45 The Economy, Why Theyre Wrong
b'This is a particularly tough episode because it\\u2019s about economics, the economy. I\\u2019ve been asked over and over again to do this. What\\u2019s hard about it is it\\u2019s very difficult to really show how you can benefit, which is a little strange compared to the rest of the episodes. Maybe you can benefit by being better informed and protecting yourself from some of the things that you hear out there.\\n\\n\\n\\nThe economy is often looked approached without understanding causality. Microeconomics shows what affects and is effected.\\n\\nOne of the key things I want to stress and make important here is that the economy is completely different than it has been in the past. Most of everything that you\\u2019re hearing today is not very good. I don\\u2019t mean not very good about the economy; it\\u2019s not well-founded. There are a lot of people who are saying things about the economy and about how things are going that seem to indicate that it\\u2019s either good, or improving, or something else. I not only want to show you that it is wrong, but also why it\\u2019s wrong, and how you can see underneath it a little bit.\\n\\nFirst of all, how do these people get these ideas that I\\u2019m considering or saying to you are wrong? One is that, over time, macroeconomics, what it does is it looks at trends, it looks at how the interest rate has occurred in different times through history, and how the economy was when the interest rate was down or up. It shows unemployment, and employment, and labor participation, and growth, all based on historical trends. The problem is that if the underlying assumptions change, then their results and their analysis are a fallacy.\\n\\nA little bit into the numbers. Take a look at it. The assumption is that all the trends analysis and things haven\\u2019t changed that affect the relationship between those trends, but we know they have. How do we know that? Take a look around, what\\u2019s going on. Take a look at how the interest rate is right now. The idea was, historically, as the interest rate goes down, home sales will go up, and people will purchase more cars, the economy will boost. It\\u2019s not happening. The interest rate is just about zero.\\n\\nI had an economics professor many, many years ago that used to say: \\u201cThe lowering of the interest rate was kind of like pushing on a string.\\u201d If the demand is there for somebody to do something, they\\u2019re more likely to take that action because it saves them money because the interest rate is lower. But to stimulate by lowing the interest rate, when the underlying desire and demand is not there, then there\\u2019s no reason to invest, no matter how supposedly free it seems to be.\\n\\nWhat about unemployment rates? They\\u2019re saying the unemployment rate is down to 5.3/5.4, etc. last month or this month, but at the same time, what is that really going? What is unemployment? It used to have a different definition. Yes, they\\u2019ve changed the definition. They \\xa0changed the definition about 15-20 years ago, but it doesn\\u2019t matter when they did it. The idea was that they no longer call for long-term unemployment as part of the unemployment rate. If you\\u2019re out for a long time, over a year, it doesn\\u2019t count. As you\\u2019ve probably seen, a lot of people have been unemployed for a long period of time. On top of that, the number of people that are out of the workforce. What that means is they\\u2019re no longer trying to find a job. If they\\u2019re no longer trying to find a job, they\\u2019re not counted; they\\u2019re not considered part of the labor force.\\n\\nOn top of all of these, you have part-time workers. What happens with part-time workers? It turns out that the way they count it (part-time statistics are really bad) is by total hours. You\\u2019ve heard me say it over and over again, life unsettled, people who are older, etc. are being laid off or replaced by younger workers, people\\u2019s hours are being cut back, etc. In this case, people are having to get jobs that may be part-time jobs. They may have to get two part-time jobs,'