Salty Ben and the Bait He’s Cast

Rodney Johnson | Monday, November 04, 2013 >>

I’ve spent most of my life near open water, particularly the Gulf of Mexico.

During that time my family earned a lot of its income from professions involving the sea. This provided me with many opportunities to enjoy water sports and learn the finer points of boating.

In all that time, the love of one sport always eluded me…

Fishing: I just don’t get it.

I enjoy the boats, the water, the early mornings, and even the act of reeling in a fish. But the part about estimating where the fish might be and then dropping a baited hook to see if I could coax any interest always left me puzzled.

I’ve spent many an hour on fishing trips. I’ve listened to countless salty dogs talk about their knowledge of how fish “think.”

Really?

Can a person actually determine what is going through a fish’s mind as it hangs out fifty feet below the surface and sees a shrimp on a hook glide by?

Hmmm.

I think it is more likely that accomplished fishermen have learned patterns of fish behavior in terms of where they feed, when they feed, and what type of food is most common.

After that, it’s simply a matter of playing the odds. All the talk about “knowing” the fish or “understanding” the fish is simply irrational.

While this has left me less than enthusiastic about the sport, it must thrill Ben Bernanke, because he approaches monetary policy in the same way. He’s using the same bait, the same locations, that seemed to work in the past.

Over the years Ben and Co. (the Fed) have become familiar with the patterns of how people reacted to certain actions. They watched how people “fed” on credit and how they behaved when it came to changes in interest rates.

Using this information, Salty Ben began operating under the false assumption that he knew how consumers think. The problem is that he never seemed to ask them.

Unlike fishing (because speaking with a fish is impossible, no matter what some of my friends and relatives think), when it comes to shoppers and savers we really can have conversations.

If the Fed had done this it would have realized that our tastes change over time. We no longer hunger for more debt, and we aren’t motivated by low interest rates. We’ve got other things on our minds.

And yet for some reason members of the Fed refuse to go down this road. Instead, they simply rely on old patterns of behavior to set their monetary hooks and cast their lines.

They’re missing some key information, which is obvious because their quest to grow the economy by having debt spur job creation is failing so miserably.

You would think that after years –five in fact – of failing to ignite the economy, they would try a different approach. But no, just like a fisherman who keeps trying the same spot and same bait, the Fed keeps trying the same old things.

So what do we do as bystanders while the Fed’s irrational acts continue?

We’ve outlined many different aspects of our economy, what lies ahead, and how people can navigate the waters in our daily letters and other writings, and now we are gearing up for our biggest conference ever on the topic.

The Irrational Economic Summit.

We named the event in honor of how the Fed and the federal government approach the economy. They keep trying what works on paper – lower interest rates and people will spend… create inflation and people will spend – but it’s not working out in the real world.

In their eyes, consumers are behaving irrationally. If the Fed simply keeps trying, so its logic goes, eventually consumers will come around… we’ll take the bait.

But we know better.

In just two days hundreds of readers will join us as we bring together some of the top thinkers in the world to discuss what we’re likely to face in the years ahead, and what we can all do about it in our personal and business lives.

From company expansion, to real estate, to investments and taxes, no topic will be off limits.

With the likes of Lacy Hunt, George Gilder, and Jeff Opdyke joining me and Harry for several days, it’s bound to produce a number of great ideas and strategies.

For those joining us, I look forward to seeing you there! Maybe we can come up with a plan that we could present to the Fed so that it better understands us consumers. We can point out what is actually motivating consumers today, and show the best path for growing our economy as we go through a decade of deleveraging.

They might listen a little better if we take them out fishing to talk about it. 

Rodney

P.S. For those not joining us, Teresa will be your conference insider for the week, sharing with you what we discussed, any shocking revelations, and updates on the event. Stay closer to your inbox this week. This is going to get interesting.

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Categories: Purchasing Power

About Author

Rodney Johnson works closely with Harry Dent to study how people spend their money as they go through predictable stages of life, how that spending drives our economy and how you can use this information to invest successfully in any market. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs such as America’s Wealth Management, Savvy Investor Radio, and has been featured on CNBC, Fox News and Fox Business’s “America’s Nightly Scorecard, where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He holds degrees from Georgetown University and Southern Methodist University.