This new Trump Economic Theory of Relativity is giving the people in power a real headache. Einstein said that time changes relative to your reference point; well, apparently so does the Phillips Curve. Fed Chairman Powell says that the reason we are not seeing inflation right now is because people are coming into the economy who were previously on the “sidelines” – at least, that is the buzz I hear in the news right now. The correct economic term for sidelined workers is “discouraged workers” and they do not show up on the unemployment statistics.
I used to teach economics at the university and I am proud to say that I am a heterodox economist. I never taught economics as it was taught in the books; that is, I did teach students the book material but I tried to make them think about alternative explanations.
Aside from an MBA, I also have BA in chemistry and an MS in chemical engineering (experimental research thesis). I know how to take data. What makes me angry is that economists think that they can treat society like their own private, bench scale, laboratory.
Take GDP as an example. There are two ways to determine GDP. One is to count the income that every person and business receives. The other way is to count the expenditures that every business and person makes. How can that be possible? I am old enough to know that a large portion of our economy is underground. There are a lot of poor folks out there who do not have bank accounts and do not use credit cards. They also do not file tax returns and live in an all cash economy. Their focus is on just staying alive.
Take the Money Supply as another example. Does the government really think that they can count every dollar bill out there? Consider all the money that is lost, ripped, burnt in fires, buried and forgotten, carried to Europe, and brought in from Asia. That does not even include the counterfeit money. Does the government really think they can measure this by looking at society as its own private economic laboratory?
And now it is finally occurring to the government that there are a lot of discouraged workers out there. That this great Trump economy is not really that great. Has mankind always lived under this type of neglect from government? Reminds me of the book Moby Dick when Ahab’s boat sunk, “and the great shroud of the sea rolled on as it rolled five thousand years ago”.