trump it was. Johnson was able to mick Trump's mannerisms, discursive rambling and even the tone of his voice almost to perfection. It is scarily accurate! The rookie cast member is becoming an integral part of the show this season, playing Biden and Trump.

Jeff Bezos Enters His Bond Villain Stage

It's been a big couple of weeks for Jeff Bezos. First Amazon buys MGM for $8.5 billion, giving him rights to 4,000 films, including the Bond series, the Rocky films and The Silence of the Lambs; and also series like Fargo and The Handmaid’s Tale. But perhaps most intriguingly, he "secured access to something much more exclusive: the deleted footage from Donald Trump’s hit show The Apprentice." Democracy dies in darkness?

A big question hanging over that deal was why was Amazon paying more for MGM than Disney paid for Lucas Films and Marvel combined? Yeah, but Amazon's not Disney or Netflix, it's Prime with an entertainment division.

Still, let's put this deal into perspective. Jeff Bezos is estimated to be worth $186 billion, so he could personally (in theory) buy 22 MGMs. At $8.5 billion, MGM is 4.6% of Bezos' net worth. He's 57; according to the Federal Reserve, the average and median net worth of Americans in the 55-64 age bracket in 2019 was $1,176,000 and $213,000, respectively. Hmm...

4.6% of $1.1M is ~$54,000 or the price of a standard Mercedes Benz E-Class. 4.6% of $213K is ~$9,500 or the price of three Peloton bikes. Yup, in a sense buying MGM for Bezos was the financial equivalent of a very expensive trip to the mall for the rest of us.

Intriguing as it might be to see Bezos cameos in future Bond films, the arguably much bigger news is that of Bezos' plans for space travel. Today, Bezos trumped rival Elon Musk when he made the surprise announcement that he will be aboard his rocket company, Blue Origin's, first human flight to space. And he's taking his brother with him. (Also, is it me or does Bezos look a little puffy in his Instagram video?) 

Balls in your court Elon...who was initially quiet about his antagonist's pronouncement, but later found a silver lining in Bezos briefly leaving earth. But as Electra King knows, The World is Not Enough for tycoons. 

Biden's First 100 Days in Charts

Today marks President Biden's 100th day in Office. Basically every news outlet has some combination of timeline, accomplishments and comparisons as well as op-eds either extolling his "complete success" or decrying his "complete failure." Well here are some more "important" Biden numbers from BI and the WSJ:

First, who's Mr. Popular? Obama, it seems. Biden's more popular than Trump at the 100-day mark but lags both Clinton and Bush (click chart to enlarge).

Next, federal spending. No competition here. Biden's planned six trillion of spending introduced in the first 100 days is more than Clinton, Bush and Obama combined! What's remarkable is the paltry spending plan Obama undertook to revive the economy in the midst of the Great Recession. The lack of sufficient spending led to a very weak recovery. Biden's not repeating that mistake (click chart to enlarge).

To put that spending into context. Here's what the unemployment situation was in the first year of the presidency for the last eight presidents (click chart to enlarge). Unemployment was high and rising when Obama came into office, but his response, in retrospect, was woefully lacking. To be fair, he did carry the burden of being the first Black president and had to be careful not to antagonize political opponents. 

Showing Congress who's the boss? Biden, definitely, with 41 Executive Orders...speaks softly, but carry a big stick?

And the big one? Depending on your point of view, the most important or most meaningless metric of Presidential success is the stock market. And Biden is the clear winner! The Dow Jones returned 9.34% in the first 100 days under his watch, versus 6.12% under Trump and -1.15% under Obama.

Al Jazeera: Give the People What They Want

In the begining of the Showtime series The Loudest Voice, about Roger Ailes and the rise of Fox News,  Ailes gives Rupert Murdoch some advice about cable news channel: "Cable is about one thing: niche." And for Ailes that niche was Conservatives. As he saw it, the network news programs, CNN and MSNBC were all fighting over the same liberal base. He wanted to capture and keep the big conservative base everyone else was dismissing. "We are just gonna give the people what they want."

And the strategy worked fantastically. Ailes and Fox News reshaped American politics and paved the way for Trump and MAGA nation, all the while making huge sums of money for Murdoch's NewsCorp., including $12B of revenue just in 2020. Fox News became the top rated cable news network in January 2002, less than 5-years after its launch, and had held on to that spot until last month. Losing out to CNN and MSNBC in the coveted primetime slots.

In addition, total day ratings (Mon-Sun, 6a-6a) was just as weak. CNN averaged 1.9M viewers per day in January, MSNBC 1.6M viewers and Fox News 1.3M viewers. And on the day of the U.S. Capitol insurrection, CNN averaged 5.9M viewers, MSNBC 4.5M viewers and Fox News a dissapointing 3.4M viewers.

Well, we know why: Fox News is no longer the only alternative cable news source for the roughly 40% of the electorate that identifies as conservative. After calling Arizona correctly, but early, for Biden on election night (even as uber-liberal MSNBC waited), the channel angered Trump supporters and some of its most fervant viewers have since migrated to even more conservative channels like Newsmax and the OAN Network...Now, add Al Jazeera to the mix? Yes, that's right, that Al Jazeera. The Qatar-based, Arabic, channel is starting a conservative online digital media platform called Rightly. Its purpose is to generate content for "those underrepresented in today's media environment." Okay, if you say so.

Al Jazeera's first foray into America in 2013, via the now-defunct Al Jazeera America through the acquisition of the progressive station Current TV cost the company $2B. So now they are trying their hand at the other end of the political spectrum. Al Jazeera has deep pockets and there are shrewd political reasons for the Qataris to want to more closely align themselves with conservatives. But we'll see if Rightly is seen as credible by disaffected Fox News viewers...perhaps they'll bring on Megyn Kelly, Bill O' Reilly, Lou Dobbs or Glenn Beck.

Trump Acquitted (Again)...Will Be President in 2024?

Two impeachments, two acquitals. Yesterday, the Senate voted 57-43 to convict Trump, but fell short of the 67 votes necessary to bar Trump from ever holding public office again. An embolden, albeit Twitter-less, Trump declared he'll be back and that this is just the beginning...

Yup, even though Trump was on TV inciting a mob to attack the Capitol. And said mob rampaged Congress seeking to capture Senators, Representatives and even his own Vice President. And 5 people died. Still, it was not enough for most Republicans to convict Trump in the very place the attack took place.

That is fear...fear of getting primaried and/ or losing the MAGA support when hopeful Republicans run for the Presidency in 2024. Fear so bad, that they would overlook an actual insurrection...Sure, some Republicans and Trump's lawyers tried to provide cover and make the claim that Trump was really horrified by what happended. Except that when a desperate Kevin McCarthy pleaded with Trump on Jan 6th to call off the mob, he was reportedly told..."Well, Kevin, I guess these people are more upset about the election than you are." McCarthy, in shock and in mortal danger, managed to (allegedly) blurt out "Who the f**k do you think you're talking to?" Of course, a few weeks later a physically safer and chastened McCarthy went to Mar-a-Lago to pledge fealty once more to the (future?) President.

So the joke's on Cruz, Hawley and others who had sights on 2024 against Kamala Harris. Trump's gonna be back and in a Tump vs Harris match-up, Trump probably wins. No wonder, Mitch McConnnell was pleading to the states to bail out the Republican party.

Trump, Congress Make History

May you live in interesting times...History is being made at a rapid clip. In one week we've had: riots in the Capitol, social media ban on the President and an impeachment (a record 2nd time for one president...in the same year...in one day...with bipartisan support)

Here are the historic headlines from the major newspapers:

From liberal tv to Trump tv:

From right to radical-right sites:

To the extreme-left HuffPost:

 

Scary Poll: Insurrection or Liberation?

Unfortunately, it depends... 

YouGov Direct conducted a poll of 1,397 registered voters Wednesday night about the mayhem in the US Capitol. A majority (62%) of those asked considered the pro-Trump supporters who attacked the Congress a threat to democracy (good!). However, while 93% of Democracts and 55% Independents (only?) saw it that way, only 28% (!!) of Republicans felt the same. In fact, a greater percentage of Republicans (45%) supported the storming of the Capitol than opposed it (43%). Scary stuff. (Click to enlarge).

Understanding Our Strange Economy

The NYT has an insightful article that helps explain Why Markets Boomed in a Year of Human Misery. Based on national accounting data, it reveals a complicated economic picture where policy, markets and consumer behavior intersected in unexpected ways. 

It begins with an analysis of the National Income and Product Accounts, which captures how Americans are earning and spending. What it shows is that, relative to the same period in 2019, personal income of Americans (in aggregate) actually increased during this historical pandemic by $1 trillion!

And that was due mainly to Congress and the Trump Administration's surprisingly swift and effective response to the Covid-induced national lockdowns. 

The CARES Act and stimulus checks contributed to $775 billions of additional income. And because of the Paycheck Protection Program (PPP), businesses saw a $29 billion relative gain in income rather than an estimated $143 billion loss in its absence. (Government works! Yay!)

But what about the economic fallout from the historic rise in unemployment in March and April? The cruel reality of income inequality comes into play here. Most of the unemployment was concentrated in lower paying jobs that couldn't be moved online. As the article notes: "the arithmetic is as simple as it is disorienting. If a corporate executive gets a $100,000 bonus for steering a company through a difficult year, while four $25,000-per-year restaurant workers lose their jobs entirely, the net effect on total compensation is zero." So, in aggregate, worker's compensation dropped just $43 billion over the Mar-Nov period, despite mass unemployment.

But this is just half the story. There were big changes in the spending side of ledger this year relative to 2019 as well.

Due to Covid, Americans spent $575 billion or 8% less this year on vacations and services like restaurants, movies, concerts and sporting events. This was modestly offset by increased spending on durable goods (like home office and gym equipment) and non-durable goods (like mineral water, stationery and clothes to look good on Zoom) by about $100 billion. And due to the Fed's interest rate cuts, households saved an additional $59 billion in interest payments.

So, in total American households spent $535 billion less in the Mar-Nov period in 2020 than in 2019.

This bears out Larry Summers' point that for many Americans the pandemic "reduced the ability to spend more than the ability to earn." That brings us to the third important component of the economy: Savings. Collectively, Americans earned more and spent less in 2020.

                                                        Savings = Disposable Income - Spending

or,                                                    Savings = +$1,030 billion - (- $535 billion) 

or,                                                    Savings = +$1,565 billion

So, what did Americans do with $1.56 trillion of additional savings? For one thing, they held on to more cash. Deposits at commercial banks are up ~20% since March. Others bought houses, causing housing prices to rise 8% nationally. Many others put money in the stock market, helping the S&P 500 rise 70% from the February lows to end the year up 16%. For the most daring (like the Robinhood day-traders) the stock market became a fun casino and stocks like Tesla its biggest slot machines.

To be sure the Fed played a key role in helping cut short a nasty bear market. Powell & Co. were instrumental in stabilizing financial markets in March when credit markets briefly froze and threatened the sustainability of the economic system. Yet, the dynamics around savings described above may have played a more sustained role in this wild stock market rally that left many puzzled and angry at perceived moral hazard...But who knows? And who knows how stocks will react once everyone gets vaccinated and returns to normal(ish) life. Does the savings trend reverse and money flow out of the stock market? Or are peoples' views of consumption and savings durably modified? 

And it's worth remembering the benefits of aggressive fiscal and monetary policies were not experienced equally across economic strata. Those who avoided major economic damage during the pandemic were largely the same people who were also doing better before it.