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Dear Fellow Traveler: I have a friend who always writes out elaborate directions to places, but somehow always gets himself lost. It’s not shocking that he’s an economist. I studied economics at four schools, which has given me insight into its limitations, particularly at the macroeconomic levels of government and large financial institutions. My conclusion is this… An institutional economist is a highly credentialed professional who uses sophisticated mathematical models to explain why everything they predicted last year didn't happen, while confidently predicting what will happen next year… Think of them as meteorologists… But we have worse track records and better suits. The Art of Being Consistently WrongEconomics is the only profession where you can be spectacularly wrong about everything and still get invited back to explain why you were right all along. Let's review their greatest hits:
This isn't cherry-picking. This is the entire orchard. The Scientific Method (Sort Of)Economics calls itself the "dismal science." But that’s unfair to both science and dismal things. Real science follows this method…
Economics does this…
What makes it dismal? The problem isn't that economists are stupid. Many are brilliant. The problem is they're trying to predict human behavior using equations that assume humans are rational calculators. Behavior is the key thing… Have you met humans? They buy lottery tickets and expensive coffee while complaining that they can't afford rent. They'll buy organic everything because "health is priceless," then stress-eat $40 worth of gas station snacks because their portfolio dropped 2%. They'll spend 20 minutes comparing prices on a $5 item online, then impulse-buy a $500 gadget because it was "30% off." They budget meticulously for groceries, then blow the savings on DoorDash because cooking felt "too hard" that Tuesday. That’s what economists are really up against… The Forecasting IndustryI’ve done some analysis on Statista and IBISWorld data. So, I’d guess that economic forecasting is a $200 billion global industry built on predicting the future using past data. This is like trying to drive by looking only in the rearview mirror… But at least the PowerPoint presentations look great.... The Federal Reserve employs hundreds of PhD economists. Their track record? They've accurately predicted 2 of the last 47 recessions. Meanwhile, the Treasury Secretary regularly appears on television to explain why their predictions were wrong, but their new predictions are definitely right this time. Why We Keep ListeningIf economists are so consistently wrong, why do we keep asking their opinions? Because human beings crave authority. They want someone in authority to tell them what's coming next. This is why every financial presentation you have ever seen starts with a slide with the person’s biography. It's about establishing authority and reputation, not about sharing their hobbies and making them seem like just another person. Uncertainty is terrifying… Bad predictions are better than no predictions. Plus, economists speak with mathematical certainty about uncertain things. They don't say "maybe." They say "models indicate" and "data suggests" while showing charts with decimal precision about events that haven't happened yet. It's fortune telling with regression analysis. The media loves economists because they provide content. Politicians love economists because they provide cover. Markets love economists because they provide volatility. And economists love themselves… because they spent decades in school… The Institutional Protection RacketBeing wrong doesn't hurt economists' careers. It helps them. When Paul Krugman predicted the internet would have no more economic impact than the fax machine, he didn't get fired. He had a Nobel Prize and continued to write for the New York Times. When Larry Summers dismissed concerns about derivatives exposure to the global markets, he didn't disappear. He became the President of Harvard. When Christina Romer predicted unemployment wouldn't exceed 8% with the stimulus (it hit 10%), she didn't lose credibility. She got more TV appearances. Economic institutions protect economists from consequences. Universities tenure them. Think tanks fund them. Media outlets quote them. Janet Yellen has been wrong about significant things for 30 years. She works at PIMCO now. It's the ultimate job security… Being wrong proves you're thinking deeply about complex problems. The Uncomfortable TruthEconomics isn't really about predicting the future. It's about explaining the present in ways that sound smart and make people feel better about not understanding what's happening. When central bankers make policy based on economic models that assume people behave rationally. Since they’re wrong, we get asset bubbles. When politicians craft spending plans based on multiplier effects that don't exist, we get debt crises. The real problem isn't that economists are wrong. It's that they're wrong with authority, and we keep listening. Want to understand the economy? Watch what people do, not what economists say they should do. Want to know when there’s a financial crisis or liquidity event on the horizon? Don’t use models. Use equations… like the one I have that’s gotten out ahead of every crash since Covid. As I explain in this article, I use three equations to determine which way the markets are heading… one for liquidity, one for momentum, and one for insider buying. The results speak for themselves. Funny enough… I learned all of this AFTER finishing my three degrees in economics and finance. Meanwhile, the next time an economist gives you directions, bring a compass. And a grocery receipt. Stay Positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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