Markets/Econ
Krugman—Stagflation or Soft-Landing
So where does that leave us? I’d say that these various temporary factors are more or less a wash, and that underlying inflation really has come down a lot; the inflation surge may not be completely behind us, but there’s good reason to believe that we can restore price stability without huge economic pain.
But then I would say that, wouldn’t I?
Sumner—About that employment-population ratio
I suspect that the BLS estimates of total population over age 16 failed to account for the sharp slowdown in adult population growth due to Covid deaths and a dramatic fall in immigration. And I also suspect that payroll employment is more accurate than the household survey. Put the two together, and it’s reasonable to assume that employment has now exceeded the pre-Covid peak of early 2020, even accounting for population growth. This is especially the case when one considers that the elderly population is the fastest growing part of the total US population, as baby boomers like me retire in large numbers. There is no “hidden unemployment”.
and Fortunately, this isn't the Volcker disinflation
Once the public adjusts its expectations to the high trend inflation, the economy returns to the natural rate. This explains why the economy today is more overheated than before the Volcker disinflation. By the early 1980s, the public had adjusted to a long period of high inflation and unemployment had returned close to its natural rate. Each year, both wages and prices rose rapidly—but the economy was not in “disequilibrium”. In contrast, today’s economy has still not adjusted to the very fast NGDP growth of 2022. Thus the labor market is more overheated than in early 1981, despite much less inflation. The labor market is in disequilibrium.
Today’s wage report is good news, as it suggests that Powell doesn’t need to do nearly as much nominal wage disinflation as Volcker had to do. He needs to get that wage index down from 4% annual growth to 3%. Fortunately, today’s workers are not used to getting 9% raises every year, and probably view the big wage increases of last summer as unusual. I still believe that some pain will be imposed on the labor market in bringing inflation down, but perhaps something closer to 4% or 5% unemployment, not the double-digit unemployment of late 1982. It may not be a soft landing, but relative to 1982 it will probably be a softish landing.
CFS Divisia Monetary Aggregates: December 2022
Re-visiting R*: Close to the end of the hiking cycle for the Fed
Hence, the R-gap is telling us the exact the same story as the P-star model – US monetary policy became excessively in 2021 and this is the main reason why we saw a sharp pickup in inflation in 2021-22.
And with the expected rate hike this week from the Fed we are now very close to having closed the gap between the Fed funds rate and R* and it is safe to say that based on the R-gap US monetary policy is now close to being neutral.
How quantitative tightening *really* works
The only sure way to decrease the losses on QE is for the central bank to pay less than a fair market rate of interest on reserves. As noted above, this would be inflationary.
With no painless solution to the problems raised by tightening monetary policy after QE, one can imagine that this is a reason why policy makers seem to be dragging their feet over tightening.
At his 2006 shareholder meeting, Warren Buffett reflected on the difficulty in managing shorts. “There’s nothing evil, per se, about selling things short,” he said. “I would say that it’s a very, very tough way to make a living. It’s not only often painful financially, it’s very painful emotionally.”
He goes on: “I’ve probably had a hundred ideas of things that should be shorted, and I would say that almost every one of them have turned out to be correct. And I’ll bet if I’d tried to do it and make money out of it, I probably would have lost money, I would have had no fun, and the opportunity cost…would have been enormous. Because if somebody’s running something that’s semi-fraudulent, they’re probably pretty good at it and they’re working full time at it and they’ve succeeded for a while and they may keep succeeding. And if they succeed and you go in at X and it goes to 5X, you know, all you’re hoping after a while is that it goes back to X again or something of the sort. It’s a very tough psychological game to play. Few people may be well-suited for it.”
The government ditched inflation-protected bonds – companies should start issuing their own
Finance Minister Chrystia Freeland recently announced that the government of Canada will no longer issue inflation-protected “real return” bonds.
The reason I’m writing this up is I think it is very, very important to know that Celsius may have committed some of the biggest, dumbest financial crimes in history, run by the Mr. Bean of investing, and losing hundreds of millions of dollars in the process. So much of this happened in broad daylight, but somehow avoided scrutiny because there was so much other stupid crap happening. Celsius lost over $4.7 billion of customer funds, which the bankruptcy judge ruled Celsius owned anyway, meaning their victims are even less likely to recover their funds than those of FTX.
Geo-Economic Fragmentation and the Future of Multilateralism
Foreign
Avoiding a Long War—U.S. Policy and the Trajectory of the Russia-Ukraine Conflict
Rand Corporation came out with a more realist inflected analysis of the war and voilà…
Turkey’s Turning Point—What Will Erdogan Do to Stay in Power?
As his recent foreign policy moves suggest, he also has several cards to play, and he may seek to manufacture a crisis—including with the West—to change the domestic mood. Europe and the United States must prepare for such a development to minimize potential damage and must have a strategy in place to counter it. Turkey is far too important a country to be allowed to drift away from Western influence. [Nate—my italics. The conceited pretension of the foreign policy establishment is breathtaking.]
Faced with the prospect of an increasingly impulsive Erdogan as the election approaches, the United States and its European allies need to begin to prepare for the unexpected from Turkey. Among his possible moves are an “accidental” though minor clash in the Aegean and Mediterranean regions with Greece; a confrontation with the United States in northern Syria; or, more dramatically, a change of the status quo on the Turkish part of Cyprus.
Wanted by Interpol, Relaxing in Dubai: Geolocating Isabel dos Santos’ Life of Luxury.
PSA: If you post pictures on social media, people will find you quickly.
Stop the proposal on mass surveillance of the EU
Right now, the EU Commission is intensely working on a legislative proposal that would monitor and audit the communication of all European Union citizens. The regulation is called Chat Control, and it really does include all types of communication. This means that all of your phone calls, video calls, text messages, every single line that you write in all kinds of messaging apps (including encrypted services), your e-mails — yes, all of this — can be filtered out in real time and flagged for a more in-depth review. This also applies to images and videos saved in cloud services. Basically, everything you do with your smartphone. In other words, your personal life will be fully exposed to government scrutiny. So, why is it that almost no one is talking about this?
Central Bank Immunity, Afghanistan, and Judgments Against the Taliban
The relief sought by the judgment creditors would violate international law and harm U.S. foreign policy objectives related to the immunity of central bank assets. So far, these issues have been mentioned only in passing. They merit greater attention, and they provide powerful reasons to deny U.S. plaintiffs compensation from the assets of the Afghan central bank without clearer direction from the U.S. government.
USA/Culture
Today, the threat of utopian politics comes from the radicalized center-left, not from the radicalized center-right. The term “progressivism” was revived in the 1980s and 1990s by Clintonite “Third Way” Democrats to distinguish their business-and-bank-friendly version of the center-left from the older New Deal farmer-labor version. But by the 2020s, “progressivism” came to mean something quite different—a commitment to utopian social engineering projects even more radical than those envisioned by the crackpot Bush-era neocons, libertarians, and religious right.
Three social engineering projects define progressivism in the 2020s: the Green Project, the Quota Project, and the Androgyny Project.
Instead of resembling the energy transitions of the past—from wood to coal and from coal to oil, gas, and nuclear—the present-day green movement is best viewed as a puritanical moral crusade like Prohibition, with Demon Oil and Demon Gas substituted for Demon Rum and Demon Whiskey.
The Androgyny Project, for its part, is bound to crash against reality in the form of human biology. I predict that in a generation the “progressive” policy of so-called “gender-affirming health care” will be viewed in hindsight the way the prescription of lobotomies and chemical castration as cures for homosexuality in the 1950s is viewed today.
The immediate necessity in American politics is to reject partisan and ideological purity tests in order to form the largest possible anti-progressive front—one that will include militant Enlightenment atheists and Orthodox Jews and Ayn Rand libertarians and Trad Caths, pre-2010 neoliberals and old-fashioned labor liberals and reactionary paleoconservatives, small businesses and big businesses threatened by harmful Green New Deal energy policies, left-liberal professors who do not want to sign diversity statements and nuns in Catholic hospitals who refuse to pretend that men are women and women are men.
Welcome to human centipede culture
And this threatens to strand us in what I’ve come to think of as “Human Centipede culture”, after that cult horror movie in which victims are stitched together mouth-to-anus, forcing each to consume the excreta of the one in front. For an onrush of generative AI technologies is already accelerating this proliferation of reboots. Buzzfeed has augmented its human writers with quiz-writing AI, while futurists predict a deluge of automated content in every field from art to pornography that will swamp our ability to tell who is human — or to care.
Perhaps the most (to date) under-priced impact, in cultural terms, of first the technologisation, and now digitisation, of everything, is the way it attenuates these tactile relationships with the world. As we lose embodied knowledge about the material world’s affordances, forms which previously seemed self-evident come to seem weightless, empty, and naff. We are deprived of affordances to think with.
Why Environmentalists May Make This Whale Species Extinct
The cause of this environmental betrayal is massive industrial wind energy projects off the East Coast of the U.S. The wind turbine blades are the length of a football field. Sitting atop giant poles they will reach three times higher than the Statue of Liberty. The towers will be directly inside critical ocean habitat for the North Atlantic right whale.
There are only 340 of the whales left, down from 348 just one year earlier. So many North Atlantic right whales are killed by man-made factors that there have been no documented cases of any of them dying of natural causes in decades. Their average life expectancy has declined from a century to 45 years. A single additional unnatural and unnecessary death could risk the loss of the entire species.
On not getting contaminated by the wrong obesity ideas
I think that the environmental contamination hypothesis of the obesity epidemic is a priori plausible. After all, we know that chemicals can affect humans, and our exposure to chemicals has plausibly changed a lot over time. However, I found that several of what seem to be SMTM’s strongest arguments in favor of the contamination theory turned out to be dubious, and that nearly all of the interesting things I thought I’d learned from their blog posts turned out to actually be wrong.
Hypobaric confinement seems to cause a lot of weight loss: the three Operations Everest and other studies
As the title of this section suggests, those three studies involved putting people inside hypobaric chambers, and, as the study names suggest, those chambers eventually reached an air pressure close to that of the summit of Mount Everest.
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The idea that one can construct a grammatically correct sentence consisting of nothing but repetitions of "buffalo" was independently discovered several times in the 20th century.