Housing Costs and Economic Sentiment

One of my New Year’s resolutions for 2024 was to do more episodes with people who think I'm wrong about something. For example, I've done several episodes about how the U.S. economy is doing much better than most Americans think. Today’s guest says my analysis (and that of many economists and economic commentators) is missing something big. Official inflation measures do a poor job of capturing the effect of higher interest rates. When a home goes from $200k to $220k, that’s a 10 percent increase in the value of the home. But, with higher rates, the monthly cost of living in that house with a mortgage might go up 300 percent. The same is true for financing a new car with higher interest rates. Or paying credit card debt. Judd Cramer, an economist who teaches at Harvard University, is the coauthor of a new paper on how our inflation data doesn't properly account for skyrocketing interest rates—and why the so-called "vibecession" isn’t as much of a mystery as we think.

If you have questions, observations, or ideas for future episodes, email us at PlainEnglish@Spotify.com. 

Host: Derek Thompson

Guest: Judd Cramer

Producer: Devon Baroldi

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