The Next Economic Crisis Has Already Started in American Households

Added: 2026-06-03

[00:00:00]What is happening in the US economy right now is worse than a recession. In a normal recession, everyone can see the weakness. Stocks fall, jobs disappear, companies pull back, politicians are forced to admit something is wrong. But this moment is different. Wall Street is still rising. AI companies are still booming. Wealthy households are still spending. Yet, underneath all of that, millions of ordinary people are being squeezed by food prices, rent, gas, credit cards, payments, and household bills. That's is why this is so dangerous. The economy may look strong at the top, but for many Americans, it feels broken, unfair, and impossible to keep up with. This is what people mean when they say the American economy is becoming K-shaped. One side of the economy is moving up, helped by stocks, assets, AI, and wealth, while the other side is moving down, with ordinary households falling behind under the pressure of everyday costs. Take a look at this clip from Bloomberg, where Peter Atwater explains why the economy is no longer moving in one direction, but splitting into two completely different realities.

[00:01:10]>> Yeah, and in fact, it's no longer a straight-line K.

[00:01:14]The The arm of the K looks almost parabolic, and the leg is turning almost straight down into despair. And so, the divide between those at the top and bottom >> [snorts] >> isn't just economic at this point, it's almost become two life experiences that bear nothing in common.

[00:01:40]And I And I worry that those at the top are doing all they can not to see those at the bottom, but in a world of social media, those at the bottom can't help but see this enormous overabundance that exists above them.

[00:02:00]>> That is the real story. This is not just rich people doing better than poor people. That has always existed. The difference now is that the gap has become impossible to ignore. The people at the top are seeing rising stock portfolios, rising home values, huge AI gains, and new opportunities. But the people at the bottom are seeing higher rent, higher food prices, higher gas prices, higher interest rates, and fewer ways to move up. And because of social media, people can see both worlds at the same time. Someone could be sitting in a rented flat or a small apartment struggling to pay bills while watching someone else spend thousands of dollars on a luxury holiday, front row tickets, or a private event. That comparison matters. That is the clearest way to understand a K-shaped economy. Two groups of people can live in the same country, under the same president, even in the same state, but experience two completely different economies. One group feels like the economy is still working for them, while the other feels like every month is becoming harder to survive. And this is worse why it's worse than a normal recession, because in a recession, most of the numbers clearly point to weakness. But right now, many of the headline figures still point to a strong economy, even while millions of people feel like they're falling behind.

[00:03:20]Reuters reported, "US consumer sentiment fell to a record low in May as surging gasoline prices linked to the Iran war intensified affordability concerns, highlighting broader dissatisfaction with President Donald Trump's handling of the economy."

[00:03:36]The University of Michigan Surveys of Consumers on Friday showed sentiment among Republicans and Independents dropped to the lowest level of Trump's second term.

[00:03:46]Trump won re-election in 2024, in large part because of his promise to reduce inflation.

[00:03:52]but Americans have faced higher prices from his sweeping tariffs and now from the US-Israeli war with Iran.

[00:04:00]This matters because it shows this is not just a political complaint from one side. It's spreading across the country.

[00:04:06]Consumer sentiment was falling to a record low, which means people are not just frustrated, they're deeply worried.

[00:04:13]And this is why it feels worse than a recession. The economy can still look strong from the outside, while ordinary people feel crushed on the inside.

[00:04:21]Stocks can rise, investors can make money, and big companies can talk about growth. But if families are going backwards every month, the official numbers stop convincing them.

[00:04:32]They do not care if economists say the economy is resilient when groceries, fuel, rent, and bills keep rising faster than their wages. At that point, the emotional economy becomes more important than the headline economy.

[00:04:46]And this is why the Iran war matters.

[00:04:48]Most people are not following every detail of oil markets, shipping routes, or the Strait of Hormuz, but they feel the impact at the pump. They feel it when filling the car costs more.

[00:04:59]They feel it when higher transport costs push up food, deliveries, airline tickets, and household goods.

[00:05:06]Energy shocks do not stay in the energy market. They move through everything.

[00:05:11]And when people are already stretched, one more increase can push them over the edge. That is how a gas price shock can quickly become a political shock.

[00:05:20]The nearly 3-month-long conflict has disrupted shipping in the Strait of Hormuz, boosting energy prices, as well as straining global supply chains, and causing shortages of a wide range of goods, including fertilizers, aluminum, and consumer products. The national average retail gasoline prices jumped more than 50% since the war started to about 4.5 a gallon, data from motorist advocacy group AAA showed.

[00:05:45]American consumers are angry about the economy," said Heather Long, chief economist at Navy Federal Credit Union.

[00:05:53]This is the part that makes the crisis feel real. Gas prices jumping by more than 50% is not a small technical detail. That is the kind of number people notice immediately. If you need your car to get to work, take your children to school, visit family, or run a small business, fuel is not optional.

[00:06:11]You cannot simply stop using it overnight. And when the gas prices rise that fast, it changes how people behave.

[00:06:17]They cancel trips, they avoid spending, they delay purchases, they stop eating out, they cut back on anything that feels extra. That is how a cost of living crisis spreads through the economy.

[00:06:29]It begins with essentials, but it ends up hurting restaurants, shops, travel, entertainment, and small businesses. So, when people say consumers are still spending, we have to ask, what are they spending on? Are they spending because they're confident, or are they spending because survival itself has become more expensive?

[00:06:49]Take a look at this clip where they discuss the lack of upward mobility and why the AI boom may be making people at the bottom feel even more hopeless.

[00:06:57]>> It's not only that they don't see any upward mobility, the AI boom has now put a target on their back. They believe that it's a zero-sum game, and they're looking at all of these gains being made in AI stocks, and believing that ultimately it will come at their expense.

[00:07:20]And so, a lot of this has to do with how both groups imagine the future, and the imagination of the future could not be more divided in terms of extraordinary optimism at the top and this dire level of despair at the bottom.

[00:07:42]And it's the despair that troubles me because I know that ultimately that is what sets people into the streets.

[00:07:53]>> That clip is important because it connects the economy to the future.

[00:07:57]People can survive hard times if they believe things will eventually get better. But if people believe the future is being taken away from them, that creates something much deeper than frustration. It creates despair. And AI is now becoming part of that story. At the top, AI is being sold as the next great wealth machine.

[00:08:16]Investors are excited. Tech companies are valued higher.

[00:08:20]Executives talk about productivity and transformation. But at the bottom, many workers hear something very different.

[00:08:27]They hear that their jobs may be automated. They hear that companies may need fewer staff. They hear that the gains will go to shareholders while the risk lands on workers. So the AI boom becomes another symbol of the same problem. The people who own assets get richer while the people who depend on wages feel more exposed.

[00:08:47]This is why the stock market rally is not cheering people up. In the past, politicians could point to a rising market and say the economy was strong.

[00:08:56]But that argument does not work the same way anymore.

[00:08:59]Most people do not live off the stock market. Even if they have retirement savings, that money is not helping them pay for petrol this week. It's not lowering their rent. It's not making groceries cheaper. It's not paying off their credit card. So when people see the Dow hit a record high while consumer sentiment hits a record low, it does not make them feel better. It makes them feel ignored.

[00:09:22]It makes them feel like the economy being celebrated on television is not the economy they're living in.

[00:09:28]Reuters reported, "Investors shrugged off the slump in sentiment. Stocks on Wall Street were trading higher with the blue chip Dow Jones Industrial Average hitting a record high for the first time since the Iran war began.

[00:09:42]The dollar was steady against a basket of currency US Treasury yields rose.

[00:09:47]That is the whole story in one paragraph. Consumers are angry.

[00:09:51]Sentiment is at a record low.

[00:09:53]Gas prices are surging. Inflation expectations are rising. But Wall Street keeps moving higher. And that is exactly why this is worse than a recession.

[00:10:03]In a recession, the pain is usually obvious. But here, the pain is divided.

[00:10:08]One part of the country is looking at asset prices and saying things are fine.

[00:10:13]Another part is looking at the cost of living and saying things are falling apart. That kind of split creates anger because people no longer feel like they're part of the same national story.

[00:10:24]The top sees opportunity. The bottom sees pressure.

[00:10:27]The top sees AI wealth. The bottom sees job risk. The top sees record markets.

[00:10:34]The bottom sees record bills.

[00:10:36]Take a look at this clip where they discuss the pressure showing up in credit cards and how the lower end of the economy may be under serious stress.

[00:10:44]>> Yeah, so if I look at credit card uh delinquencies, which this month look like they're going to come in at about 13%.

[00:10:53]What is so striking to me is if you if you look at it mathematically, that level is historically high.

[00:11:03]But it comes at a time when within the card portfolio, you have enormous convenience balances that are absolutely riskless for the card issuer.

[00:11:15]And so, on their own, I suspect that the the quality that the card issuers are seeing among their lowest tier is distressful.

[00:11:29]And the challenge right now, Tim, is that we have this this bifurcation.

[00:11:37]>> This is where the numbers become more worrying. Once people start falling behind on payments, the pressure becomes harder to hide.

[00:11:44]Credit cards are often the last option when wages are not enough.

[00:11:48]People use them for food, fuel, bills, car repairs, medical costs, and emergencies. But the credit card interest rates are extremely high. So, once people fall into that cycle, it becomes very hard to escape. That is why this is not just about mood. It's about how the economy is working.

[00:12:06]If people at the bottom are borrowing at high rates just to survive, while people at the top are building wealth through assets, the gap keeps widening.

[00:12:15]And this is where the political danger begins. People will tolerate hardship when they believe the system is basically fair. But when they believe the system is rigged, they stop trusting politicians, institutions, and official data. They start looking for someone to blame.

[00:12:30]That can show up in elections, protests, and anger toward both major parties.

[00:12:35]This is why Peter Atwater's warning matters.

[00:12:38]He's saying the pain at the bottom is not just red or blue. It's purple.

[00:12:43]Food, fuel, rent, debt, and wages affect people across political lines. When life becomes too expensive, party loyalty becomes weaker.

[00:12:53]People want relief. And if they do not get it, they will look elsewhere.

[00:12:58]So, when we say this is worse than a recession, this is what we mean. A recession is an economic event. It has a beginning, middle, and end.

[00:13:07]But this is a confidence crisis, a cost of living crisis, and a trust crisis.

[00:13:12]Millions of people are watching the top of society get richer, while their own lives become harder.

[00:13:18]The economy is not simply collapsing, it's splitting. And official numbers can hide that pain for a while, but not forever. The real question is not whether the stock market can keep rising, it's whether ordinary people still believe the economy has a place for them.

[00:13:34]A recession hurts income.

[00:13:36]This hurts trust.

[00:13:37]A recession damages spending.

[00:13:39]This damages hope.

[00:13:41]Rate cuts or stimulus can help an economy recover.

[00:13:45]But once people believe the future only belongs to those who already own assets, that is much harder to fix. The market may still be rising.

[00:13:53]The headlines may still talk about resilience, but underneath the surface, people are tired, angry, and losing faith.

[00:14:00]That is why this may be worse than a recession.