San Francisco Fed contra Blanchard, Domash, and Summers—Finding a Soft Landing along the Beveridge Curve.
Why is it so difficult to achieve a soft economic landing?
Thus, it is now too late to avoid the need to attempt a highly difficult soft landing. If the economy were an airplane, it is coming in much too fast, leaving little margin for error.
The Fed’s best hope is to gradually slow nominal GDP growth, perhaps to a 5 percent rate over the next 12 months, and a 4 percent rate over the subsequent year. If we were to escape with a mini-recession (roughly 5 percent unemployment) and 2 percent inflation by 2024, it might not count as a soft landing, but by historical standards we will have escaped high inflation with relatively little damage.
Cautionary note about how banks increase the supply of liquidity to customers during QE, but don’t decrease it during QT—thereby necessitating central bank intervention in the ensuing illiquidity—Why Shrinking Central Bank Balance Sheets is an Uphill Task.
A ‘buyers’ market’ for homes is still elusive in the US.
So for aspiring homeowners waiting for a slowdown to buy, the bank writes that in a mild recession — perhaps one of the more optimistic economic scenarios as the Fed continues to hike — the likelihood of a buyers’ market is slim: “While outright declines in national home prices are possible and appear quite likely for some regions, large declines seem unlikely.”
Will House Prices Decline Nationally?
For now, I’m sticking with “stall” as the most likely national outcome (but there will be regional price declines), however the odds of a 5% to 10% national decline have increased.
How many mortgage industry layoffs need to happen to balance out falling origination volume?
Based on our back-of-the-envelope analysis here, if the industry experiences a 65 percent drop in origination volume from the peak in fourth-quarter 2020 to a trough in first-quarter 2023, per MBA’s forecast, production employment will likely need to be scaled back by 24 to 31%. As of second-quarter 2022, we are only between 2 and 10% there.
Arthur Burns is a patsy—Stop Lionizing Paul Volcker and Villainizing Arthur Burns
Europe
Where is the press coverage of the Ukrainian offensive? Right now, there is literally nothing on the websites for the Washington Post, NY Times, or WSJ about any progress the Ukrainians might be making. When the people that brought us the Ghost of Kyiv go dark, it means something—either the situation on the ground is dire, the West is souring on Zelensky, or Germany and France are looking for an off-ramp.
Diplomacy Watch: Why did the West stop a peace deal in Ukraine?
European Sparks & Darks Tell a Fascinating Story.
Another example of “identify the bottleneck.” The driver of high spot power prices in Germany is not limitations on generating capacity–it is the high fuel prices. (Presumably the lower efficiency units are offline in Germany now, as their gross margin is negative.) Conversely, generation capacity limits are evidently much more binding in the UK.
But if you look at forward prices, the story is different. Quarter ahead clean sparks in Germany are around €200, while in the UK they are over €300. Two quarter ahead (the depth of winter) are almost €600 in Germany and a mere €300 or so in the UK.
Erdogan is sitting in the geopolitical catbird seat—Understanding the Erdoğan-Putin Duet.
When God closes a door, he opens a window—The Military-Industrial-Complex's Big Break in Ukraine.
Last year, defense contractors shed a tear when America’s war in Afghanistan came to a close. They collected up to half of the Pentagon’s $14 trillion in spending over the U.S. military’s two-decade venture in Afghanistan. But just after one protracted conflict came to a close, another came to the complex's rescue.
Britain’s pawnbrokers are booming
China
Above all, Chinese government officials need to accept this difficult truth: rising internal debt and the end of a period of unusually high investment means that China’s historic growth surge is most likely a thing of the past.
Supportive of the Zoltan thesis—Why is China so Obsessed With Food Security?
You see, China may be home to one-fifth of the world’s population, but it contains only about 7% of the world’s arable land. And the percentage of land in China suitable for cultivation shrank from 19% in 2010 to only 13% in 2020, amid urbanization and widespread pollution of soil and water. Remarkably, China still manages to produce 95% of its primary grain (wheat and rice) needs, in part through efficient production. China’s wheat production per hectare is almost 50% higher than the United States (though almost half that of the world’s most efficient, the Netherlands).
Criticism of the CHIPS Act from a proponent of US industrial policy—Where the Chips Fell
More broadly, although economic and technological competition with China may offer effective political cover in today’s environment, it is clearly not a serious goal of U.S. policy. In light of Congress’s refusal to maintain strict limits on investment in Chinese semiconductor manufacturing facilities or protections on research funding, the recent symbolic controversies over Taiwan (like Nancy Pelosi’s visit) appear all the more bizarre. Likewise, conservative talk of “dismantling the administrative state” and returning power to Congress has once again proved totally fatuous.
Taking the long view, CHIPS might have been a great policy solution twenty-five years ago, but amid the current American postindustrial landscape, it is probably too little, too late, on its own. Fallen national champions like Intel, Boeing, GE, IBM, and the like have been hollowed out by decades of financialization, offshoring, and underinvestment; CHIPS or similar subsidies will not fix that.
General Interest
The Western Elite from a Chinese Perspective
From 2017, but worth reading for the GS anecdote alone.
When I was an intern, in one of the training presentations, a senior banker told us to distinguish between the process and the results. He said that we should focus on the process, which we can control, rather than the result, which is subject to luck. And here at Goldman, he said, we don’t punish people for losing money for the right reason. I have always loved asking questions, so I asked him, was anyone ever punished for making money for the wrong reason? After giving it some thought, he said that he had not heard of any such thing.
Enjoyable hate reading—a review of recent books about different flavors of authoritarian scarcity, promoted by self-loathing leftists—Reversing the Freight Train.
Related: The “Energy Transition” Delusion: A Reality Reset.
After at least $5 trillion in spending over the past two decades, hydrocarbons still supply 84% of global energy, down just two percentage points. For context, burning wood still supplies more than five times the amount of global energy than do all the world’s solar panels.
George Carlin’s Save the Planet stand up bit.
Rand Corporation report trying to assess technological trends and apply them to possible conflict scenarios.
Is there any lower hanging regulatory reform fruit than making the airlines responsible for security and disbanding the TSA? The Humiliating History of the TSA.
He’s right, this does sound crazy. Vince McMahon in Wrestletalk.
“This might sound crazy, but when two animals — the primal instincts kick in and survival kicks in... If you see someone weaker than you, you see someone that’s crippled or in a wheelchair, deep down your primal instinct, you want to destroy them, you want to eat them, you want to eat them alive! That is what we do. That is what human beings do to one another. That is our basic primal instincts.”
‘A white nationalist pyramid scheme’: how Patriot Front recruits young members
Jon Stewart and the Pentagon honor Ukrainian Nazi at Disney World.
Review of The Internationalists, a book about the Kellogg-Briand Peace Pact, which, thankfully, outlawed war in 1928.
The Cream Rises to the Top—The authors attribute the remarkable resurgence of the pre-revolutionary Chinese elite to human and social capital. I’m pretty sure we’re not allowed to speculate that it’s really genetics/IQ.
When confronted with their resume-polishing and credential-mongering, I can only think of the exchange from The Princess Bride in which Inigo Montoya seeks to gain the trust of the Man in Black:
“Would it help if I gave you my word as a Spaniard?”
“No good — I’ve known too many Spaniards!”
So, too, with me and the great menagerie of geopolitical experts.
The Decline and Fall of the American Empire
The post–George Floyd racial reckoning has hit the field of medicine like an earthquake. Medical education, medical research, and standards of competence have been upended by two related hypotheses: that systemic racism is responsible both for racial disparities in the demographics of the medical profession and for racial disparities in health outcomes. Questioning those hypotheses is professionally suicidal. Vast sums of public and private research funding are being redirected from basic science to political projects aimed at dismantling white supremacy. The result will be declining quality of medical care and a curtailment of scientific progress.
Here are some solid figures: I had six classes last year, and I didn’t have a single one without multiple students who identified as transgender. Some classes had more than others, but the absolutely lowest number was two in a 26-person class. Most of these students were just non-binary, but I had least five in the midst of actual medical transition, along with quite a few more who spent their days planning how to get the process started. I’d estimate that 70% or so of these students are female, and talk about breast binding and “top surgery” are common conversation topics at lunch time. It’s hard to not step in when you hear an obviously depressed, dysfunctional teenage girl working out how she can convince her parents to approve a double mastectomy, but what can you do? If I said anything at all, I’d be fired in a heartbeat.
How Weed Became the New OxyContin.
If you’re over 30 years old and you used to smoke weed when you were a teenager, the strongest you were smoking was probably 20% THC. Today, teenagers are “dabbing” a product that’s three, four, or five times stronger, and are often doing so multiple times a day.
America’s Bad Bet on Sports Gambling.
Gambling is, according to the fifth edition of the Diagnostic and Statistical Manual of Mental Disorders, addictive. Estimates are that about 2 percent of the people who do it wind up in extraordinary trouble. This spring, I sat in a sports bar in King of Prussia, Penn., with a former gambler who had opened his laptop to explain how betting sites work. It was a slow sports day, and suddenly there popped up on his screen a solicitation to bet on Argentina’s “B” Soccer league. “If you’re sitting here in the dark on a beautiful Saturday afternoon placing prop bets on the Argentine B league,” he said, “I don’t think you need the DSM-V to tell you what the problem is.”
“We now have very good research comparing American kids who speak English at home to immigrant kids who don't speak English at home,” he said. “American kids who speak English at home are much more likely to be anxious, depressed, disengaged, and experienced non-suicidal self-injury compared to kids who don't speak English at home, using speaking English at home as a proxy for engagement with American culture.” When he advises immigrant families in the United States, he tells them not to speak English at home.
The data are eye-catching in their own right. But when you put them together with global figures, you find that 2021 marked the moment in which American life expectancy was overtaken by that of China. This is a historic transition in some ways even more telling than the more commonly cited GDP figures.
Why do we have troops in Syria?
Why do we have troops in Yemen?
Why do we have troops in Somalia?
Health
You’re going to look stupid doing it, but maybe you should—Brain Stimulation Improves Memory in Older Adults. Here’s a listing for a TENS machine on amazon.
Gentlemen, we can rebuild him. We have the technology—Synthetic cartilage is now stronger than the real stuff.
Good news for Europe—Benefits of Cold Adaptation.
Do I have to start wearing those blue blocking glasses?—Excessive Blue Light From Our Gadgets May Accelerate the Aging Process
