6/11/2025
By John Jean, Research Analyst

I read a piece from a highly regarded Wall Street whiz on the demise of American Exceptionalism.

He admitted measuring the demise is difficult but noted that a near-term recession and higher inflation will be clear indicators.

On the latter, he cited Goldman Sach’s prediction of core CPI by the end of the year rising to 3.5% from the prior projection of 2.5%; which is already lower than anyone on the street thought back in April.

It’s odd because 6.6% core CPI was not the end of American Exceptionalism in 2022.

Then there’s the imminent recession point.

The textbook definition of a recession is 2 consecutive quarters of GDP decline. However, the National Bureau of Economic Research (NBER), which officially declares recessions, considers a broader set of indicators, including employment, personal income, industrial production, and sales, to determine if a recession is occurring. Although, their declaration has historically lagged the actual recession.

The USA has seen a long list of recessions, and while some may have temporarily raised questions about the future of American Exceptionalism, the nation always recovered and moved to new heights, proving the doubters wrong.

Not even the promises from the Federal Reserve have been able to stop the recessions. The good news is they have been shorter in duration.

There was a trend of less GDP lost during recessions, until around 2009; however, since then corporate profits have been meteoric – have we forsaken Main Street for Wall Street?

Meanwhile, the amount of federal debt surged past GDP contributing to sharper GDP declines during recessions as well as more inflationary pressures. Thus, boosting corporate profits and helping Wall Street through asset inflation, while real wages stagnate and Main Street is left out.

It is also important to note that economic bubbles and recessions have been happening throughout history and often revolve around new trends and technologies in which investor hype precedes reality.

The 1890s saw several bicycle innovations made to the product such as chain drive transmission, better gear ratios, and improved tires. These new innovations culminated in the Saftey Bike, which sent demand for these new bikes soaring.

A plethora of new bicyle companies were formed to saitate the demand and investors bid up their share prices creating the conditions for an economic bubble. At the height of the boom in 1896, 750,000 bikes were produced per year in Great Britain.

However, the same year the USA expierenced a recession due to a drop in silver reserves and cheap American bikes flooded the British market. This resulted in 40 publically traded bike companies going bankrupt by 1901, with many more in the following years. All said and done, around 70% of the companies either went bust or left the sector.

The first key takeaway is that although many of the companies went under, the core innovations prevailed and bikes did not go away, they are still being sold in larger numbers today.

The second key takeway is the British economy would still hold the dominant position on the global stage for decades after this metaphorical bump in the road with bikes.

We don’t like recessions, but they have been a part of the boom-bust cycle from the very beginning, and they are not the “be all, end all” of national exceptionalism.

John Jean
Wall Street Strategies

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