It’s hard to see how the country’s mood could get any more negative, despite a two-year bull market and signs of job growth. But even if the many prophets of doom are right, where else would you want to be when armageddon comes?

We’re living through a depression of epic proportions.

I don’t mean an economic depression, of course—the world seems to have dodged that bullet for the moment.

But we’re now a decade into a steep downturn in the national mood, which shows no sign of improvement despite a two-year bull market in stocks and months of notable employment growth.

Some measures of the funk we’re in:

  • In the most recent AP-GfK Poll, “things in this country were headed in the right direction” for 35% of respondents, and the number is actually on the high side among similar surveys. AP-GfK, however, hasn’t registered a lower percentage of positive responses since December 2008, when the nation was staring into an economic abyss. “Wrong direction” scored 62%, by contrast.
  • In January, while some polls saw a fleeting pickup in sentiment, the respected Gallup survey found a dismal 19% “satisfied…with the way things are going in the United States,” vs. 78% dissatisfied.
  • What’s more, satisfaction with “our system of government and how well it works” and “the size and power of the federal government” fell to decade lows, and Gallup noted that the pace of the decline has accelerated over the last three years.
  • Another long-running series, from the Pew Research Center, puts the percentage of those satisfied in mid-March at 22%. That’s down from 59% in early 1998. The only readings as high as 50% in the last decade came in the flush of patriotism after the 9/11 attacks, and again in April 2003 as US tanks rolled into Baghdad, inducing temporary satisfaction in exactly half of the respondents. Since then, all through the housing boom, the credit binge, and two bull markets, the mood has steadily grown grimmer.

It might have something to do with the fact that real household income has stagnated for more than a decade, while economic inequality has increased sharply, with the top 1% of the households hogging 58% of all gains seen over a recent 32-year stretch.

Is This a Pessimism Bubble?
Now, factor in the recent financial collapse, and the resulting pursuit of unconventional monetary policies.

Federal Reserve Chairman Ben Bernanke may be right, as he said today in Atlanta, that the recent pick-up in inflation will prove transitory in the medium term. But the market’s response today was to bid gold prices sharply higher to a new record.

Traders appear to be listening less to the man with the monetary powers and the Princeton pedigree than to the charlatans selling the “end of America” and the threat of hyperinflation.

The gulf between economic performance and the direction of asset prices on one hand, and popular political perceptions on the other, is just about as wide as it can get. Either the sour sentiment dooms the uneven growth now under way, or stronger and broader growth will perk up sentiment.

The latter is the likelier outcome. Pessimism is at a historical extreme, and growth is not—so it could get considerably better.

We’ve seen rapid turnarounds in the past. Between January 1997 and February 1998, the proportion of respondents who told Pew they were satisfied with the national trend rose from 38% to the aforementioned 59%.

How did that happen? All it took was for unemployment to hit longtime lows, while incomes rose nicely and inflation remained tame.  

We’re not likely to revisit that nirvana in the near term, of course. But don’t we need to feel at least a little better?

Perhaps we already do. When Gallup asked people about their overall quality of life, rather than the perceived direction of the country, 77% pronounced themselves “satisfied” in January, down just five percentage points in three years.

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