Renowned venture capitalist Chamath Palihapitiya recently expressed his view that the US economy is already in a “near-synthetic recession.” In his remarks during the latest episode of the All-In Podcast, Palihapitiya discussed public perception regarding the current state of the economy, contrasting it with official economic data.

He began by explaining the composition of Gross Domestic Product (GDP), which is often used as a barometer for economic health. “GDP is the sum of four things. Most of it is what people spend. Then, the next big slice is what companies and governments spend and the last is what we export to other countries”, explained the investor. Despite the 1.6% increase in GDP in the last quarter, more than half of Americans believe that the economy is in recession, a feeling that Palihapitiya attributes to the GDP calculation methodology, which may not adequately reflect the economic reality experienced by the population.

Palihapitiya further explained that, in periods of high interest rates, both consumers and companies tend to adopt a more conservative stance with their spending. “Consumers prefer to keep their money in banks to generate interest, while companies limit their investments because borrowing money is expensive,” he said. On the other hand, when interest rates are low, there is a greater incentive to spend, as the cost of capital becomes more affordable.

However, the government does not follow the same logic, as Palihapitiya notes. “Unfortunately, it turns out that our governments in America continue to spend more and more. So even if the net interest income is small, even if the net interest income is high, they say, ‘Forget it, the taps are open,’” he commented.

The billionaire concluded by highlighting the discrepancy between official numbers and the perception of ordinary citizens. “Rates are at 6%, people are saving more, they are not receiving more, things are costing more. The government is giving you free money, so you feel like everything is changing,” he explained. He suggests an overhaul of economic assessment methods: “If we don’t revisit this thing from first principles, we’re going to have this dynamic where we think one thing is happening, but exactly the opposite is happening. In this case, I think we are in an almost synthetic recession.”


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