Imposing Some Sense On The Economy and The Markets

It's time to impose some sense on the economy and the markets. It's a different approach than simply making sense out those overstuffed creatures that influence, in some cases dominate our personal and family lives.

So what's the difference?

When we try to make sense out of the economy and the financial markets, we typically try to analyzed what's actually happening and attempt to provide some explanation that makes some sense. 

For example, the government reports statistics about, let's say the overall economy. A big (an egregious) example is when the Big Orange Guy opines that our current economy is the greatest in the history of the U.S. In response to what should be an obvious overstatement, we try to provide both known facts, combined with personal experience that might help us to see how "off the mark" from reality is such an overstatement.

We take a similar approach when drilling down to such areas as the job market, inflation, the impact of illegal immigration on the job market the stock market and inflation, and so forth. The goal is to find our way to reality vs. the either ignorant or intentionally wrong statements offered by the powers-that-be and their minions. We'd rather keep a clear view of things rather than a blurred or tainted one. It helps us make better decisions about how best to save and spend our hard-earned money - at least those of us not in that top tier of society that benefits from the policies and profligate misleading propaganda the come at us 24/7 - at least those of us who have not learned to restrict access to our personal circle of sanity and peace of mind.

We hope our exercise in making sense is helpful in this regard. 

Imposing sense is a different matter. Here we try to discern what should be when it comes to our economy and the financial markets. Put simply the difference is between what is and what should be. So when we impose sense, we want to look at no simply what's going on. In fact, there's an ethical component here.

A good example is all the chatter about the Fed raising or lowering the Fed Funds rate. It pretty much concerns itself with how either will affect our economy and financial assets.

Until recently, we heard that the Fed was raising their Fed Funds rate to rein in inflation. Whether their logic was/is sound or not, that's what they claimed to be doing. One aspect of this would be that raising rates will cool what they claim was a "hot" economy that was causing prices to rise.  

On the flip side, recently we hear that the Fed has lowered the Fed Funds because prices no longer are rising as they once were. (Notice that we're not saying prices have fallen; only that the rate of increase has fallen.) And so, with inflation now "under control," the Fed can claw back the recent rate increases so that those higher rates will not impede economic growth, even give a boost to the economy.

Oh, and let's not forget Wall Street and its venerable stock market that craves low interest rates. Why? We'll leave that for another time. Just know that the Fed will take credit if the stock market continues its unfathomable rise to the stars in 2026, if it continues to lower it's Fed Funds rate.

But if we were to impose some sense on the manipulation of interest rates, we would be obliged to take a different approach, something like this:

When the Fed raises its Fed Funds rate, it enables those who need/rely on income from their investments to achieve their objectives using relatively "safer" or more reliable vehicles like Treasuries, CDs, perhaps even some corporate bonds (those of stable companies) to derive their income. 

(We note that "safer" can be misleading here; but, again, a discussion of this will be left for another time.) 

And even clearer example would be to consider senior citizens - those who are retired from active money-earning work. In the past, such folks would place their money in banks, in CDs, rather than speculate in the stock market. Go back far enough, and you would find such vehicles paying 5% when inflation was less than that. So they could keep up with inflation with a little left over and not have to concern themselves with the drama of the stock market. If you're not familiar with such a scenarios, you might do some digging into the past and find out how that all worked. To say the least, it was a different world.

So imposing sense calls on us to see the world from this sort of view, not the view put forth by those whose vision is restricted to how much or how fast the economy is growing, and/or how much or how fast the stock market it rising.

Imposing looks at things from both a personal and a moral stance.

Well, perhaps we've gotten a bit long-winded here. So we'll cut off today's thoughts for now. Going forward, though, we'll be trying to do more imposing of sense, as we attempted to outline above. 

We do this with the hope that we can all take a deep breath and extract ourselves from the slimy influence peddlers in the government and on Wall Street. The former want to dampen any inklings of discontent. They do this so that we'll keep voting for the same-old same-old policies that line their pockets and keep us steadily asking for more "benefits" from them to keep us financially afloat. The latter want to pick our relatively empty pockets at every turn and funnel our hard-earned money into their own overstuffed pockets.

Make sense?