Econ/Markets
Problems of an American Industrial Strategy I: Kindleberger's Dilemma and the Development State
However, I think that Kindleberger has a flipside. His system of hegemonic stability requires that the country at the top of the hierarchy accept a degree of free ridership. In other words, by serving its function as the world's bank, it gains almost infinite "monetary sovereignty." It can spend as much as it wants and tell bond vigilantes to shove it where the sun doesn't shine. This is what makes a country a "developed market." Yet, the higher you are on the hierarchy, the more you need to open your capital and current accounts. Thus, you lose the ability to have substantial control over the real economy and its growth. It is no wonder China has stepped back from its dreams of having a key currency.
The US can't use foreign markets to get price signals about the demand for the goods it is trying to promote outside of a few advanced industries in which it has some inherent advantages. In turn, trade can't get us to full employment because we have to consume more than we produce to be the international market and lender of last resort. I am all in favor of increasing the American savings rate a bit over time, but that is not how we drive up employment outside some specific sectors. If you try to make the US a trade superpower, you will have to decrease American consumption and export the surplus. This breaks the bank, and the world descends into depression and instability.
Second great experiment second update
1975 may be a good historical precedent to think about. The Fed acted more quickly that it is doing now, but still never raised interest rates substantially above inflation as it did in 1980-1982. Nonetheless, inflation did fade. But it never got all the way back to its previous value, and then took off again with additional shocks in the late 1970s.
The underlying paper—Expectations and the Neutrality of Interest Rates
Government Debt and Capital Accumulation in an Era of Low Interest Rates
So where does that leave us? Let me suggest four tentative conclusions. First, the decline in real interest rates around the world over the past several decades is not a mystery. It appears to be the result of an increase in world saving, a decline in world growth, and possibly an increase in market power. Second, because interest rates are so low, greater government debt is most likely not problematic from a budgetary standpoint. The government can probably roll over the debt and the accumulating interest forever, in essence letting growth take care of the debt. Third, there is an outside chance that this Ponzi scheme of perpetual debt rollover will fail. That possible outcome is especially dire because the failure makes an already bad state of the world even worse. Finally, even if the perpetual debt rollover succeeds, the increased debt could still crowd out capital. If the economy’s capital stock is less than the golden rule level, as appears to be the case, this reduction in capital accumulation will, in the long run, depress not only labor productivity and real wages but also the resources available for consumption.
Housing, Inflation and Why the Fed Should Consider a Pause
However, it appears the Fed is missing the recent sharp slowdown in household formation. The surge in household formation during the pandemic was unrelated to monetary policy (it was mostly due to work-from-home and the pickup in divorces). And the recent slowdown in household formation is also unrelated to monetary policy.
This “dramatic shift” in household formation is leading to Rents Falling Faster than "Seasonality Alone". Since rents are falling - and will likely continue to fall - it probably makes sense to look at inflation ex-shelter for monetary policy over the next several months.
Quantifying the Costs and Benefits of Quantitative Easing
Our simulation analysis indicates that QE4 is likely to reduce the Federal Reserve’s remittances to the U.S. Treasury by about $760 billion over the next ten years. Moreover, QE4 did not have any notable benefit in reducing term premiums, raising concerns about the efficacy of QE as a tool for providing monetary stimulus.
Joe Gagnon on *25 Years of Excess Unemployment* and the Phillips Curve Debate—Joe Gagnon on David Beckworth’s podcast largely discussing the implications of this paper. He argues that the Phillips curve is non-linear, flat in low inflation regimes and steep in high inflation regimes, leading him to support a higher inflation target.
Who are the better forecasters of inflation, bond traders or economists? Everyone is bad at predicting the path of inflation and rates.
Previous posts (here and here) showed that long-term bond yields and long-term inflation compensation derived from bond yields are not good predictors of future inflation. Another post showed that economic forecasters are better at predicting inflation than consumers, but that neither group is especially accurate. This post compares the predictive accuracy of bond markets and economists over both short-term and long-term horizons. It finds that although short-term inflation compensation from bond yields has slightly better predictive accuracy than economists’ projections, economists are actually better at long-term forecasting.
2022 Finance Charlatan of the Year—The polls are open. This is a tough choice. The competition is brutal. Kevin O’Leary, Cathie Woods, Chamath Palihapitiya, Elon Musk, the 3AC Guys—the Mooch didn’t even make the cut. You have to go with SBF ultimately, but this 2022 crop of Financial Charlatans is the stuff of legend—’92 Dream Team levels of financial chicanery.
While Armanino provides audit services, it is their “attestation” services that have been particularly popular among cryptocurrency firms. Attestations are a more limited examination of a company’s books than an audit. While an audit includes a formal opinion and detailed validation of a company’s financial claims, attestations only perform limited procedures that basically check that information provided by management matches the claims made by management.
Foreign
The Prophet of Brexit: An Interview with Maurice Glasman
Those places still had a notion of solidarity, they still had an affection for the existing political system: Parliament, democracy, accountability, they understood these things are at stake. And they voted to defend it. So, yes, capital has tried to fragment this political sense of solidarity, but it turns out they haven’t succeeded. That’s the remarkable discovery that’s been brought to the table.
I need someone from the UK to explain to me why the “Stop Oil” folks are above the law.
Justin Trudeau promised that the euthanasia system would not lead anyone to choose to end his or her life due to a lack of social support. But in private, even practitioners say that the support that Canada most efficiently provides to many vulnerable patients now is death.
A new government that includes some of the Russia-friendly opposition elements might result in Slovakia softening its hitherto prominent position among the European states backing Ukraine.
Russia’s New Theory of Victory—How Moscow Is Trying to Learn From Its Mistakes
Domestic/Culture
The Nihilism of the Ruling Class
David Rothkopf is the deep state made flesh. A sort of “Yung Kissinger,” Rothkopf has done the cursus honorum of journalism, government, philanthropy, and academia. Not that he is or ever was in charge of anything. No one is in charge of anything. There is only a way things work. But if anyone knows how things work, it is Rothkopf.
That’s why it’s worth reading his new masterpiece of airport nonfiction, American Resistance: The Inside Story of How The Deep State Saved the Nation. Or in case you have better things to do in the airport—my summary of the book’s argument:
The deep state does not exist.
The deep state is stronger than the president.
The deep state is the true democracy.
There is no deep state.
Can an AI Chatbot Replace the Washington Blob?
I sat up straight with sudden shock, lingering hangover atypically gone. Bland, normative, politically unimpeachable top-line consensus on any given topic, with serviceable prose? My God, I thought, brimming with inspiration to change the world, just how much of the Washington foreign policy establishment could ChatGPT replace?
When you hit your knees tonight, thank the God to whom you pray that we don’t train air-traffic controllers the way we train teachers, or turn their first years on the job into a perverse hazing ritual at the expense of the innocent. “What? You think you’re the first person to run a plane into a mountain?” disdainful veterans would tell tearful rookies in the staff lounge of the control tower, spinning tales of their own early, fatal mishaps. “Don’t worry, you’ll learn. Look, no one can do this job straight from college.”
The Fifth Wave: CNN’s Long Goodbye—Cable News Will Likely Be Swallowed by the Revolution It Began
At the same time, substantial profits can be extracted from a relatively small number of viewers. The trick is to strip production of overhead—actors, star anchors, fancy graphics, batteries of writers, foreign bureaus. Drawn by the law of economic necessity, all of cable, including news, aspires to a specific kind of format: reality TV. The Trump boom in cable news should have alerted us to this fact. Trump’s opponents believed he was trying to turn the U.S. into fascist Italy. In reality, he successfully transformed our politics into a tawdrier version of “Naked and Afraid,” in which bizarreness and titillation made up (more or less) for the lack of a story, intelligible dialogue or coherence in human behavior.
A $100 Billion Lesson In Why Building Public Transportation Is So Expensive in the US
The U.S. continually breaks its own records for most expensive track miles on Earth, stretching the realm of credulity on costs for projects big and small. The problem has existed for decades, but it has been allowed to metastasize to such an extent that it is difficult to even fathom where the money is going.
$400b might not get you planes that stay airborne, but it does pay for sweet zero altitude ejection seats—I hope the pilot is ok.
Meet Mississippi’s Yawt Yawt, a Wild Pig’s Nightmare and Hunting Legend in the Making
Turning North America Back into 'Beaverland'
How a Cocaine-Smuggling Cartel Infiltrated the World’s Biggest Shipping Company
In total, the haul consisted of more than 15,000 bricks of cocaine, weighing nearly 20 tons and with an estimated street value exceeding $1 billion.
Another instance of Federal Government’s aggressive agricultural price support regime.
Science/Health
The Two Lies that Killed Nuclear Power
…the Rockefeller Foundation and its allies decided to argue that radiation produced genetic damage, the damage was unrepairable, and the amount of this damage was proportional to the total dose received regardless of how rapidly or slowly that dose was incurred. This is called the Linear No Threshold hypothesis or LNT.
More recently, recycled rebar, containing Cobalt-60, was accidentally used in the construction of 180 apartment buildings in Taiwan. Over 20 years, 8000 people received an average of 400 mSv each. The high dose cohort (about 11%) of the population received a mean cumulative dose of 4000 mSv with a max of 6000. The highest annual dose rate is estimated at 910 mSv. The cancers expected normally for this population is 115; the cancers actually observed was 95. According to LNT, we should have seen 153 cancers.
A short history of saturated fat: the making and unmaking of a scientific consensus
…saturated fats have no effect on major cardiovascular outcomes, including heart attacks, strokes or cardiovascular mortality, or total mortality. National dietary guidelines have not recognized this new thinking on saturated fats, however, and continue to promote policies based on outdated or insufficient evidence.
Setting the Record Straight on Ivermectin
Based on the clinical evidence from the 93 trials that ivermectin reduced mortality by an average of 51 percent, and on the estimated infection fatality rate of COVID-19, about 400 infected Americans aged 60-69 would need to be treated with ivermectin to statistically prevent one death in that group. The total cost of the ivermectin to prevent that one death: $40,000.
Building Fast and Slow Part IV: Construction of the World Trade Center
On the west shore of Manhattan, existing piers were torn out, and pulled to the middle of the Hudson where they were burned. In their place workers built large steel cofferdams into which the material removed from the site was dumped, creating 23 acres of new land that would become part of Battery Park City.
PARP, NAD+ and Metabolic Rate: Obesity Explained