Welcome to Ask Fear and Greed, where we answer questions about business, investing, economics, politics, and more. I'm Michael Thompson and hello Sean Aylmer.

Welcome to Ask Fear and Greed, where we answer questions about business, investing, economics, politics, and more. I'm Michael Thompson and hello Sean Aylmer.

Hello Michael, Sean.

Hello Michael, Sean.

I have got a cracker of a question for you today, and I know that in asking you this question, I am asking you for a lesson.

I have got a cracker of a question for you today, and I know that in asking you this question, I am asking you for a lesson.

Oh I like it. I don't know what the question is, but I love the economics lesson. Oh I like it even more?

Oh I like it. I don't know what the question is, but I love the economics lesson. Oh I like it even more?

Go on, Oh yeah, oh yeah? Is there, Professor Aylmer, a sweet spot for the economy? Is there a point at which economic growth and unemployment and inflation and wages and everything is just all in alignment. Is there a sweet spot for the economy?

Go on, Oh yeah, oh yeah? Is there, Professor Aylmer, a sweet spot for the economy? Is there a point at which economic growth and unemployment and inflation and wages and everything is just all in alignment. Is there a sweet spot for the economy?

The answer is yes, but you're only there for a minute, and you never know when you're there until after we had a good yeah, pretty good time then yeah. I mean, economists aren't known as dismal scientists for no reason, because something is always about to go on. So in economics, when you talk about sweet spots, you probably economists would talk about optimality, an optimal point.

The answer is yes, but you're only there for a minute, and you never know when you're there until after we had a good yeah, pretty good time then yeah. I mean, economists aren't known as dismal scientists for no reason, because something is always about to go on. So in economics, when you talk about sweet spots, you probably economists would talk about optimality, an optimal point.

And sweet sweet spots definitely have better more marketing appeal.

And sweet sweet spots definitely have better more marketing appeal.

I think, at the risk of boring you Michael, not listeners, but you because your attention spent is so poor.

I think, at the risk of boring you Michael, not listeners, but you because your attention spent is so poor.

It is very short, isn't it? It is? It is.

It is very short, isn't it? It is? It is.

In economics, there's something called preato optimality. You want to look smart in economics, you guys at proto optimality.

In economics, there's something called preato optimality. You want to look smart in economics, you guys at proto optimality.

Yeah, stropped a couple of preretos.

Yeah, stropped a couple of preretos.

That's right. It's a point where resources are allocated in a way that no one can be made better off without making someone else worse off. So effectively, resource and resources are always scarce. There's never enough resources, be that money or food or whatever you want. When it's preto optimal, resources are allocated as efficiently as possible. So, in a sense, you could call that in theory the sweet spot for the economy. What it doesn't take into account is what people are thinking and feeling and wanting and all that sort of stuff. So it's not kind of a realistic concept. So let's just take it to real life economies. They're moving, changing, shifting all the time. So just when an economy arrives at its destination, looks up and goes, eh, that's what I've felt somewhere else, Like it never stays anywhere. You mentioned the big three variables Economic growth, inflation, and unemployment. So what if we could grow it let's say three percent three and a half percent, four percent, unemployment, inflation two and a half percent. I reckon that'd be pretty optimal. Like I reckon would all say, wow, this is pretty cool. And all these things are related to each other. And at the moment, I mean, economic growth is a bit slow, but inflation, as we found out yesterday's around that two and a half to three percent, unemployments around four percent, the economy is probably growing one and a half to two percent. So right now you could almost argue, might not feel like it a bit of a sweet spot.

That's right. It's a point where resources are allocated in a way that no one can be made better off without making someone else worse off. So effectively, resource and resources are always scarce. There's never enough resources, be that money or food or whatever you want. When it's preto optimal, resources are allocated as efficiently as possible. So, in a sense, you could call that in theory the sweet spot for the economy. What it doesn't take into account is what people are thinking and feeling and wanting and all that sort of stuff. So it's not kind of a realistic concept. So let's just take it to real life economies. They're moving, changing, shifting all the time. So just when an economy arrives at its destination, looks up and goes, eh, that's what I've felt somewhere else, Like it never stays anywhere. You mentioned the big three variables Economic growth, inflation, and unemployment. So what if we could grow it let's say three percent three and a half percent, four percent, unemployment, inflation two and a half percent. I reckon that'd be pretty optimal. Like I reckon would all say, wow, this is pretty cool. And all these things are related to each other. And at the moment, I mean, economic growth is a bit slow, but inflation, as we found out yesterday's around that two and a half to three percent, unemployments around four percent, the economy is probably growing one and a half to two percent. So right now you could almost argue, might not feel like it a bit of a sweet spot.

We're getting close to a sweet spot, so.

We're getting close to a sweet spot, so.

It doesn't it's two out of three, ain't bad.

It doesn't it's two out of three, ain't bad.

It's not necessarily a requirement that there's always going to be kind of one out of whack and the other tool being used to kind of force it back into kind of into shape.

It's not necessarily a requirement that there's always going to be kind of one out of whack and the other tool being used to kind of force it back into kind of into shape.

In a way, it is what you're saying. It's true because if you think of the employment market, right, if there are lots of people without a job, then you know, small business hiring someone doesn't have to pay as much, so it takes the heat out of inflation. So they all work together. I think you think the economy is traveling along and Taylor Swift says I'm going to tour Australia and it goes fantastic. I want to pay nine hundred dollars for a Tailor Swift concent And this literally happened last year. And so there's this big boom in the cities that Taylor Swift played in Melbourne and Sydney. So people spend their money on Taylor Swift. They don't have the money to spend it on other stuff, so other parts of the economy drop back. What if you know there's a global leader who says, let's put tariffs on the world. What if there's another global leader who says, let's invade my neighbor and send energy prices through the roof. Like that's just the reality of what goes on. So to my original point, there probably is a sweet spot. You're probably there for a minute and you never know that you're there. And it's when those three economic variables economic growth, inflation and unemployment or the labor market are at a prato optimal point. But you ain't ever going to stay there.

In a way, it is what you're saying. It's true because if you think of the employment market, right, if there are lots of people without a job, then you know, small business hiring someone doesn't have to pay as much, so it takes the heat out of inflation. So they all work together. I think you think the economy is traveling along and Taylor Swift says I'm going to tour Australia and it goes fantastic. I want to pay nine hundred dollars for a Tailor Swift concent And this literally happened last year. And so there's this big boom in the cities that Taylor Swift played in Melbourne and Sydney. So people spend their money on Taylor Swift. They don't have the money to spend it on other stuff, so other parts of the economy drop back. What if you know there's a global leader who says, let's put tariffs on the world. What if there's another global leader who says, let's invade my neighbor and send energy prices through the roof. Like that's just the reality of what goes on. So to my original point, there probably is a sweet spot. You're probably there for a minute and you never know that you're there. And it's when those three economic variables economic growth, inflation and unemployment or the labor market are at a prato optimal point. But you ain't ever going to stay there.

You do realize I'm going to use all of this now at a barbecue or something. If I'm going to barbecue, that'd be I'm going to pick my audience and I'm just going to go, hey, guys, what are your what do you reckon about? That pereto optimality? And knowing my like there is going to be an economist there, and they go, ah, yeah, well what do you think, Michael, what do you reckon? And that is the moment at which you will see the blood drain from my face and go, oh dear, good luck bluffing your way out of this one.

You do realize I'm going to use all of this now at a barbecue or something. If I'm going to barbecue, that'd be I'm going to pick my audience and I'm just going to go, hey, guys, what are your what do you reckon about? That pereto optimality? And knowing my like there is going to be an economist there, and they go, ah, yeah, well what do you think, Michael, what do you reckon? And that is the moment at which you will see the blood drain from my face and go, oh dear, good luck bluffing your way out of this one.

It reminds me of the story that when I was in birthing classes my first child, Charlie, and they went around the room and said what do you love doing? And I said, I love sea kayaking. I think it was or something like that, I'm mad sea kayaker. And it turns out that one of the guys in the class was Australia's champion sea kayaker and he came after this and said, you want to go sea kayaking? At some point I said, I only said that to me, my wife laugh like I was making it up, So you were you. I was caught out touching you were not a sea kayaker. I'd never been on a sea kayaker in my life. But I was just sort of saying it because I knew the only person in the room there that would not take it seriously was my wife. And so I just said that, and this bloke came and said, don't go sea kayaking. I'm like, no, all right.

It reminds me of the story that when I was in birthing classes my first child, Charlie, and they went around the room and said what do you love doing? And I said, I love sea kayaking. I think it was or something like that, I'm mad sea kayaker. And it turns out that one of the guys in the class was Australia's champion sea kayaker and he came after this and said, you want to go sea kayaking? At some point I said, I only said that to me, my wife laugh like I was making it up, So you were you. I was caught out touching you were not a sea kayaker. I'd never been on a sea kayaker in my life. But I was just sort of saying it because I knew the only person in the room there that would not take it seriously was my wife. And so I just said that, and this bloke came and said, don't go sea kayaking. I'm like, no, all right.

So in summary, I need to make one hundred percent sure that there are no economists around before I start spouting off about pereto optimality.

So in summary, I need to make one hundred percent sure that there are no economists around before I start spouting off about pereto optimality.

Before making the core or as we like to call it.

Before making the core or as we like to call it.

A sweet spot for the economy. That is great. Thank you Sean for answering that question. That's a really good explanation. Thank you, Michael, class dismissed. I think you excellent. Say right about now. Look, if you've got your own question that you would like us to answer. It can be anything about business and investing, about economics or politics, or name your topic relationships. Get into that, maybe, Sean. Then send it on through via LinkedIn, Instagram, Facebook, or at Fearandgreed dot com dot au. I'm Michael Thompson and this is ask Fear and Greed

A sweet spot for the economy. That is great. Thank you Sean for answering that question. That's a really good explanation. Thank you, Michael, class dismissed. I think you excellent. Say right about now. Look, if you've got your own question that you would like us to answer. It can be anything about business and investing, about economics or politics, or name your topic relationships. Get into that, maybe, Sean. Then send it on through via LinkedIn, Instagram, Facebook, or at Fearandgreed dot com dot au. I'm Michael Thompson and this is ask Fear and Greed