Slow Cooking in a Microwave World: Reading Beyond the Economic Headlines

We live in a microwave world. But the economy is roasting in a slow cooker.

In this episode of the Midweek Memo, host Mike Maharrey talks about modern news media and the struggle to make sense of a slowly unfolding economy in a world where headlines drive decision-making. Along the way, he maps out some of the fundamentals he sees underlying today's economy. He goes on to talk about Federal Reserve Chairman Jerome Powell's Jackson Hole speech and the trajectory of monetary policy in a broader economic context, why more inflation is in the pipeline, and the current state of the gold market. 

Mike opens the show lamenting that he sometimes feels like a broken record. 

"I think part of the problem is I tend to be a macro kind of guy. I’m generally focused on the big picture. I’m most interested in the underlying dynamics. And let’s be honest, those things don’t change much from day to day and week to week. The economic fundamentals are essentially the same as when I started doing this show back in January. There’s a tidal wave of inflation out there that was created starting with the 2008 financial crisis and then increased exponentially during the pandemic. There is a massive level of debt that was incentivized by the easy money. There are all kinds of bubbles and malinvestments in the economy caused by monetary malfeasance. The government is borrowing and spending us into oblivion."

So, while headlines come and go, these underlying dynamics are playing out under the surface - slowly. 

"Now, at some point, it will all come to a head and there will be some big event like the financial crisis, or a stock market crash, or something else, but there is no telling when that will happen, right? It could be tomorrow. It could be Monday. Or heck, it could be next May.

"The thing is that history tends to play out in slow motion. I’ve heard it said that things happen slowly and then all at once. I think that’s true. Day to day, things just kind of muddle along. But the mundane is punctuated by these big events from time to time. 

"The thing is our modern society isn’t built for slow."

Mike shares some of his experience working in television news, pointing out the challenge of reporting things quickly and accurately. The default in our modern times tends toward fast. 

"Get the info out there and clean it up later. Or maybe don’t clean it up at all. Because often, once the details about something really come together, we’ve moved on to the next headline. This is a challenge for somebody like me who is more interested in the big picture. I’m trying to analyze the news of the day within this bigger framework. But because the framework is the same, I start to feel like I’m being redundant. Basically, I’m trying to be a slow cooker in a microwave world."

Mike uses an example from the 1940s to show how the rapid pace of information has made decision-making windows much smaller.

"Back in the day, when information moved much slower, decision-makers had a lot more time to consider before they acted."

Today, everybody has instant access to information, so the pressure to "do something" quickly has increased. This often leads to bad decisions.

"Think about this in terms of markets. A few weeks ago, we had a big stock market selloff. Everybody freaked. Suddenly, pretty much everybody was convinced there was going to be a recession. The soft landing was off the table. And then two days later, the soft landing was back on again. The thing is nothing fundamentally changed over that three or four-day span. The underlying economic dynamics are pretty much the same today. But we had these wild swings. If you made snap decisions based on that one day and sold your stocks or your gold, well, you might be regretting it. Or maybe you made the right decision too early, right?"

This is why it's crucial to keep macro dynamics in mind as you scroll through your news feed on X.

"You’ve got to have a solid economic framework. You’ve got to understand what causes inflation. You have to understand the boom-bust cycle. You have to understand supply and demand dynamics. Data has to be interpreted through that framework. If you have a crappy framework, you’re going to be lost. Unfortunately, most of the mainstream financial commentators, most politicians, and quite frankly, a lot of professional economists operate through the lens crappy Keynesian frameworks. That’s why they say stupid stuff like, 'Inflation is transitory.'"

Mike reiterates that things tend to happen slowly in the economy. There is a lag between a new policy and the impacts of a policy. 

"That is hard to grasp in the microwave world. We’re used to putting something in there, setting the timer to a couple of minutes, pushing a button, and then eating a meal two-and-a-half minutes later."

Mike then pivots to put his philosophical musing into practice, analyzing Jerome Powell's Jackson Hole speech within a broader economic context.

"It was the clearest indication yet that more inflation is in the pipeline. Now, you might be thinking, wait a minute, Mike. Powell said that inflation is beat. What do you mean he indicated there is more inflation on the way? He didn’t say that. Now, it's true he didn’t say that. But that’s exactly the policy he’s signaling."

Mike outlines Powell's speech and reveals that he is, in fact, signaling a return to inflationary policies. But most people don't realize it because they are confused about the root cause of price inflation. And he points out that the central bank has already made this pivot. The money supply is increasing. That is inflation.

"A lot of people don’t understand this. Thanks to government schooling and an intentional propaganda campaign, most people think inflation is this mysterious thing that just happens because of the reasons. Most likely, it’s greedy corporations.

"No!

"As I talked about last week, inflation is a policy. It’s done on purpose. The people who know this aren’t going to say it though, because they would rather you keep blaming the grocery store."

This explains why Powell & Company has never acknowledged that pumping trillions of dollars into the economy and handing out trillions in stimulus to people who weren’t producing anything were at least two factors in the post-pandemic inflation surge.

"This might explain why nobody seems to grasp the fact that this monetary policy pivot is, in fact, a return to inflationary policies, albeit at a much more modest pace than during the last two economic crises."

And that brings us full circle. 

"This stuff plays out slowly. It’s a slow cooker meal. It’s not a Hungry Man in the microwave. It would be wise to brace yourself for more inflation - from now to eternity."

Mike notes that some people seem to get this, given the trajectory gold. He cites an article by Brien Lundin arguing that we are in the beginning stages of the next phase of the gold bull market. 

"Keep your eye on the big picture. If Brien is right – and what he wrote certainly makes sense in the macroeconomic framework, you’ll want to get your gold now. These price drops are buying opportunities."