Wrap Up for August 2023

Daron Acemoglu discusses Power and Progress with Russ Roberts.

California farmers are thinking differently re harnessing flood waters for aquifer management.

What makes level targeting better than growth rate targeting?

Part of the inspiration for Nikola Tesla's lifelong work with electricity, came from his pet cat.

Recommendations for five books on fiscal policy.

Doctors are dealing with moral distress.

What happened to small dollar mortgages?

Which states have the most job openings for workers?

Brink Lindsey argues for economic independence.

The actual Phillips curve relationship was between wage inflation and unemployment, not price inflation and unemployment.

Chances are the Fitch downgrade was overdue.

For central bankers, the low R star view of the world prevailed for too long.

In recent years, a flight of taxable income from large urban areas.

AI is proving effective for antibody treatments.

The real risk identified by Fitch, stems from politics. And Greg Ip explains why he thinks the downgrade shouldn't be ignored.

Once you add money to a barter economy, inflation is possible.

There are ways to make better use of the electrical grid we already have.

Unemployment is associated with inflation but it is not a causal factor.

Why were slaves treated more harshly in richer societies?

China: "Authoritarian impasse" or "structural dead end"?

For healthcare, electronic payments turned out to be a ruse.

How strong is lock-in from low rate mortgages, really?

Chronic absenteeism in U.S. public schools has nearly doubled recently.

Banks no longer expand lending in response to base money increases.

When gross output is taken into consideration, consumption assumes a more rational one third approximate for total economic activity.

What if the recent assessment regarding China's slowdown is wrong?

Bill McBride notes the evidence for a rising natural rate of interest.

It's Martin Wolf's musings in the introduction that make this five books recommendation worthwhile.

Liberty Street Economics looks at possibilities for the natural rate of interest in the near future.

How useful is central bank balance sheet expansion, really?

Some musings from Kevin Erdmann on Jackson Hole.

"Did the U.S. Really Grow Out of Its World War II Debt?"

Fixed rate mortgages have created quite a conundrum for U.S. central bankers. Meanwhile, inflation in the U.K. still has its own problems.

Some recent economic trends are unfortunate.

Jeanna Smialek sums up the latest Jackson Hole meeting. Here's the Arslanalp/Eichengreen report on higher public debt.  Axios touches on their paper and Timothy Taylor highlights it alongside other examples.

The stress of coping too much.

A thought provoking discussion on cancer screening.

There are growing labour shortages in what are vital disciplines.

How can home prices still be going up?

There's an upsurge in business formation.

Christine Lagarde at Jackson Hole: "Policymaking in an age of shifts and breaks"

From the Richmond Fed: "The Pandemic's Effects on Children's Education"

"Medium Term" Concerns are Becoming Short Term Realities

Fitch recently downgraded the United States' long term ratings to AA+, but why? For many economists and policy makers, their recent report is both confusing and seemingly, untimely. Others however, such as John Cochrane and Olivier Blanchard, argued that the downgrade makes sense, and I agree. 

Indeed, there are good reasons for immediate concern. Among those but certainly not limited to, are higher interest rates on government debt, the rising debt stock, and rising healthcare costs. Unfortunately, in the 12+ years I've paid close attention to such matters online, these fiscal issues have often been scarcely noticed, other than occasional warnings to take heed and "do something". 

Consequently, the general lack of seriousness about the matter, made the the medium term seem as though something which would never arrive. In short, there's a broad based unwillingness to face fiscal burdens head on, which has left us with a government no longer fully committed to its debts. Alas, it is futile to insist "This is about Republicans" because - after all - Republican representation is part and parcel of our institutional makeup. Perhaps that explains why Olivier Blanchard declared our budgetary process is no longer reliable. 

There's little denying as well, how the world has changed after recent domestic market inflation which is far trickier to eradicate than tradable sector inflation. In his support of the Fitch decision, Adam Ozimek explains how excessive inflation made the world economy a heavier burden for many consumers. I get that for younger workers with good incomes, non tradable sector inflation is more of an irritation than anything. However, for many who have recently retired, such as myself, there's still a higher price level for housing and vital time based services which may be permanent, even if it no longer increases. This reality has dramatically changed the life expectations and trajectory of retirees who are mostly dependent on Social Security.

Again, much of what transpired relates to the secondary or non tradable sectors I've written about over the years. I still believe a lot of fiscally induced austerity could have been avoided in the near future, had proactive measures been taken for building manufacture and knowledge maintenance in domestic markets. Yet governments now focus instead on industrial policy which largely involves tradable sector activity. While some of this could turn out well, still recall how many of these institutions eventually find their way back to good deflation via internal means. Whereas we could have realized clear benefits from innovation in domestic non tradable sectors. Indeed, careful attention to the creation of good deflation in these markets, might have kept our government from becoming so unstable in the first place. 

In all of this, what if Fitch wasn't an "appropriate" institution to raise a fuss about government fiscal shortcomings? Axios wrote: 

There is no doubt that U.S. policymaking can be a messy affair and that the current deficit trajectory is problematic. But it's not as if credit analysts have special insight into the scale of those challenges or how likely they are to spill over into some kind of default or crisis.

Well, who else should have suggested taking action, in their stead? For that matter, what institutions have we created, that are specifically positioned to address such concerns? Perhaps one reason such warnings went unheeded, is that no such institution exists. What we have isn't designed for these tasks in the first place. It seemed every time institutional "onlookers" referred to the medium term problems of fiscal burdens - even onlookers with extremely important responsibilities - people reasoned how they should not concern themselves with such things. 

The result? We inadvertently destroyed much of the impetus that might have existed, to address "medium term" concerns regarding fiscal burdens. Nevertheless, kudos to those who continued to sound the alarm just the same. That said, talking about it was only a starting point. The real challenge in all this, was to start doing things, and often just simplifying things, so as to actually reduce daily living costs for consumers on a regular basis. Then, and only then, a real chance to reduce government fiscal burdens as well, in a way that likely doesn't necessitate punishing austerity. Is there still a chance of doing so? I have grown tired and weary, and I'm hardly the only one.

Wrap Up for July 2023

Peter Turchin discusses his new book End Times.

Should emerging economies follow the new "turning inward" consensus that includes national industry subsidies?

Even if moderation seems like common sense, sometimes it's perceived as a weak virtue.

The 2020s as the new 1970s?

Matthew Klein reflects on his first two years publishing The Overshoot.

The story of titanium is a surprising one.

Janet Yellen's China trip was one of "managed tension". Plus, China appears to be at the height of its powers.

Storytelling can help people understand the role of central banks.

Visualizing the roads of the world.

The auto industry was born from three different maintenance philosophies.

Scott Sumner considers some aspects of recession risk.

Will services exports become a more substantial part of economic development?

Remembering when it was possible to order kits for home building by mail.

State and local tax exemptions for non profit hospitals, are increasingly being questioned. 

After 10 years, the belt and road initiative has reached the debt bailout stage.

What lies on the other side of our unsettled times?

Noah Smith grades "economic schools of thought".

Many banks are no longer willing to take on small mortgages.

The federal deficit almost tripled in the first nine months of the fiscal year.  And interest costs on government debt are quickly rising.

The path to mass flourishing particularly depends on (greatly) reduced consumer costs.

When it comes to industrial policy, much more is at stake than "good jobs".

NIMBYs continue their opposition to more accessible housing.

Sectoral imbalances lead to losses in total factor productivity. Plus, some clarification.

How does the work of Joseph Tainter hold relevance for the present?

Was there a "constrained efficient inflation"? Marcus Nunes responds. 

Confidence in the value of higher education, continues to decline.

A new healthcare journal looks at some of healthcare's most pressing challenges.

Veterinarians face some of the same supply side problems as physicians.

"Will interest rates eventually revert back to pre-pandemic norms?"

Timothy Taylor highlights a life spent in productivity research. 

What if marginal costs and calculations aren't really relevant anymore?

It's hard to fathom how Germany has deindustrialized in recent years.

Skills polarization has come to China. Yet neither China or the West has begun to address it.

Rural people in the U.S. have struggled to maintain healthcare access.

Some notes from an interview with Robert Solow.

A great essay about "great work".

I'd never thought about increased levels of physical pain during the Great Recession, but it makes sense.

Labour shortages will ultimately change the nature of rural farming.

Visualizing global livestock densities.

Wrap Up for June 2023

Service sector companies are less likely to use tax cuts in ways that promote growth and investment capacity.

Can China transition from its local real estate patterns to more closely resemble developed countries?

Brian Potter highlights the "golden age of the power industry" (Part II).

Would a recovery of real wages pose problems for needed reductions in inflation?

Modern schooling was built to foster national identities, democratic civic engagement and economic development, rather than local community engagement and support.

Banking has adapted since the Silicon Valley Bank's demise.

Farmers are starting to return to the integration of forest and pastureland.

"You can't tell how much someone earns simply by looking at their home address."

Expectations play a more important role in inflation today, than was once the case.

The U.S. budget deficit has reached a point it is starting to reduce living standards.

The current mediocre GDP growth with its unusual component of labour scarcity, might be a result of two current trends: secondary market services sector dominance, in a historical moment when relatively more services sector labour is required due to a growing wave of retiring baby boomers. Which could also explain why some now expect a full-employment recession.

Oil producers are learning to avoid the boom and bust patterns of yesteryear.

The UK has recently faced declining living standards.

A 2023 map for economic freedom. Also, countries with good options for lithium production.

Homeschooling is becoming more diverse in the United States.

The productivity slowdown in Europe is different from what has transpired in the U.S. Also, part 2.

The constituency for smaller budget deficits is small indeed.

Inflation also involves grief processes which must be dealt with.

J.W. Mason responds to a paper by Daniela Gabor re industrial policy.

More on the electric power grid (part III). Part IV. And, grid reliability has been less of a problem in other countries.

Supply chains in the U.S. are starting to heal.

"Market" or "government" labels tend to be imprecise when it comes to actually getting things done.

Income inequality has increased within occupations.

Why does dollar strengthening cause problems for the global economy?

Consumer demand is causing inflation to rise, not corporate profits.

"Real manufacturing construction spending has doubled since the end of 2021."

How might weight gains compare to price gains?

The economy seems to be doing fine. So why aren't people "feeling" it? Plus, Canada has a strong immigration strategy. Now it just needs to build more housing.

The urban wage premium has declined.

Wrap Up for May 2023

ChatGPT was actually more accurate and empathetic than the doctors.

I was interested in the sixth chapter of this eBook as it explores issues surrounding rural healthcare markets.

It's not yet clear how AI can benefit healthcare at a basic level.

A debate on the $250,000 deposit insurance ceiling.

Imagine if rural communities in the U.S. had viable non formal learning centers such as this. Instead, taxpayers are still expected to support local educational institutions which - although they hold value, don't emphasize practical survival methods or local social connections.

What makes industrial policy today different from the past?

"Are banks inherently fragile?"

Immigration has proved a lifesaver for rural citizens who otherwise struggle to access local physicians.

"Austerity" doesn't have to be a dirty word this time.

Recession? The most important monthly indicators remain strong.

Rising interest rates are still being confused with monetary tightening.

What work is most exposed to ChatGPT?

There are still risks in the banking system.

Brink Lindsay begins to explore definite positive actions.

Two factors particularly account for the possibility of long term inflation.

The economics profession has a class problem.

Debt default would erode dollar dominance.

Diane Coyle reviews Seven Crashes by Harold James.

Encouraging "doing business" is not the same thing as economic reform.

Has progress slowed, or does it just manifest differently now?

Brink Lindsey considers ways that life could ultimately be made more affordable.

Robert Lucas: His greatest strength was asking good questions, which in turn motivated people to find solutions. Timothy Taylor highlights some of his thoughts on economic growth. In particular, he made people think about general equilibrium differently. Plus, Thomas Sargent highlights recollections of time spent with Lucas.

The productivity potential of AI.

A larger framing for fiscal burdens.

Jeanna Smialek has written a new book on the recent evolution of the Federal Reserve.

There's a resurgence in manufacturing across the U.S.

Martin Wolf recommends five books on the world economy.

What if no debt ceiling crisis actually exists?

Might low inflation return? It's certainly a possibility.

What may transpire this time instead of a recession.

Decoupling is inevitable. What will be changed? Also, an interview with Dan Wang.

David Beckworth highlights a paper re 400 years of central bank balances.

Dan McDowell details the international backlash against the dollar in a new book.

There's a 1949 electrical transmission grid map in this Construction Physics post. What especially stood out to me was an area in East Texas which didn't yet have lines. Many relatives from both sides of my family were - at the time - living here.

"Furman and Bernanke on NGDP as an indicator."

The geography of remote work is still evolving.

If globalization is "dead", what happens to productivity?

Michael Strain on the debt ceiling debacle.

How effective is current macro data for real GDP and productivity measurement?

Markets as knowledge ecosystems.

Women hold many of the jobs which could be affected by AI.

Full-reserve banking is not a good option to address banking failures.

R** and financial stability.

Kevin Erdmann highlights his recent papers.

Wrap Up for April 2023

The Fed Put was invalidated. But what does that mean?

A current visualization of global dollar dominance.

These industrial book recommendations aren't guides, rather, they are different ways of understanding the world.

"...across all measured countries, the real price of housing has increased nearly 30% on average since 2010."

Building construction costs are only about 25 percent of their total lifetime expenses, yet this is often not adequately considered.

Auto inflation is still with us.

"Financial dominance and fiscal dominance make the Fed's job harder."

An argument from Niskanen for affordable manufactured housing.

It's been a meaningful labour market recovery.

When "Made in America" goes too far.

Peter Turchin has a fairly simple model of societal breakdown.

Why isn't Europe ready to be a "third superpower'?

When it comes to knowledge accessibility, industrial policy is as problematic as ever. But for different reasons this time.

"Greenways can be a simple low-tech solution to complex intersecting issues."

U.S. national debt has an interesting history.

"The Role of Wages in Trend Inflation: Back to the 1980s?"

A debt default could have considerable macroeconomic effects. The possibility of debt default was also discussed in this FOMC 2013 meeting.

How will Republicans move forward?

Things have actually changed for millennials, and for the better.

Some cultural and geographic aspects of gun violence.

A simpler way to think about monetary policy.

There's more to regulations than meets the eye.

"...stopping supervolcanoes from erupting is something we as a civilization are likely underinvesting in." Especially since doing so could provide promising sources of electricity.

Does Joseph Tainter's model suggest potential societal solutions?

Might federal lands pose housing opportunities?

The debt limit drama has worse implications than millions of citizens currently recognize.

"The US banking system is still stressed."

"Software only nibbled around the edges of the world."

Wrap Up for March 2023

Presently, China globalizes its auto sector as the U.S. (temporarily?) caters mostly to higher income groups.

On the decline of knowledge diffusion.

What is really responsible for the failures of Britain's economy?

Chronic loneliness alters the brain in unfortunate ways.

Lack of housing access is the primary cause of homelessness.

Monetary Policy Report from the Fed dated March 3, 2023.

A visual of the world's forests.

Nearly one quarter of U.S. mortgages originated in 2021.

Noah Smith reflects on the 2000s.

Why isn't low inflation an alternative to quantitative easing?

It didn't take long to reduce the debt/GDP ratio.

More (Macro) musings on the current state of the economy.

Keeping NGDP stable continues to be the best way to manage inflation.

Noah Smith provides details of the SVB bank run. And a take from Adam Tooze. Joseph Politano explains the Fed's quick actions. 

The real bailout story is about much more than SVB liabilities. The Fed's new collateral treatment is unsettling to some since it represents a regime change. However, Joseph Politano notes that the program is but a small part of present totals, and it might even end up stigmatized. In all of this, there has also been confusion regarding moral hazard.

Adam Tooze highlights various sources regarding the banking crisis.

Many young people in the U.S. now face auto loan problems.

Douglas Diamond explains how SVB violated basic tenets of sound banking.

Why did other banks come to First Republic's rescue?

Still, what if the debt ceiling debacle turns out to be worse than the bank crisis?

Or, what if the U.S. uses an inflation "tax" in a long proxy war with China?

With greater nominal stability, banks would have fewer problems overall with their balance sheets.

Ricardo Reis provides helpful references for dollar swap operations.

Private school choice is not always an option for rural counties in Texas. Ultimately we'll need a new approach for local education, one that is not only economically sustainable for populations as a whole, but also takes student preferences into consideration. 

On recent declines in bank asset values.

Banks have not responded quickly enough to QT and QE on the part of the Fed.

David Beckworth discusses the SVB collapse with Steven Kelly.

"The 1950s was an anomaly."

What countries hold the most U.S. debt?

What makes it possible for banks to "create money"?  Scott Sumner explains profit maximizing and non profit maximizing factors. 

Since high costs and immigration restrictions get in the way of semiconductor production in the U.S., why not encourage the more optimal conditions in Canada?

Cities are trying new approaches for extreme flooding events.

Tyler Cowen notes how our living history is rapidly changing.

Younger people are primarily driving less for economic reasons. Younger people also account for a considerable amount of the decline in U.S. life expectancy.

A failure to raise the debt ceiling is more dangerous than government shutdowns.

It's time to get serious about budget reform.

In real estate, there's a new east-west divide.

It turns out some of that "robust" hiring activity was actually an illusion.

Scott Sumner provides a link in this post to a free copy of his new book, Alternative Approaches to Monetary Policy.

An agenda from Niskanen Center for abundant housing.

Higher interest rates will be needed as a component of future Fed stress tests.

NPR highlights the "Shorter Lives" study.