As a Cub Scout, I learned that lichens only grow on the north side of trees, so I could orient my map. As a soldier, I learned to aim slightly lower when aiming uphill, as the reducing air pressure gave a slight lift to the bullet. As an investment analyst, I learned that stock prices have a propensity to weaken on Friday afternoons, as traders dislike holding risk over the weekend. As an economist, I learned to marvel at the wealth and variety of economic data. However, each datapoint offers little clues of the gigantic economy.
There is a parable from India about blind men describing an elephant. Each blind man was allowed to touch only one part of the elephant and then had to describe the animal. Their descriptions were so different that they began accusing the each other of lying and started fighting. The moral of the parable is that people make grand assumptions based on limited information. That is the challenge of economic data.
An example was the unexpected 0.3% drop in manufacturing last month. It is down 6.1% since February. Auto products were down, as were computer sales, appliance sales, and furniture sales. Clearly, the economy is sputtering without additional stimulus. Just as “justice delayed is justice denied,” pandemic relief will be less and less helpful as we dig a deeper and deeper hole.
What has changed is that the traditional three-dimensional model for economic analysis has become four-dimensional, with an added complications from the pandemic, and then five-dimensional with Modern Monetary Theory (MMT).
