"The Expectation That Everything Has To Exponentially Rise Is Foolish" Featuring Dr. Kruti Lehenbauer, Analytics TX

For our COBT listeners and viewers, it's Maynard, Mike, and Jeff here with something which is just what the doctor ordered. In this case, I'm talking about Dr. Crudy Lienbauer. Crudy is a good friend that we've gotten to know through many of her social media postings and other publications and posts. She is sometimes referred to as the data whisperer.

In our estimation, we've really enjoyed her reports, her analytics, her use of data, statistics. She's a master's and a PhD in economics and public policy. And so she really dives into the issues. And we're one week out from the Fed, but there's always lots of other things we can talk about. We've teed up some great topics.

uh grudi let me just say thank you we're delighted to have you join us and really appreciate your time today thank you for the kind words and i'm very excited to be here um you know because it's all about understanding what goes on around us

Well, we can't wait. That's kind of what, I'd like to think that's what Veritan's about, Mike. What do you think? Oh, definitely. That is exactly right. Understanding the world around us. We're all about it. Can we borrow that, Kurti? We're going to say that now. Go for it. at least in energy but energy applies to so many things we get to meet nice smart people like yourself all right mike i see uh you know i will i will share mike has red and green font in the spirit of the holidays

as he, on his cheat sheet. Yeah, Maynard, you know, as far as, you know, what we'll talk about today is, you know, Dow's up a couple hundred points today. and it really is because bitcoin is rallying today as most you know over the last month or so bitcoin's gone from what like 125 000 down to around 80 000 this this past week and now it's up around

86, 87,000. So a bit of a rebound, but that's kind of been weighing on equity markets over the last couple of days. Bond yields keep inching higher. Crude oil price continues to be under pressure. Natural gas. uh we'll have some interesting things to talk about there it's a star and basically copper continues uh going higher attending all-time highs not a lot of talk on that recently but we thought we'd get that in you know as far as the basically bond market you know the 10-year yield

We talked about it last year and last week in the COBT. It got to below 4% because Kevin Hassett was rumored to be the next chairman of the Federal Reserve. And he might be. I don't know. But Trump has said that he'll come out early next year and name who that is going to be. Bottom line is we've said it for a while. December 10th is a big day. That's the FOMC meeting.

everyone's looking at that to see what the fed's going to do uh and i i would assume you're going to have a lot of uh a lot of narrative coming out of that as well as a lot of narrative coming out of uh president trump deciding depending on what they do there so that's the big day

As far as broader equity markets, like we just said, I think the markets have been volatile. Bitcoin has been the main mover of the markets as of recent. But, you know, as we think about it, nothing has really changed. I mean, energy. Continues to lag because oil prices are going down. And the leader is big tech, right? And big tech continues to lead the market. Hasn't changed at all. And so that continues. As far as energy commodities.

WTI continues to be under pressure. I sound like a broken record there. We're trading at just under $59 a barrel. You know, the biggest culprit, again, is people's expectation for what the oil surplus is going to be in first half of 2026. you have any uh you've got estimates you know down in one and a half million barrel surplus it's as high as four million barrel surplus so the key word is surplus there's going to be a surplus that's going to keep a lid on crude oil prices and so you know

What I would say to that is that it is very, very, very consensus that oil is going to be under pressure. That doesn't mean it won't be. It's just very, very consensus. And so anytime we see something very consensus, I tend to want to go the other way. I don't think it's too early to start getting bullish, but we're going to have to get through this period of pain. I think the interesting thing to me is OPEC met last weekend.

And they did what most people expected. They basically put a pause on oil output hikes through Q1 of next year. But they also did something very interesting. They came out and basically said they want to have third-party verification of OPEC. of OPEC members' maximum sustainable capacity as a reference for the 2027 baseline production estimates. And so essentially what OPEC is saying by doing this, and frankly, this is really Saudi-directed, if I had to guess.

is they want to see what verifiable maximum sustainable capacity estimates are. Not capacity that OPEC says they have, not capacity that oil markets think they have. but really what is verifiably estimates of what their reserves are and what they will be. And so I think there's many implications, both positive and negative to that. As far as U.S. natural gas.

We're up almost at $5 on MMBTU here this week. The 12-month strip is around $4.15. It hasn't moved much. And the reason why gas is up at $5, the prompt price, is because cold weather is upon us. You know, gas storage is still a little bit above average.

And so that's interesting. Now, I think what's really interesting, and I was talking to Jeff about this earlier, and I hadn't noticed it being away in Panama for a week, but natural gas production, lower 48 natural gas production has really spiked. At the beginning of this month, it was around 107, 108 BCF. It spiked to as high as 114 BCF. Now we're back down to 112 BCF. That's a four or five BCF spike in the course of one month. I don't know where all this is coming from.

I would imagine a $5 an M, you know, everyone's basically opening the basically taps. But it's interesting to see that. The other thing we saw here in the last month or so is U.S. LNG exports are up about a B.C. 1.5 BCF a day. That's almost 18 BCF a day. And so we're seeing not only a supply response, but we're also seeing a demand response for natural gas. So, you know, with that, Maynard.

That's kind of what we've seen in here over the last couple, you know, last week or so. And so we'll hand it back to you. All right. Awesome. Well, Jeff, before you jump in with Rudy, anything on your mind on the markets or the world? I mean, just listen to Mike and I know we'll get into the discussion today.

on some of the near term i was kind of you know as as we had a little break last week just thinking about you know what are the what are a handful of themes i'm wondering about as we go through the next couple quarters and one in the traditional energy space the thing that's most interesting to me is just the anticipatory nature of of specifically oilfield services stocks you know so you have last quarter oils down almost double digit you know the oih is up 15 percent

And so people are like, is this a little trade that's going to pop or whatnot? But it's just fascinating because stocks are always anticipatory. Historically, the oil field services sector, the vast majority of the... the upside is achieved before earnings ever bottom. So is the stocks telling us something or is the surplus going to be a head fake? So that's probably the most interesting thing I've been thinking about in the traditional energy world in power.

This has been such a rocket ship year for a number of the new technologies, the SMR companies, et cetera. And it feels like 2026, there's going to be a sorting out of those technologies that have real staying power versus some that kind of...

kind of kind of kind of flounder and the third thing that strikes me as interesting is also in the power world where you know in the in the existing you know power providers it feels like we have a healthy kind of cross current of demand pool demand growth pool big capex opportunities you know there's a lot of inflation going on in there and how do investors react to significant capex as it comes to fruition and projects have to be executed

And then rate pressure for the customers. How does that whole soup play out? And you're seeing there's a lot of press in and around electricity power, electricity price. you know increases but that's kind of the whole soup i think about for the for for the um the existing power producers awesome well uh crudy there you have it there's a

always a lot going on in the world particularly a lot going on in the world with numbers and the economy and the macro and next week is the fed and so on and so forth so thank you for joining just in time to help us sort out some of these things i'm gonna try well maybe crudy we we can start anywhere you want i think we we came up with when we talked last week thank you for making some time but we talked a little bit about interest rates the dollar

inflation, tariffs, energy prices, be they power or oil and gas. And also, you're from India originally, so we talked a little bit about... sort of a global perspective and maybe an Indian perspective. There's lots of things to discuss. How about here? Let's start here. If we were saying, Dr. Crudy, What do you think of the current health of the economy? Because I would say that's definitely a debate, right? Some people are saying slowing, prices are up, you know, confusion.

And I think maybe the other side of it is investment is up, the market is up, interest rates may be easing. If you were talking about the health of this economy and looking at some of the data,

What would you say? I would say that we've had the last five years have been a roller coaster for a variety of reasons, not just with the advent of AI becoming such a big deal. but all the related investments that go into it on the one hand. And on the other hand, we've also seen, like never before, a whole... political and news-driven narrative across the world, which thrives on creating panic.

Or it's basically like everything has to be a hook. You can't just say anything anymore. It has to be a hook. If it is not a hook, people will not pay attention. what we forget when that happens is that then we start creating hooks whether they are true or not so when people are all freaking out about the economy i want to say take a trip down the last 25 years take a trip down the last 50 years

We are not in any unique situation as a world that we have not been in before. The only difference is that now you have every expert tweeting about it, writing about it. and combining about it. So, yes, there are fluctuations. That's how the market works. That's how expectations build. That's how businesses react. That's how customers react.

That's how employees and employers behave with each other. Yes, we've seen a lot of changes. Yes, we had a pandemic. But more importantly, we have lost sight of the fact that we are living in the long term. i'm gonna quote one of my favorite economists joanne robinson so i don't know if you know this but canes the big architect of the neo

new economic style of thinking with a heavy government intervention always said, well, in the long run, we are all dead. So we should only worry about the short run. And his own student, Joanne Robinson. has done a series of articles. This is back in the 30s and 40s. And she says, yes, in the long run, we are all dead, but not all at once. You cannot ignore the long run.

Because you're so focused on the short run. Yes. Does it matter that we are looking at the next month? 10 days, actually a week for the interest rates. And then, you know, first quarter, second quarter. But what we also need to do is to look at the past quarter, past two quarters, past year. Everybody's freaking out about Bitcoin. At last year, same time, it was at 86,000 and it made news.

So this expectation that everything has to exponentially rise is foolish to say it in the kindest way possible. Can I ask you, since we're on the long run, And it's not on our short list of topics. I'm already violating the terms of engagement. The deficit, the debt. And I don't know what Cain said about... about national debt, but I'm guessing he wasn't too worried about it. What do you think about the long run, the debt, the state of

our national finances and how we should be thinking about that? Let me first start by saying that one of the reasons why the debt has exponentialized to the extent it has in the last few years is because of And this is going to sound like I'm targeting the Fed. I'm not. I'm simply saying that there were some very irresponsible decisions made in raising the interest rates.

in a claim to combat inflation, but actually has made the debt worse. Also add to it the amount of government expenditure programs that have been added on because it looks good for the GDP. And again, this is non-partisan. Both parties are guilty of doing this. So this is not me saying X versus Y. This is me saying, you've given too much power to them. The debt has gone up because of that.

But one of the easiest ways to start reducing it, or at least managing it, would be to lower the interest rates. Fed is a private entity. They need to lower the interest rate. And on the other hand, cut back on the government expenditures that have remained unreined for a year.

I mean, if you look at 20 years ago, we didn't have so much debt. We didn't have so many expenditures. I mean, right now, sorry to kind of go in a slightly opposite direction. We were talking about inflation earlier. When you start looking at what comprises inflation, you will see that one of the fastest rising costs month after month after month is the health care costs.

Who is protecting these people? Because in a purely free market economy, if somebody provides you bad service, you would be able to switch your provider. Why is that not an option to the same extent in healthcare? Who is allowing them to be an oligopoly, a small group of people that offer the service?

versus a genuinely free market situation where you can go buy soda from whoever you like. You don't like Coca-Cola, go drink Pepsi. Nobody's stopping you. But if Coca-Cola and Pepsi were the only two soda makers, now certainly as a consumer you have a problem well we guess we could add in the government reimburses you for your purchase of one of those two and make it really fun oh god look so maybe we did

The Fed is meeting next week. Maybe two questions for you. It seems like you brought up our focus on short-term-ism.

That has really crept into things. It seems like the other thing we've noticed and we talk about, it happens in energy, it happens in all sorts of areas, is the way political thinking has... injected itself into lots of decision-making situations and the other one is the um controversy or the manipulation or the lack of intellectually honest data, however you would describe the situation with our data, but maybe those two things have come together in a bit of a...

a storm where um someone with an agenda you know creates data that supports the agenda it's a long way of asking you you're you are Your background is all about decision-making with good data and the thoughtful use of data and the thoughtful analysis of data. Next week, what would you be thinking about if you were at the table and you were making a case for...

Here's what I think the data says. Here's what I think we should do regardless of the political considerations. I think that the data right now, okay, so since you brought up next week, I'm going to contextualize it in. with respect to the interest rate. But it can apply to pretty much anything. I would sit at the table and I would look at what we have had happen objectively.

in terms of the tariffs, in terms of the political upheaval, and other considerations that are taking up so much of the energy in our economy right now. Those are a lot of social things. I'm not saying they're not important, but they should not factor into a decision-making process. I am just using this as an example, of course, Maynard. I may not like you. But that does not mean that I should not respect what you have to say. And I think that's what a lot of us have forgotten.

that we are confusing our feelings and our emotions and allowing those to make decisions on what we support and don't support instead of allowing the data to tell us what we need to know. Like I mentioned earlier, and like you mentioned earlier, when the data is being presented with an angle at every point, it is even more critical for people like us.

to take a step back and say, let me look at the trend. If you can't look at a trend yourself, dude, just pull the data out and throw it into any copilot, GPT, whatever you use. at least see the trend. I'm not saying ask it to analyze it because that's not going to be biased, but you can definitely ask it to create a trend line so that you can see what's happening. And when you see what is happening,

Make your own judgment. When the best way to break out of short-term thinking is to actually see the long-term view. And so it applies to, you know, like interest rate should have been cut. I've said this again and again since March. By now, we should have been down to maybe 3%, right? I'm not going to the extreme of, oh, cut it by 2%. It doesn't work that way.

create a disaster in the market but a quarter at a time a quarter at a time because you know what it took them two years to take it from less than two to four and a half percent So it should not take more than two years to bring it back down to 2%. Well, so let's pick up on these points. So interest rates, when you...

pull back and look at the data and think about what costs are going up, what employment's doing, all the things you look at. I'm no expert, but... What would be the key data points if, because I know you said you would have been bringing it down since March and we'd be at 3% right now. But what are the key data points you, if the Fed was listening today?

that you'd say, these are the points you should really focus in on, or here's the long-term trend? I would say that they are worried about an unemployment rate. That has been hovering around the natural rate of unemployment since 2021. The 4% freakout that people are going in for, that's our natural rate of unemployment in the United States.

It always has been. It's just that it wasn't on social media until recently. So that's a valid concern. Inflation is a valid concern. But what is getting inflated is the key thing. A lot of the inflation is also being driven by labor prices going up.

So I'm going to kind of go into a little bit of economics. Bear with me, all right? There is aggregate demand and aggregate supply in any given economy. The aggregate demand... represents the goods and services that are purchased by people i'm oversimplifying it and it depends on the liquidity money

and the investment and savings curve. So these are the four things that contribute to aggregate demand in an economy. Investments and savings, and liquidity, and the money, which determines the interest rate, right? The aggregate supply, on the other hand, is exclusively determined by the resources in an economy. That's land, labor, capital, and entrepreneurs.

what the aggregate supply is going to be based on their productivity, right? So if you think about it, these two curves, in the long run, how much can all the resources in a country create? is a steady vertical line. So the long run aggregate supply curve is always a straight line. In the short run, however, because it fluctuates with price levels, you're going to see it upward sloping.

like you're used to seeing a traditional sub sub up line supply curve so it always goes from bottom to top right and then the demand is going to go down the man down in the opposite direction. That's what creates the equilibrium. When liquidity money, which is managed by the Fed or monetary policy decisions and IES curve, which is managed mostly by fiscal policy and government policy, are fighting with each other, that aggregate demand curve swings instead of staying.

steady and when it swings we lose that equilibrium point we have lost that equilibrium point and the panic that we are seeing is because of the short-run response of the aggregate supply curve However, in the long run, the capacity can only go up if our productivity increases. So the technology that we are seeing right now kind of goes back to what Jeff said earlier on.

We are seeing some major capital gains on the one hand. And then on the other hand, we are seeing these layoffs and employment situations, which are concerning. They're all short run. And one of the things that we need to do, this is the data I would put in there. Look at the long run behavior of employment rates, unemployment rates, GDP growth rates.

which is what is determined by the equilibrium of aggregate demand and supply, and the price levels. Again, that's the inflation. And how it has fluctuated with the rate of interest changes point after point, month after month. These are the data points that if you, these are all publicly available data. Just go and find the data, drop it into your favorite AI or copilot or whatever, see the trend.

and then decide if our current location on that trend is worth worrying about as much as we are, or are we just going through a major growth phase? We are like... You know, back in the 20s, when cars started becoming popular, you had the drivers who were driving the horse carriages. And their livelihood... was entirely being challenged and changed because these cars were taking over. We aren't like those horse carriage drivers right now. Things are changing fast, and if we don't learn,

drop our reins and learn how to drive a car, we're going to be left behind. So does that mean, Kuri, if you were thinking about this and you're the Fed, The case to lower interest rates is the disruption in employment, the disruption in kind of the examples you're citing, the restructuring of the economy that's going on. And then the other reason to lower interest rates is GDP. And GDP is tepid. Its growth is tepid. And then your other comment I think you're making...

I'm trying to speak crudy here, is that if you're keeping rates high to fight inflation, inflation is being caused by government spending. And so... you are applying a weapon to a problem that it doesn't fight. Because ironically, when you keep rates high, you're just increasing the cost of the debt.

and that's driving up that's i.e that's more spending i guess the the one question i had of that is if part of the problem here is the government If you lower interest rates and try to address employment and GDP growth and the state of the world, doesn't the government...

just find more ways to spend? Like, what do you do about the fiscal situation? Or is that just not the Fed's purview? I'm going to... go into some economic theory without getting too complex about it. But for a developed country, I know it sounds

outdated to say developed and underdeveloped. I never know if that's politically correct anymore. I don't care about political correctness, otherwise we probably wouldn't be talking, right? But in developed countries, When the GDP growth rate goes much higher than 2%, it means that there was something happening where the resources were not being productively used.

to start with so as a developed country if you want a gdp of higher than two percent growth rate i mean gdp growth rate of higher than two percent something drastic needs to change. Because otherwise, the high growth rates that we are talking about, that we see in places like China, India, etc., that's because they are developing countries.

their resources are not already being used to the maximum capacity. So if we are running after 2%, 3%, 4% growth rates in GDP, and we are making it happen, by shoving government spending in there, then we are doing ourselves a disservice because we are now sliding down to the level of a developing country, which automatically means that our labor is not... at its full capacity. It's a catch-22. And here's the graph that I was trying to draw. The IES curve that you see

Here, this is the LM curve. That's what the Fed controls, right? And then this IES curve is what fiscal policy controls. When they meet, that is the rate of interest that exists naturally in the market. However, when the Fed decides to move this LM curve to a higher interest rate, right? If you think about it, this new line that I drew, if that is where the interest rate is going to be, look what happens to the output. It's going to fall.

And when that output falls, right, we're going to see a shrinkage in our GDP. So GDP growth is not HEPID. It is actually negative.

and it is being compensated and offset by government spending, which is very unhealthy for the economy in the long run. Let's talk about tariffs. We'll just jump ahead to tariffs and bring it into this discussion because...

If you listened to, you made the comment, we should have started cutting in March. We should be down to 3%. And, you know, as I replay the tape and think about the news stories and the... the discussion, the tariffs and what tariffs would do to inflation and the uncertainty around tariffs was a significant reason for going slower on cutting rates.

Maybe help us think about that as a variable. And then while you're at it, the other thing that's fascinating about tariffs, just watching it from the cheap seats. is it does seem to be raising a lot of money for the federal government. And so it's now this source of income. It was a reason for waiting.

But maybe just talk about tariffs and Mike and Jeff are going to jump in here, but weave that one into this interest rate discussion for us. You're going to love it. Here we go. Okay. See the red line? Yes. Okay, so that's what happens when the tariffs are increased, because it increases the cost of manufacturing in a country like ours, where we are heavily dependent on imports.

for certain critical goods okay so you see how it switched up the red line and see what it did to the interest rate yep So now we are at a higher interest rate in real world than what the Fed is claiming it is doing. So if the Fed interest rates were lower, then... we would probably naturally have been already at the same interest rate in terms of the addition to whatever the Fed is charging. So did you just say...

And let me just try this. Sorry, Mike. Tariffs are taxed. They're taxed on somebody or they are a increase in cost. And the Fed's reaction could have been. We need to alleviate that burden on the economy by cutting rates instead of saying we should consider keeping rates where they are to fight the inflation caused by.

those tariff costs. Is that what you are basically saying? I know, but I don't agree with tariffs on a tax. And here's why. Tax is collected from the people who live within the country. Tariffs, on the other hand, are collected from people who are importing from another country. As a producer or seller or intermediate seller of any goods

Tariffs allow the choice of finding alternatives. It's kind of like this. When you go to purchase something from the store, you are making the choice to purchase it, regardless of its price. Nobody's forcing you to do it. Tax, on the other hand, you don't have a choice. It's like taxes and death, right?

It is not a tax in the traditional sense of the term, and it does not necessarily go back to the people who pay. So I suppose if we had a tariff defender on the show... the tariff defender would say, hold on, the entity that's going to pay that tariff is either the importer or the exporter, like they'll find a way. to divide up that cost and then it's going to trickle through to the economy based on whether or not the consumer decides to continue to

the consumer still has a choice. So whether the impact of the inflation depends on their selection. Absolutely. And here's the proof of it. Remember how cars and the tariffs on steel were like the biggest fears? And I'm not a tariff defender. Let's start by getting that, you know, this is just objective. Well, you won't be invited to any parties if you say you're a tariff defender. I'm already not invited to parties. Jokes aside.

Because of the way the – so the market has already proven this consumer-driven behavior if you look at it closely. So I don't know if you – following the news this last week they had a record sales on black friday and all of that right but then when they split up the data they found that gen z actually has cut back In terms of the generational spending, they're cutting back tremendously on spending. All of a sudden, handmade items and personalized gifts are being given a higher priority.

Despite all the things with the cars, everybody expected prices are going to go up through the roof. They have. But you know how consumers have responded? They are not buying new cars. There's a reason why the used car market has blown up. It's because if the producers refuse to bear the costs and or make choices of getting sourcing their resources from the right places with lower tariffs.

Consumers are basically indicating, no, dude, you chose to import this. We are not, we don't have to buy it. Crudy, I wanted to go back to one point you made earlier. You talked about healthcare costs going up.

quite substantially. And when I think about inflation, I think about health care costs. I think about government spending. I think about housing costs, labor costs, but I also think about energy. And you hear Trump out there every day talking about how oil prices are low, gas prices are low, yada, yada. And that's true. And you're seeing that in deflation numbers. But if you look at where our society is going, we're going more electrification, right?

And if you look at the inflation numbers from an electrification standpoint, they're going up. It's a smaller piece, but they're going up quite substantially. And we've kind of labeled the inflation that we're seeing is, you know, we think we should look at price the plug rather than price at the pump.

Do you agree with that? Is that something we got to keep our eye on? Because we are changing sort of like an industrial revolution going on right now and how we how we make things, how we consume things. What are your thoughts there? I absolutely agree with you. And actually, earlier on when we were talking, when you were reading out the data, that exactly that point came into my mind. And I'm glad you brought it back up because it is the fact that there is a higher dependence.

on electric vehicles now. There's a reason why natural gas is suddenly going up. And that reason is that the electricity usage is no longer being used maybe for manufacturing in households as much. as for charging cars. And I mean, okay, do you remember the Christmas movie, you know, where the dad is plugging in like 12 things into one socket?

Like that was all of us until not that long ago. And now I don't know anybody who does not have a multi plug charging thing because they have so many devices. So electricity. And the use of electricity has evolved. And so the traditional methods of measuring like what we call the basket of goods for the inflation, I think that hasn't kept up.

When we are still measuring inflation based on the numbers as the base year from 1981, we are doing everybody a huge disservice because none of us has a traditional phone anymore. None of us has traditional cable anymore. And you know what? You don't want to watch your TV. That's fine. Your TV is still going to be on and it's going to be playing music for you. This is the kind of stuff that my mother would have.

I mean, not physically, but verbally beat out of us, right? Why is this light switch on? I don't hear anybody asking that question anymore because everything is always on. so yes there is a difference in the way we are consuming energy and the prices are fluctuating especially for gas not natural gas but like gas oil right um

Because we still have a dollar pegged to it. Every time the damn dollar shifts, the price of that shifts. And because we are such geniuses, we are counting all of that in the inflation number. Which means we are not telling the truth about what people are paying out of pocket. We're not telling the truth about what does it mean for pay to plug instead of pay to full, you know?

So I don't know if that helps, but yes, we are on the same page. And Kriti, I'd like to go back to where you started all the short-termism and I like the idea of taking a step back. and you you mentioned long run you know what are you know if you were to have three issue issues over the long run that peak your interest the most sounds like one of them may be just the government and fiscal policy and is there ever going to be constraint but what

What would be that top three list of kind of long run critical issues you have your mind focused on? Okay. One of them is the production function of any given economy. And that is basically, just to simplify it, how the resources are used in combination with each other. So land, labor, capital, entrepreneurship, and technology.

because the technology can enhance all the others. How are they being used to increase our production possibilities curve? Because that determines the long-term aggregate supply. That's issue number one, I think, for me, interest-wise. The second thing is, a lot of people think that technology is a replacement for human beings. When I see the trends within the labor market, I don't really focus so much on the low skilled workers, but the high skilled workers. And the reason I do that.

And this is going to sound like I'm going off on a separate track, but I really am not. It's because the quality of our higher education has deteriorated. It's become a marketplace. And when we see that happening, I come from a country where public education, higher education has always been free. There is a reason why I chose to do my PhD in the United States and not in India.

That's because there is a qualitative difference when everything is in the marketplace, whether it's publicly funded or privately funded. And I think that's where we are headed. That worries me. immediately and directly impacts the quality of local labor. So that's my issue number two. And issue number three, inflation doesn't bother me. It's just...

you know, it fluctuates. But more than the fiscal policy, I mean, yes, the government spending, but more than the fiscal policy, it bothers me when I see that the monetary policy is trying to drive the economy. Because that... is more rigid and more difficult to adjust unless every member of that federal committee is engaged in ensuring that the local economy gets the boost you deserve so i think if if i was following that right crudy is if you're at the table next week

Unlike how I characterized it in the beginning, you'd be, I think, really saying more, we're supposed to fight inflation. We have some outdated ways. that we think about how to calculate that. So let's really get into the data that is most telling when it comes to inflation. And as you've looked at that data, you think that data suggests we should cut rates? Absolutely. So what would be...

So, you know, hey, give me 46 minutes. I'll eventually figure out what you said. But so seriously, though, because I was pulling up, you know, just on chat GPT while we're talking. you know the components of cpi and it does look like something right out of the 50s i mean it's like what does apparel cost what does transportation cost what i mean you know it looks very basic it's probably been a while since we thought about

how to measure inflation. But if you were trying to pick one or two or three things to just test what is the level of inflation, what would you pick? How would you determine it? Or if we said magic wand, recalculate CPI with a new formula, how would you think about that? Well, first, let me say that that would be my dream come true. Wow. We're there. The 47-minute mark. We hit Crudy's dream. I would love to be.

one of the people who works on recalculating the CPI. Wow. By the powers vested in COBT, we now make this possible. So that being said... That should tell you also that I've investigated it way more than I should have. But I always get thrown by certain breakdowns that they put in there. So you have the main categories, you have the food. You have the energy, healthcare, and transportation where they look at automotives and other stuff, and then there's a whole other group, right?

lots of subcategories in all of this. The irony is they already have the data they need to do this right. They're just not calculating it correctly. they're not weighing it correctly and the way the reason i say that is because we are talking about the consumer price index we also have a producer's price index by the way which is separate

So when we are looking at consumer price index, we should not only be considering gas prices or oil prices from a wholesale perspective. You have to look at them from the individual spending perspective. That's not being done. The same way with health care. What is the average person being for health care is given less weight than what is the total expenditure on health care. So if Medicare.

is left, right, and center, encouraging everybody on Medicare to go and get whatever surgery they waited their whole lives for, because now it's free. It's still showing up on my inflation. still showing up on what I pay to the insurance company, but not to the same extent. So it is misguiding. It's misleading. So what does that mean that if you were calculating inflation, you would go to the consumer level and look at a sample of representative people and see how their costs were changing?

I would first and foremost change the basket of goods that we are taking into account anymore. Our needs versus wants need to be cleared out significantly more than they were in the 80s. And I know that they've updated some of them, some of their categories. But clothing, really? How many people need to go and buy clothes all day long? How are you comparing buying clothing with cars in one place? Why? Because it should be on a per unit basis over a fixed period of time.

In today's DNA, at least that's true. Is there some economist that would argue with you, you know, kind of like the, you know, sports stats or something like this, which is like. Yes, I know it's flawed, but it's consistent over time, and it's important that we measure things. Let's don't.

let's don't tweak it like yeah you're right crudy but you know we got to keep this apples to apples is this is this an argument for in this area you guys work in the energy sector so i'm just going to ask a counter question before i answer that one Uh-oh, get ready. How many businesses do you know who have told you we've always done it this way? A lot. And it doesn't make it right, does it? Yeah.

So I agree. And actually, I think every economist out there who is into the macroeconomy study would say that it would completely destroy the consistency, et cetera, over time. But other countries have done it. India changed its basket and inflation calculations not that long ago. And one of the ways that they did it is you maintain the current measure.

as you transition into the new measure. Our own Fed has done it in the past 20 years. It wouldn't be the first time that adjustments are being made. But I think adjustments need to be made. at a micro level as well as the macro level. This is a set method. I get it. Continue measuring it out. Switch to the new method. Eventually, you get to a point where you've collected enough data.

where the new method can, the other one can be phased out. It doesn't have to be overnight. Again, long run, short run. Really interesting.

Kruti, the time with you has gone by faster than maybe any guest in history. But maybe with the time we have left, you just mentioned India changed. It's how it calculates inflation. uh we've touched on tariffs we kind of touched on energy prices but india was something we wanted to talk a little bit about with you because it is it is the rising

one of the key rising economic powers on the planet and we're always curious to learn more. What would you share with us about maybe what people don't understand about India, its growth, its future? how it governs itself why it's a good place to do business tell us a little bit more from your perspective it's gonna sound completely biased but i'm gonna go for it anyway uh

India is one of the few foreign countries where English is one of their official languages. In fact, even within India, people are most comfortable communicating with each other using English. Because even though we have a national language, not all the states use it. Everybody has their own language. So unlike the United States, where all states speak English, American English, sure, but...

India doesn't have that. So English is the common language. So when it comes to being able to communicate with the people there, it's a lot easier. Yes, I've heard this. I'm guilty of making fun of it myself. Accents are an issue. Just because somebody speaks with an accent doesn't mean they think with an accent. So we can move past that in today's day and age much better. That being said,

And this is true also of China, what I'm about to say. These economies, India, China, as cultures, are a savings-based culture. The per capita gold, for instance, that families have in these countries is higher than a lot of us here. The reason is... the culture itself is savings-based. And if you kind of go back to what we were discussing earlier, savings are an important part of aggregate demand. So one of the reasons why these countries are growing

and are growing rapidly is because with advancing technology, they are able to shift their production possibilities curve at a rate which is much faster than a lot of other countries. So there's a focus.

on move that aggregate supply curve, move that production possibilities curve, and kind of start maximizing their own resource usage. So as partners, a lot of these developing countries could actually be what we are looking for because that's the beauty of trade that you can do what you're good at let them do what they're good at and you trade so that

both teams get the best of all work it's hard to squeeze india into the last you know eight minutes but mike anything on your yeah i think you know one of the questions i have i think it's a sort of big picture question but there's this concern and just the us and just globally that ai robots stuff of that nature is just going to lead to just a massive jump in labor you know just labor is just going to plunge what does that mean for society

And I kind of look at what you said about the buggy whips and the automobiles. I mean, if you look at that, the market expanded by hundredfold, right? And when I think about this right now, it seems like there's a lot of concern that, yeah, people are going to be unemployed, but...

when you think about the potential productivity gain in the u.s society the pie might be massively bigger which provides more opportunity how do you think about that i mean are are people getting too concerned with this i mean are you concerned how do you see this playing out I actually think that the fears are far worse than the reality. So here's a little anecdote that will probably help you understand where my mind is going.

lines first started flying airplanes. There's a reason why you have those puke bags in the seats. And the reason is that we often react as human beings. When we are in unfamiliar territory, we have unexpected reactions. Those puke bags started becoming so common in airlines because people would be like, oh my God, I'm flying. Well, right. Over time, that has gone away. Similarly, and I've seen this firsthand, a lot more people, when I was growing up, India was still a fully socialist country.

This was in the 80s. it was very common whenever we went because we didn't own a car or anything nobody we knew owned a car we didn't even have a telephone um and you know when we went somewhere and if we took a car instead of going by bus or train

I remember my mom always having a bag because she would throw up the whole way through, and it would take her two hours to recover. It's no longer a problem, but it was psychological. It's the fear of... have not having done something and i've seen that in multiple people like i said with flying with my mom's gonna kill me for saying that anyway uh but the point is

We are in that situation with AI right now. We are in unfamiliar territory. We are terrifying ourselves about the possibilities because we also live in a world where hooks are so attractive. Oh, my God, the AI is going to turn into a human being and come kill you. Now, suddenly, you're paying attention, even if I just completely fabricated that.

But we live in a world like that right now. So you have to remember, these are just puke bags. We won't need them later. So back to the question of, do you think the overall economy gets massively bigger and really kind of...

We don't have to worry about the debt because productivity is going to be so much more. GDP is going to be so much more. So we're going to have the flexibility to do a lot more things to contain that debt. Is that kind of how you think about it? I would like to think about it.

The problem is that we have no control over certain decision makers who also impact the other side. Because you could have aggregate supply that goes up to infinity. But if the aggregate demand is being... held in check who's going to buy those goods well it's kind of in this in the same vein if you know the fed you know and focus on short-term interest rates get so much you know air time but

If we have no confidence that fiscal policy is controlled, why would anyone buy long-term debt? It seems like there's no governor on that. So to me, that's the most fearful thing that I have in the economy is we have, what's the impetus to buy 30-year debt in a government that has no fiscal restraint? cannot speak on behalf of others but i've always felt that the 30-year 50-year debt cycle is one of the biggest detriments that gen x

has faced and Gen Z is currently facing. You should not buy a house if you can't afford a house, period. If you have to take a 30-year loan for it, maybe you should buy a smaller house. and paid off in five. I know it sounds exactly opposite to the consumerism that we are used to being fed. This is exactly why our inflation and related fears are going up. It's like we are so addicted to purchasing.

that we can't break out of that cycle. And we're so used to just being like, yeah, I'll just put it on my credit card. 50%. I have almost a perfect credit score. And my official interest rate on my credit card is 29%. I never used it because I use it for the points and then paid off every month. But the point is 30%?

With an almost perfect credit score, what does that mean for the people whose credit scores may not be perfect, who might have had a situation which required them to go get debt? How much are they paying? And where is the consciousness about this? We're constantly fighting about, oh my God, he said this and she said this. But where is the financial literacy? Where are the tools?

As we wrap up, this has been so interesting. I was wondering if you could touch on one last thought, which is because so many of your comments have gone to you know, the economy's a frontier. Like, how much can it produce? And it seems like both sides of the aisle have just, they've both... leaned in more to manipulating the economy, generally. And do you have any observations about if we were in the war room of the...

White House or Washington or something. If we're really trying to liberate the economy, we really want to grow. We really want to create more wealth. We want to improve the capacity of the economy. Are there one or two things that would be your favorite suggestions for, boy, let's pull that regulation or let's push that supply or let's improve that feature?

a couple of things that you think about that we really ought to be doing as a society to improve our economy? It's going to sound partisan, even though it's not, okay? But heads up. I was really hopeful about what Doge had set out to do. Of course, those hopes were shattered very quickly. But that's what we need. We need to make the government leaner.

The fact that we were able to survive 40 plus days, almost 40 days, sorry, of government shutdown with only essential services being in play tells you everything we need to know. about how much waste is up there so if i had another magic wand that's what i'd do all right that's good that makes it two magic wands we're um We're changing the definition of CPI. We're updating it. We're going to keep calculating the old stat, and we're bringing back Doge. I think that's what we...

I don't know about Doge specifically after I saw some of the stuff they did. But we're bringing back the spirit of Doge. Yes, the spirit of Doge. There we go. The spirit of Doge. Well, Dr. Liam Bauer, we really appreciate it. You're over. I didn't say you're in San Antonio, so you're not far from us. You'll have to come see us in Houston. We'll come see you. But this is for those of you listening or watching, Crudy does a lot of things on LinkedIn.

a lot of videos, a lot of cool. You saw her post-it note today. She does a lot of things where you take a topic or reduce it to a post-it note. So we encourage everyone to keep up with her and reach out as you have questions or comments. Absolutely. Always happy to answer questions and talk. Well, we enjoyed it. Let's see what happens next week. Even though that's a little short termism and thinking, let's see what happens over a multi-decade run.

thank you so much grudy thank you i'll see you guys later thanks everybody