It’s The Economy Stupid; Or are the Economists Stupid?

They say a broken clock is right twice a day and after a year can boast of a long string
of successes. Sooner or later the economic pundits are going to be right. We will have a
recession.

We have been listening to this prediction from investment elites for almost three years
and still the promised land of economic demise eludes us. We had GDP growth
of 2.5% in 2023 finishing the fourth quarter with an impressive 3.3%. Unemployment has been lower than 4% for two years. An accomplishmentonly seen in the boom era of the 1960’s. In 2023 the economy added over two million jobs.

Yes, inflation is still a problem, but it has dropped from 9% year over year to a little over 3%. Wage growth now exceeds inflation,and the consumer economy is robust as evidenced by the preponderance of “We Are Hiring” signs that dot the landscape.

So why are so many economists still pounding the table for a recession? Since 1980 the
investment elites of the world have dined out on the idea referred to as Trickle Down
Economics. Give the wealthy the freedom to create businesses through a lower tax
burden and the entire population will benefit. Raised in this environment there is little
appreciation for how economies react when governance adopts a Trickle Up policy that
promotes growth from the bottom up and the middle out.

They panic at inflation because their concern is based on the reality that they have large
caches of money and inflation reduces the value of that asset. They proselytize that
inflation hurts the working citizen and they are right. It reduces the value of wages, but
one simple fact eludes them. The average citizen does not have a lot of cash in reserve.
The devaluation of monied assets have little effect on their net worth. What they do
have in abundance is productive hours. Forty to Sixty this week, next week, next month
and next year. And the value of that productive hour has increased.

So, what does the average worker do with the proceeds from this more valuable
productive hour. He takes his family out for a Pizza. He buys a new pair of shoes for his
kids. He drives the economy with his increased spending based on his increased
earnings. It has yet to dawn on investment elites that businesses are built on demand
from consumers and when the consumer has more money in their pocket businesses
thrive. They hire more people; they pay them better wages which affords them the
ability to buy more goods that drives more business.

Sooner or later the culture of trickle up economics will affect the learning curve of those
who study economies for a living. The investment media is still beholding to the Trickle
Downers of the last four decades. They will continue to recruit talking heads from
prominent investment groups who will warn us of an impending recession. And one day
they will be right, but that day is a long way off. Like a broken clock their predictions are
of little value. They offer a distraction from the simple fact that the economy seems to be
doing pretty well.