The Seesaw Economy

November 21, 2025

Doug Leyendecker

Welcome to This Week’s Leyendecker View

I know nothing with any certainty, but the sight of the stars makes me dream.
– Vincent Van Gogh

FAVORITE READS OF THE WEEK

Chicago, the contest between dumb and dumber
“Stupid is as stupid does”- Forrest Gump

Is this how fascism works?
Canceled for bodily autonomy.

MUST WATCH OF THE WEEK

Life’s biggest moments are flukes, not fate
We control nothing, we influence everything.

THINKING OUT LOUD

The Seesaw Economy
It doesn’t make predicting easy

Federal Reserve Chairman Powell has a dual mandate: to manage inflation and to ensure full employment.

Let’s start with his first mandate, to manage inflation. Unfortunately, since the massive Covid fiscal and monetary response, inflation has been stuck higher than it was before the Covid crisis. More unfortunately still, there are current influences that could keep inflation higher for longer.

A lot of our inflation comes from domestic influences, mostly the government, and they are not simple influences to unwind.

Today’s higher inflation is a consequence of massive Covid financial stimulus. As revered economist Milton Friedman said years ago, “Inflation is always and everywhere a monetary phenomenon.” The government’s response to Covid validates Friedman once again.

The Federal government has been juicing the economy for decades with fiscal and monetary stimulus. This is because our economic policies have not produced enough output and/or politicians are unwilling to get into the muck and do hard but productive policy work. Instead, they’d rather just promise voters free stuff.

Higher real estate costs are also a consequence of Covid stimulus. Significantly increasing healthcare costs are a consequence of Obamacare. Higher electricity costs are a consequence of misallocation of capital to more expensive “clean energy” that’s not truly clean. Higher costs across many industries are a consequence of ever-growing regulation. And Washington’s step toward free trade sent many well-paying middle-class jobs overseas.

Put another way: The federal government and its ill-advised policies are always the most to blame for inflation and, in today’s economy, our economic malaise. This is what happens when the government asserts too much influence over the private sector.

Given Washington’s deep-rooted influence over our economy, the Federal Reserve has many impediments to bringing down inflation. But when it does, the absolute costs of goods and services will remain elevated. So if wages haven’t risen by then in an equal or greater amount than the “new normal” costs, then the average American suffers.

The Fed’s challenges don’t end there. If it drops interest rates too much and/or too fast, the consequence could be even higher inflation triggered by the higher demand that cheaper money creates. The lower interest rates fall, the higher real estate values tend to rise, which is a major component of the inflation calculation.

Now onto the Fed’s other mandate: to ensure full employment. Employment has not recently fallen far or fast enough to warrant great concern, but cracks are showing in the labor market.

New college graduates are struggling to find jobs. More companies are using AI and robotics to increase their labor productivity, which seems to be translating to more layoffs and less hiring. Time will tell the full force of today’s technological innovations’ potential to replace jobs. But, at least for now, companies are using AI and robotics, to replace some basic white- and blue-collar work and grow profits.

So long as this persists without decent-paying jobs that replace lost jobs, the labor market will suffer. This would put pressure on the overall economy, which would motivate the Fed to cut rates, which could drive up real estate values, which could increase inflation, which would require higher interest rates.

The prospect of stagflation—where prices keep rising but the job market and wages don’t follow—remains. Meanwhile, Trump and his team are demanding much lower interest rates.

On the one hand, lower interest rates combined with low unemployment would likely lead to higher inflation. On the other hand, job market malaise would likely require some form of economic stimulus, which could be inflationary. Which scenario is coming? We don’t know. Maybe some combination of them both.

Any worsening job malaise would require some sort of safety net support, which would only add to our debt, despite increasing alarm over its ballooning size. As I’ve written before, we are in a Keynesian Trap. We’ve become so dependent on ever more fiscal and monetary stimulus that we’re unable, at least in the near term, to wean ourselves from it.

Rates down, inflation up, rates up, inflation down. Job losses up, rates down, rates down, inflation up. AI job losses up, more safety net stimulus. More safety net stimulus, more potential inflation. More safety net stimulus, more debt. More debt, higher interest rates.

We don’t have a playbook for these circumstances. So, in the near-term, this “seesaw economy” may be the best case we can hope for as the Trump administration tries to lead us out of risky territory. But let’s hope they can do more than avoid risk. Let’s hope they can succeed in achieving organic and robust growth, higher tax collections, and lower social safety net needs.

THE RANDOMS

Europe’s climate change policies gave Russia the economic and political advantage to invade Ukraine in February 2023. As a consequence, yet more people continue to die to this day…because of climate change…policies.

If economic and social cycles run their course over a century or more, rather than a generation, or less, would that mean every perspective we have today is based more upon fad than wisdom?

Given the vast number of private companies with a valuation over $1B, will we soon see a rip-roaring IPO market?

NYC seems headed into the abyss of socialist-style governmen t, while San Francisco is starting to dig its way out of the mess their brand of socialism created.

If China is going to win the AI race, which could significantly reduce the number of jobs, then what are they going to do with their 1 billion population?

The reason finance cannot be an economy’s primary economic driver is because it’s a service-providing industry. All services must have a master, and, at the end of the day, that master has historically been production. Yes, we need more manufacturing in this country.

The people who do everything to avoid failure are not the people who achieve.

People who achieve without failure generally are at the right place, right time. Those people are wise to remember the old saying: Easy come, easy go.

ECONOMIC NEWS

Economy

The middle class is in trouble
US trade deficit is falling
Hiring beats expectations
Insurance inflation is up up up
Has the American dream vanished?
Reverse mortgage rise not a healthy sign

Labor

Work-life balance more important than $$$
AI has to destroy jobs, says AI godfather
Where the AI job losses are so far
The new map of the American worker

Healthcare

New Mexico opens doors to free child healthcare
Weight loss craze to mint trillion-dollar company
AI giving doctors a run for their money

The Lone Star

Gov Abbott seeks to shut down Muslim organization
$850MM for new technical college
Google to invest $40B in Texas

BUSINESS

Finance

Will private credit be the next subprime?
Is fake-money crypto over?
Is private credit “garbage lending”?
Credit fund losses starting to pile up
Goldman is the king of M&A
And says there’s no stock market bubble