“The way we thought about the economy is not how it is anymore”

Sherwood’s Jack Raines interviewed Kyla Scanlon to discuss the economy, national debt, social media as an information source, common misconceptions about the Fed, her new book, and more. Kyla is a writer, speaker, and content creator who educates her audience about what’s going on in financial markets and the economy. Her work has appeared in The New York Times, Bloomberg, Yahoo Finance, and more. Kyla just published her first book, “In This Economy?” This article is a transcript of their interview that has been edited for clarity.

Jack: As someone who has studied the Fed more than most people over the last three or four years, what do you think people get wrong the most about the Fed?

Kyla: I think the Fed has a really hard job, and the way we thought about the economy is not how it is anymore. We're using models that don't apply to the current state of affairs.

People believe the world is always against them, and they think the Federal Reserve is working against them. I think the Fed has this really hard job where it’s trying to balance price stability and maximum employment by moving around interest rates and a balance sheet. That is super hard! It’s essentially an art form. I think that's what people forget about the Fed: It is trying to nudge the economy. None of its tools are direct. It isn’t going out to companies saying, “Do this!” and “Do that!” 

The Fed is trying to influence human behavior by managing the price of money, and that is a really hard job. It's not simple to manage humans, and humans are not rational, so that makes the whole foundation of economics very shaky.

Jack: The Fed is not literally just printing money?

Kyla: No, no, that's the U.S. Mint. The Fed impacts interest rates, right? I guess you could say it “prints money” with the balance sheet and by making money more or less accessible, but, no, it doesn’t literally print money.

Jack: Let’s take a step back: When did you start creating content?

Kyla: In college I was an economics tutor, and I wrote about my options trading experience on a blog called Scanlon on Stocks, so economics education was always important to me. After graduation I moved to Los Angeles and joined a rotational program with Capital Group, where I saw a need for education outside of the asset management space. For example, people were buying different assets, but didn’t really know what they were buying, etc.

I left Capital Group and joined a startup called On Deck where I built out their investment education arm and then… GameStop happened. I started talking about GameStop, and I realized that there was a gap in the market for just talking about the economy and the Federal Reserve in an accessible, fun way, so I started doing skits and pretending to be Jerome Powell. 

The whole theory of my content is that I think people need foundational knowledge about the economy. There are good starter economic books, like Basic Economics by Thomas Sowell, but I thought there was room for fun too. I try to be fun and lighthearted, but, yes, basically I started making content because of GameStop.

Jack: Do you think social media has exaggerated a lot of misconceptions about the economy? It’s easy to publish hot takes on X, and people are somewhat incentivized to do that because controversial takes drive the most clicks.

Kyla: There’s this research paper from the Swiss Finance Institute called “Finfluencers” that refers to social media users who are slightly wrong and have these hot takes, as you’re saying, as “anti-skilled,” because they’re bad investors. But people pay attention to them because they’re noisy! I do think the media landscape is a really noisy place.

Simply including a negative word in the headline improves your click through rate by, like, 2.3%, but a positive word decreases it by 1.9%, so it’s just the business model of social media to be a little bit inflammatory.

When you're talking about the economy, because it's so personal for people, like everybody has a personal inflation rate, everybody has a personal interaction with the labor market, everybody has a personal affectation with the Fed, I think that that can definitely influence how you make content.

Jack: I noticed throughout your book that you referenced a lot of people's tweets, including different journalists and economists. Do you think that there is a lot of value in social media too? 

Kyla: Oh yeah, I wouldn't be here if it weren't for Twitter, which is crazy. I think I was active on Twitter at exactly the right time, too, and I’m grateful for that. But think about it: The smartest people in the world, especially in finance, are on Twitter. It's like the water cooler of the industry. Twitter, for me, is like a place where I learn quite a bit because you have the best economists in the world tweeting out charts.

Jack: I'm glad that you still call it Twitter as well. I think everybody still calls it Twitter.

Kyla: X is too confusing. It's a variable, not a company name.

At what point did you decide to go from writing your newsletter and creating videos to working on a book? 

Kyla: I wrote a blog in July 2022 about the “vibecession,” which led to a New York Times opinion piece, and that Times piece caught the attention of Penguin Random House.

When Random House reached out, I realized two things: I really wanted to write a book, and a book gave me the opportunity to slow down and write something timeless. Most of my content is timely: I’m usually responding to recent news in my videos and newsletters. I wanted to take time to build a foundational toolbox that explained inflation, the labor market, the Federal Reserve, monetary policy, fiscal policy, etc. There’s so much noise on social media, and a book is a static resource that people can refer to over and over again.

Jack: How would you summarize In This Economy? in one or two sentences?

Kyla: It’s a toolbox to understand the economy. My theory is that if you don't understand the economy, it's very hard to exist in the economy. Everything that we do is an economic transaction, from buying a cup of coffee, to you know, taking the subway. I think if you have a little bit more knowledge about the world around you, you can make better decisions. And if we all make better decisions, those decisions will compound.

The book is designed so you don’t have to read the chapters consecutively. There's a chapter on inflation, there's a chapter on GDP, a chapter on supply and demand, and at the end of the book, I included policy recommendations and talked about problems and opportunities.

Jack: You did a fantastic job breaking down the debt ceiling and its political ramifications. What's your take on our national debt? Is it a crisis? Is it too high? How did we get here? Where do we go from here?

Kyla: I think our interest service payments are a bigger red flag than the amount of debt itself. We can take on a lot of debt because we're the biggest country in the world, and everyone relies on us and we know it. But the Fed has been raising rates in order to battle inflation, and now our interest payments on our debt are projected to surpass our defense spending, and that's concerning. If debt is productive, it’s fine because it will pay itself back through growth, but if the debt is going towards just paying off interest, that's not good.

Jack: I was pretty familiar with the stock and bond market content, but I found the monetary policy, fiscal policy, and Federal Reserve chapters super interesting. Were there any parts specifically that you were the most interested in writing or learning about?

Kyla: During the time of writing, I was very obsessed with the Federal Reserve, and I dug into the history of the Fed. I think that for the time that we were in when I was writing it, and for the time that we're in right now, the Federal Reserve is a very important entity to understand, so that was fun to write about. In the end, I rewrote the book three times, which I don't recommend doing. I added chapters on opportunities and problems, and I borrowed a lot from Derek Thompson’s “abundance agenda.”

That was really fun because when you're making content, it's easy to bemoan the current state of affairs and think, “inflation is really high and the labor market is weird and the economy is weird,” but I think it’s important to discuss solutions too.

Jack: Were there specific points that you had to rewrite that changed the whole book? Or what were the friction points where you thought, “This isn't right, I need to fix this?”

Kyla: The chapter order. Each chapter can be read alone, but I wanted to structure the book like a journey through Maslow's hierarchy of needs, right? The foundation of the hierarchy of the economy is money, so money is like the first thing that you probably think about when you think about the economy. A lot of the rewriting was getting the order right.

Also, when I first wrote it, I didn't write like myself. I have a distinct writing style, and it didn't sound like me. I like to include philosophy, literature, and poems in my work, but I hadn’t included any of that in the book. When I was reviewing it with my editor, we agreed that it didn’t sound like me. When I went back and referenced poetry, it made a lot more sense to me.

Jack: Which areas of the economy are you most optimistic about, and which areas are you most pessimistic about moving forward?

Kyla: We're in a fuzzy time with the election coming up that makes it hard to figure out what to be optimistic about or pessimistic about because everything could change in November, but right now I’m excited about all of the manufacturing acts that the Biden administration has passed: the Chips Act, the IRA (Inflation Reduction Act) the IJA (Infrastructure Investment and Jobs Act), all of those are starting to pay off. For example, they're building a fab plant in Arizona. 

I think it’s exciting that American manufacturing is coming back. But, it’s also potentially worrying that we’re starting to enact tariffs on China, and we’re bullying Canada again. I think that we really need to be friends with the countries that we're friends with and not beat everybody up on the playground.

Jack: What did you learn the most about over the course of writing this book that you didn't already know? Did you learn anything that changed your preconceptions about some part of the economy?

Kyla: I think the one thing that changed a lot for me was how I thought about economic data.

I was a little bit skeptical of data going into this because of the whole vibecession piece that I wrote where I mentioned that the data is probably not matching how people feel and asked why is it happening? Now I am really worried about how we collect economic data and how polls are used.

Polls and surveys are hard, but they are our primary source of information about the economy. Like, one of the main ways we judge the strength of the labor market is through job openings. To calculate job openings, people have to respond to a survey, and the response rate of the survey has declined quite a bit. I spent a lot of time wondering, “If the data that we're collecting about the economy isn't so good, how can we determine the actual strength of the economy?” Of course, we look at a whole plate of data, it’s not just one data point, but that was something that was surprising to me. One other thing that I learned a lot about was the history of the US economy.

I didn't really spend a lot of time on economic history before I wrote the book. I majored in economics, but the focus is on charts and graphs when you're taking economics. You don't always get the background. I enjoyed learning about the history of banks and, you know, why the Federal Reserve came into existence because of the panic of 1907, and wildcat banks. That was really fun.

Jack: One thing I enjoyed about your book was how easy it was to read. Most economic writing is very dense and full of jargon. Why do you think that is?

Kyla: Economists are incredibly smart, and I feel lucky to be tangential to their space, but a lot of them are academics, who, I think, are trying to impress other academics. This is just me speculating, and I don’t know if it’s true, but I think that’s what ends up happening, and many of them aren’t writing for basic consumption. That's the opposite of what I wanted to achieve. I do have a chapter, or a section of a chapter, on theory, but I spent a lot of time just applying concepts that economists have done a great job of discovering to the real world. 

Jack: If somebody could only read one chapter from In This Economy?, which one would you recommend? 

Kyla: The inflation chapter is really important. I talk about levels versus rates, and then I discuss inflation versus deflation versus disinflation. I think that that's an important concept to understand because a lot of people think that inflation going down means that prices should go down, and that's just not true! It's a semantics issue.

If you enjoyed this interview, make sure to check out Kyla's book, "In This Economy?"