When I studied economics for my undergraduate degree at Boise State I learned many important concepts, not the least of these was this: An economist can have any opinion, take any stand, and be both right and wrong at the same time depending on which theories or schools of thought one subscribes to.
With this comfortable shield to hide behind, I would like to offer an alternative index from which to gauge our local economy. It is not based on unemployment figures, government data, or a sophisticated econometric model. Those can be found readily and are great resources as well.
However, this cutting edge model was introduced to me by my father, a lifelong banker right here in Idaho. If Pennsylvania has Punxsutawney Phil (who, by the way might suggest we have six more weeks of economic winter ahead of us), then Idaho has The Horse Trainer Index. In this most sophisticated of models he visits his local horse trainer who is a skilled master of his craft as a trainer of cutting horses. This model is quite accurate and a great barometer for measuring the economic health of the valley.
In normal economic times the trainer will typically house a stable of four fine reining horses per individual. This is indicative of the normal economic conditions here in our state. However, in poor economic times he will have fewer horses to train. It is not a ringing endorsement for our current local economy that he currently has one mule and one mixed breed horse. As far as knowing when the economy has returned, the trainer will once again sport high powered quarter horses and all will be right with the world once more.
Admittedly, there may be those skeptical of this model but it has proven its value over the years. It also offers an anecdotal glimpse into the consumer and business sentiment that permeates both our macro and micro economies: fear. Both consumers and businesses alike are hoarding cash in reaction to their fear of the unknown.
The economist John Maynard Keynes popularized the concept of the paradox of thrift. This concept describes a phenomenon wherein the market pulls back and saves money rather than spending it. Doing so drives up the savings rate. More consumers and businesses saving more money should, in theory, be a good thing. Did we not get where we are today due in large part to businesses and individuals overextending themselves?
However, we are currently in a paradoxical environment where the collective masses making wise decisions hurt the greater good. We are operating in a liquidity trap wherein businesses and consumers are hoarding cash. Having seen the collapse of the modern day equivalent of the roaring twenties, the market has acted rationally in that it is saving for the unknown future. No one is quite sure where the economy is heading and hoarding cash seems to be the popular choice. It is not dissimilar to the Great Depression Generation who collected and hoarded any potentially useful item that may have had future usefulness for them.
To make matters worse, there are several landmark pieces of legislation having recently passed or in process in Congress. The resulting paralysis of the market is compounded as businesses and consumers attempt to sort out what these governmental changes mean. This same phenomenon occurred during the Great Depression as well.
When our collective fear of the future eases and we begin to understand what unintended consequences may result from current legislation, confidence will begin to be restored. With that confidence comes more spending and our local economy will begin to climb out of this trough. Until then, I’ll continue to ask my dad how many horses his trainer has in his stable.
If it were socially acceptable to carry a man purse I would do so. I realize in today’s sophisticated age of reasoning and enlightenment I could buck social norms and tote a man bag anyway. One problem: I don’t live in Europe. I live in Idaho. And unless your man bag is carrying a dead pheasan
