Why the Economy Feels Broken (Even When It Isn’t)

Why does the data say one thing while everyday Americans feel another? In this episode, we explore the disconnect between economic reports and consumer sentiment. Discover how media narratives shape anxiety, why small businesses struggle under regulatory burdens, and who actually benefits from economic uncertainty. From job reports to spending habits and the influence of government policies, we dissect what truly drives public perception and economic behavior. Learn why fear can halt spending and how creative thinking helps people adapt through tough times. 

Chapters

• 0:00 Media’s Role in Economic Anxiety
• 1:18 Disconnect Between Data and Real Sentiment
• 2:03 How Experts Influence Economic Perception
• 5:33 Winners and Losers in Today's Economy
• 8:02 Regulatory Burden on Small vs. Large Businesses
• 9:18 Impact of Consumer Confidence on Spending
• 12:05 Creative Adaptation During Economic Uncertainty
• 14:32 Government Policies and Economic Impact

Transcript

Speaker 1: 0:00

Well, you know, I've long said that it's the job of the media to scare the hell out of everybody who watches it. And so if if you spend your time geared into the media narratives, their job is to frighten you. And the way you know, they're trying to frighten you is to look at the commercials on the news programs. It's for buying gold, it's for insurance, and it's for medicine for health related or stress related health problems. So migraine headaches, stress related irritable bowel syndrome, ulcerative colitis, heart disease, hypertension, high blood pressure, increased cholesterol all of those are stress related illnesses. So you've got advertisers who are advertising to solve the symptoms that the news is causing. So if you want to keep your advertisers happy, you make it as frightening as possible because nobody's going to watch happy stories on the news. I mean, there's just a, you know, nobody will pay for that. Yeah. So so yeah, the there is a great deal of anxiety as it relates to the economy because that sells that sells eyeballs on screens.

Speaker 2: 1:18

So this week I'd like to highlight the economy. The latest jobs report, which came out earlier this month, shows that hiring and wages are both up. But consumer sentiment is sharply down. And depending on what you're reading, you either hear about the resilience of the economy or the theory that the economy is slowing down. Regardless, I would say the sentiment among Americans is that the economy is not great right now. Everything's costing more. They're feeling it every time they go to check out. And wages just don't keep up. And why? Because it's just generally more difficult to afford. How would you explain the difference, this gap between what the experts are saying and what people are really feeling? Where is that coming from?

Speaker 1: 2:03

Well, I think there are two factors here. The first of which is, which expert are you listening to? And economic data is so rich. There's so many variables involved with economic data and. You know, it's essentially, If let's say it's a, let's say it's just ten variables, which is the that's too small of a model. And you say, and the economist or the statistician says, well, this one of these nine, we're not going to count because of some idea in their head that it doesn't matter. So they they take that out of the model. It's essentially a mathematical model. You take that variable out and you get a wildly different result. You know, I mean, baking a cake would be, really inexpensive if it wasn't for the eggs. Well, let's not count the eggs, because you're probably going to get eggs from the next door neighbor. And so if if the The economist or the statistician makes that assumption, they don't need to share that with you. But they can say, oh, you know, the cost of baking a cake is going to be lower now because they've assumed one variable, it doesn't matter, which is why you have experts who disagree on the data. Probably about 20 years ago, there were two sets of, there's a subset of economics called econometrics. And these econometric guys got in these really big academic fights about which variables were the most important for predicting an outcome. And so one one group of scholars said, crime increased because of this reason. And another group of scholars took the same data and said, well, yeah, you've made an assumption. You've you've essentially, pushed the outcome in the direction that you want it. So, it all goes back to the Benjamin Disraeli quote, which is, there are lies, damned lies in statistics. And the more you know statistics, the more you can manipulate the data to get whatever answer you want.

Speaker 2: 4:30

So what do you think is being left out right now?

Speaker 1: 4:33

Oh, I think the models are so complex. You know, I just heard a report today that in in one of the jobs reports, you could count an individual job seeker more than once. So an individual going into the data could be counted multiple times. Well, that skews the data, which means pushes it to the left or pushes it to the right. And the other thing is the sample the these are not they're not sampling the entire population of the United States. There's they're they're contacting people that is a subset of the United States, which they assume is representative. Well, that may or may not be true. And if the samples wrong, the outcomes are wrong. So if the sample doesn't accurately represent the population, then you're just guessing. So it's interesting, but it may not be true.

Speaker 2: 5:33

Yeah. Yeah. Okay. So here's my question then who who do you think is winning this economy? Who are the ones who are looking at it and saying, okay, yes, this is better for us when what what feels like the majority maybe of the middle class are feeling a pinch.

Speaker 1: 5:53

But I think it's a distinction that happened a few years ago, which was, with increasing burdensome regulation. Larger organizations have the resources to manage those regulations, and that happened 3 or 4 years ago. This increased regulatory environment as it related to the lockdowns. Large companies could manage that increased burden of regulation, small businesses and 62% of people employed in the United States are employed by small business, not the major publicly traded fortune 500 companies. And they have an important part to our economy. But the vast majority of people maybe not the best. We'll just call it the majority of people. The majority of people are employed by small businesses who don't have the extra resources to handle the regulatory burden that's been put on businesses in the last 3 or 4 years. As a result, there's been a shift toward larger businesses who can handle the increased regulatory burden. And so. If you're in a large corporation, you're doing great because your compliance department, your legal department is managing the increased regulatory burden. If you're or, you know, a 5 to $250 million company, you're just trying to make it go and you and your 110 employees or are trying to figure it out, and you don't have a, a robust H.R. Compliance department, and you don't have your own legal team. And so you're having trouble managing that regulatory burden. So I would say larger companies are doing better. And if you're in a larger company, you're probably seeing a lot of good things. If you're in a smaller to mid-sized company, you're probably, struggling just to keep up. I've been talking about the burden on businesses, burdens on individuals. If I'm a high net worth individual, it's a nuisance. But the proportion of my wealth that's spent on daily needs is really small. And if it boosts a few percentage, that doesn't make that much difference. Let's say I spend 3% of my my wealth to manage my daily existence. Well. If I'm spending 95% of my wealth to manage my daily existence and increase matters a lot more. And so people who are wealthy, it's it's not nearly the burden. And I, you know, I think about young people who are starting out. It's an incredible burden for them.

Speaker 2: 8:43

So what does this, lack of consumer confidence due to the economy, how does it impact the economy? And and what do you see happening in the near future?

Speaker 1: 8:52

Consumer confidence is a measure of consumer anxiety. Worry about will I be able to control what happens and anytime there's uncertainty what what organizations do what individuals do is they just they just grab on to their money that they they think, I'm going to hold on to my money until I can be assured that I'm not going to lose it. People hate to lose money. They hate to lose money more than they like to get money. And so anytime there's anxiety, they'll hoard cash rather than spend cash for the future. So what we're seeing is anxiety in the general population about what the future holds. Everybody holds on to their cash. They don't spend money there. And so the economy doesn't grow. Does that make sense?

Speaker 2: 9:49

Yeah. So how long.

Speaker 1: 9:51

Leads to anxiety in the markets? It leads to anxiety at the grocery store. And people just hold on to their money and stop it in their mattresses.

Speaker 2: 9:59

So economic indicators and I and you know, experts who may come out and warn of a slowing economy are almost, producing a self-fulfilling prophecy in that case.

Speaker 1: 10:11

Well, you know, I've long said that it's the job of the media to scare the hell out of everybody who watches it. And so if if you spend your time geared into the media narratives, their job is to frighten you. And the way you know, they're trying to frighten you is to look at the commercials on the news programs. It's for buying gold, it's for insurance, and it's for medicine for health related or stress related health problems. So migraine headaches, stress related irritable bowel syndrome, ulcerative colitis, heart disease, hypertension, high blood pressure, increased cholesterol all of those are stress related illnesses. So you've got advertisers who are advertising to solve the symptoms that the news is causing. So if you want to keep your advertisers happy, you make it as frightening as possible because nobody's going to watch happy stories on the news. I mean, there's just a, you know, nobody will pay for that. Yeah. So so yeah, the there is a great deal of anxiety as it relates to the economy because that sells that sells eyeballs on screens in every economy. Somebody has figured out how to make money. In the Great Depression where you had 30% unemployment, there were still a subset of people who figured out how to stay in business, how to stay alive. And so in every economy, there is a way to make money. It's just figuring it out. And that requires us not to live in fear, but to think creatively. And it's hard to think creatively when you've got a gun to your head. I mean, it's just so. So the more we worry about things, the less the creative parts of our brain turn on. The second piece is, I, I encourage everybody I work with to read history. I mean, just look at history. There were always bad times and it will get better again. I, you know, I was talking to to some of my children and they go, man, these, these, you know, these interest rates are insane. And then I tell them, well, you know, when I bought my first house, it was a lot less expensive that I know, but interest rates were even higher then and they'd come down. And so they will come down again. And I tell them back when I was even going to buy a house back in the 1980s, how high the interest rates were, it was absolutely unaffordable. Well, people figured it out. They still bought homes. They went on with their lives. They had children, they saved for their retirement. I mean, all don't put your life on hold waiting for everything to be perfect, because that's never going to. Yeah. So living outside of fear and and believing that you can figure it out, that's the important. That's the important part. And people have always figured it out. The Berlin Wall separated East and West Germany, and they killed people who tried to get across it. And. I went to the Berlin Wall in 1984, and I went to East Germany, and I saw how awful it was. And I went through checkpoint Charlie. And, you know, I, I was afraid I was going to get arrested, but I still wanted to go see East Germany. The Berlin Wall now has been down longer than it was up. In other words, the separation between East and West Germany lasted, I think, about 28 years and the Berlin Wall has been down longer than it was up. So things always change. Nothing stays the same and people live through that adversity and they come out the other side.

Speaker 2: 14:04

Even better all the time. And there's the big issue about how much, presidential administration and executive branch really have, power over the economy. You know, everyone, like, take the credit for, low gas prices. And the minute they jump up, they say, oh, well, there's there's actually not much we have done to impact that. But in your view, how much power do you think and why do you think? And then ministration does have it's economy that the energy.

Speaker 1: 14:36

Let's talk about one factor of the economy and then we'll back up to the larger factor. Let let you use gas prices. If I have an administration who says we are going to close down all the drilling on federal leases, we are going to, actively put coal out of business. We are going to, move away from exploration in, fossil fuels. What that tells investors is, oh, okay, we're not going to make that much money in this sector right now. Where can we make money that the government will support? And so if if the government, through its policies and regulations, makes it difficult for an industry like fossil fuels, coal gas, oil to to thrive, investors won't put their money there. So there won't be exploration. We won't build new refineries. We won't build pipelines. All of those things increase the the price on those, those, resources because there aren't as many of them, and they're harder to transport and they're harder to turn into the, the things that we need. If if I'm an investor and I'm going to get, tax credits for investing in wind turbines or in solar cells, solar panels, it may not be, as an effective energy transfer, but I'll make more money. I'll put my money over there. So what what we see is that the policies of an administration affect the prices based on the regulations they put in those areas. So, yeah, gas prices are going up. Why? Well, because the current administration shut down exploration, shut down leases and shut down pipelines that could have, created, very inexpensive fossil fuels. The second part is that if you know, the country's about 5050, you know, in terms of which president they want, it's pretty close. It's not like 9010. It's about 5050. If you have half of the population who is concerned about what's going to happen, it doesn't matter which half, what are they going to do with their money, they're going to hang on to it. And so the economy is always the greater the amount of uncertainty in our political situation, the greater uncertainty there is in the economy in general. And if we put our so presidents do have a considerable effect on the economy indirectly, by shaping the way people feel and how they feel, their emotions affect how they behave with their money.