Facebook Twitter LinkedIn The future course of the economy always involves a bit of guesswork. But it seems to me that the following two claims are pretty likely to be true: 1. Over the past three years, monetary policy has been far too expansionary. 2. It is likely that monetary policy is still a bit too expansionary, although I have less confidence in that claim. Here are some recent data points, starting with the Financial Times: A “blowout” March retail sales report sparked a sell-off in US government debt and shook global currency markets on Monday, in the latest sign that the world’s ..read more

Facebook Twitter LinkedIn The Financial Times has a story that points to some disturbing features of South African politics: It is the kind of fervent devotion that has driven a wave of support for the former president [Jacob Zuma] ahead of a critical general election on May 29. Yet as recently as January, the 82-year-old African National Congress veteran appeared to have been cast into the political wilderness after he was suspended from the party he once helmed for launching “vitriolic attacks” against the leadership and backing a rival one. So Zuma was a highly corrupt and semi-authoritar ..read more

Facebook Twitter LinkedIn In a recent post, I listed 6 ways that Trump intends to reduce inflation: Trump has a 6-part plan to bring down inflation: 1. Favors NIMBY policies to prevent housing construction in the suburbs. 2. Expel all the illegal workers that pick our food and provide other key services. 3. Put heavy tariffs on imported food and other goods. 4. Have Medicare do less negotiation of drug prices. 5. Run super massive budget deficits. 6. Easy money. Now Politico suggests that his advisors have found another method to add to the list: Economic advisers close ..read more

Facebook Twitter LinkedIn During the golden age of macroeconomics (roughly 1984-2007), many economists understood that interest rates were not monetary policy. After 2008, economists have been drifting back to old-school Keynesianism, with its emphasis on fiscal policy and interest rates. For the umpteenth time, it makes no sense to talk about interest rates causing changes in other macro variables. To do so is to engage in reasoning from a price change. Interest rates can change for multiple reasons, and the effects of the rate change will depend on the underlying factors that caused rates t ..read more

Facebook Twitter LinkedIn Janan Ganesh has an piece in the FT entitled “The Rise of Bleak Chic”. I don’t demand show trials or the ritual egging in public squares of people who were bearish on cities. There is no need for a mea maxima culpa from those who doubted if even the handshake, let alone the restaurant, would return. But let’s imagine that things were reversed: that we optimists were the ones proven wrong. We wouldn’t have been allowed to slink off like Homer Simpson into the hedge. There would have been recriminations.  There is an asymmetry in public life. If you err on the si ..read more

Facebook Twitter LinkedIn I don’t know. But the possibility is greater than I would have wished to see. Inflation data is often noisy and unreliable, for a wide variety of reasons. Wage inflation is the most meaningful for monetary policy. Among all of the various price indices, the service sector inflation ex-housing and energy is probably the most closely tied to wages. Wages aren’t closely linked to housing or gasoline prices, but they are fairly closely linked to the price of haircuts, fast food, and medical care. And while this series is pretty noisy (red line), it does seem to be trendi ..read more

Facebook Twitter LinkedIn There are many different types of superintelligence. Some people understand quantum mechanics. Some people are really good at chess. Some people can read Finnegan’s Wake. [I’m tempted to say, “Some people understand supply and demand Scott Alexander is really, really good at analysis. So good that he’s become famous for engaging in this activity, with a cult following all over the world. (In recent years, the new people I meet in Orange County are largely through Scott Alexander meet-up groups.) Thus it would be interesting to see what would happen if Alexander took ..read more

Facebook Twitter LinkedIn Here’s Jim Geraghty of the National Review: We’ve reached the point where Biden administration officials, Democrats, and pro-Biden columnists are tearing their hair out, furious that the electorate perceives the economy as being subpar. But if you look in the right places, the economic frustration makes perfect sense — and those right places include grocery prices since before the pandemic, the number of new jobs that are part-time jobs, the current high gas prices and likely summer price hikes, how inflation counteracts the good recent run of the stock market, and h ..read more

Facebook Twitter LinkedIn 1. Be careful what you wish for (from Matt Yglesias’s Substack): While several states have banned abortion, a bunch of other states have made it easier to get medication abortions and otherwise reduced restrictions with the result that there were actually more abortions in 2023 than in previous years. And abortion rights is getting more popular. A new Fox poll showed that 70 percent of the public believes mifepristone should be legal and the previously popular idea of a 15-week ban is now underwater 43-54. Abortion rights have become a millstone around the GOP’s neck ..read more

Facebook Twitter LinkedIn Each day I get more and more depressed about the intellectual climate in America (and the rest of the world.) How often do you see people quote polls suggesting that the public believes the economy is doing poorly, as if these polls actually meant something? Matt Yglesias directed me to this Chris Rugaber tweet: Most people (as individuals) are doing fine. Most people (in aggregate) are doing poorly. ¯\_(ツ)_/¯ Facebook Twitter LinkedIn ..read more