Category: Current Affairs
Mary C. Daly understands the median voter theorem
Ms. Daly…has shifted her tone particularly dramatically in recent weeks…
As recently as mid-November, she had argued that the Fed should be patient in removing its support, avoiding an overreaction to inflation that might prove temporary and risk unnecessarily slowing the recovery of the labor market. But incoming data have confirmed that employers are still struggling to hire even as consumer prices are rising at the fastest clip in nearly 40 years. Rising rents and tangled supply chains could continue to push up inflation. And she’s running into more people like that woman in Walgreens.
“My community members are telling me they’re worried about inflation,” Ms. Daly said last week.
Here is the NYT story, and note she is not the most right-leaning member of the FOMC. This, in a nutshell, is why I think inflation will converge to a reasonable level, albeit with a possibly high degree of pain along the way.
Texas, Utah, and Idaho fact of the day
The Texas population grew by about four million people in the past decade—far more than any other state in raw numbers, and enough as a percentage to make it the third-fastest-growing state in the nation over that period, behind Utah and Idaho.
Here is the full story, mostly about Texas. Mobility trends are one simple way to try to predict how America will evolve. For the pointer I thank the excellent Samir Varma.
What should I ask Sebastian Mallaby?
Sebastian Christopher Peter Mallaby (born May 1964) is an English journalist and author, Paul A. Volcker senior fellow for international economics at the Council on Foreign Relations (CFR), and contributing columnist at The Washington Post. Formerly, he was a contributing editor for the Financial Times and a columnist and editorial board member at The Washington Post.
His recent writing has been published in the New York Times, the Wall Street Journal, and the Atlantic Monthly. In 2012, he published a Foreign Affairs essay on the future of China’s currency. His books include The Man Who Knew (2016), More Money Than God (2010), and The World’s Banker (2004).
I am also a big fan of his new and forthcoming book on venture capital, namely The Power Law: Venture Capital and the Making of a New Future.
So what should I ask him?
Zvi’s Omicron post #7
But the main uncertainty that I’m now wondering about, that feels central, is how we will react.
What will happen when the rice grains on the chessboard suddenly get fully out of hand, stuff hits the fan and the hospitals overflow? Not if. When. How will governments react? How will the people react?
Do read the whole thing, recommended.
In which ways does inflation harm the poor?
That is the topic of my latest Bloomberg column, here is one bit:
One major factor: The poor is the socioeconomic group that finds it hardest to purchase a home, and real estate seems to be one of the best inflation hedges. U.S. real estate prices have been on a tear for some time, including through the recent inflationary period…
The poor also save less, including as a share of their incomes, because they have to spend a relatively large percentage of their incomes on necessities. That means they have smaller buffers against many kinds of changes and uncertainties, including those of inflation.
Some researchers have referred to inflation as a “regressive consumption tax,” because cash balances are so often the pathway to consumption for poorer income groups. Poorer individuals also are less likely to have cash management accounts and other asset holdings that might partially insulate them from the losses of inflation.
And:
Probably the strongest argument in favor of the notion that the poor are less affected by inflation is that inflation can, under some circumstances, lower the real value of debt. If prices go up 7%, and your income goes up 7%, all of a sudden your debts — which typically are fixed in nominal value — are worth 7% less.
This mechanism is potent, but it assumes that real wages keep pace with inflation. Right now real wages are falling, and with higher inflation may continue to do so. Furthermore, many poor people roll over their debts for longer periods of time. Repaying those debts will eventually be cheaper in inflation-adjusted terms, but not anytime soon.
I’ve been focusing on the U.S., but elsewhere in the world the general correlation is that high inflation and high income inequality go together. Correlation is not causation, but those are not numbers helpful to anyone who wishes to argue that inflation is a path to greater income equality. Have very high levels of inflation done much for the poor in Venezuela and Zimbabwe? And if you ask which group would benefit from an improvement in living standards prompted by higher rates of investment, as might follow from a period of stability — it is the poor, not the wealthy.
There is further content at the link.
My Conversation with Ray Dalio
Here is the audio and video and transcript. Here is part of the CWT summary:
Ray joined Tyler to discuss the forces that will affect American life in the coming decades, why we should be skeptical of the saliency of current equities prices, the market as a poker game, the benefits and risks of the US dollar as the world reserve currency, why he thinks US inflation will not be transitory, the key to his success as an investor, how studying the Great Depression enabled him to anticipate the 2008 financial crisis, Bridgewater’s culture of radical transparency, the usefulness of psychometric profiles, where the United States is falling short most in terms of moral character, his truth-seeking process, the kinds of education crucial to building a successful dynasty or empire — and what causes them to fail, how transcendental meditation helps him be creative and objective, what he loves about jazz music, what we undervalue about the ocean, why he loves bow-hunting Cape Buffalo, and more.
Here is one excerpt:
COWEN: If we think about macroeconomic cycles, Christina Romer claims a lot of downturns are the result of Fed contractions. Jim Hamilton claims that some downturns are the result of high oil price shocks, and you have a theory of debt cycles. If you’re just trying to apportion out mentally, how many of the cycles are Fed contractionary shocks? How many are oil shocks? How many are debt cycles? How do you see that landscape?
DALIO: I think that there’s goods and services that exist in a certain quantity, and then there’s a certain amount of money and credit, and they interact. And throughout history, if you have, let’s say, an oil shock that is not accommodated by an easing of central bank policy — in other words, the production of more money and credit — then, what I’m saying, if there was the same money and credit and you had an oil shock, then as oil goes up, something else would have to go down, and it would produce one set of circumstances.
It wouldn’t produce the same inflation. It would produce a consequence, and it would produce a transfer of wealth for those who are selling the oil at a high price — they gain wealth. And it would produce a decrease in the wealth for those who are having to pay that higher price. For example, it would make Middle Eastern countries richer, and it would make American companies and American entities poorer. That’s what would happen in a world in which we were to look at those items, and that certainly can cause a downturn in the economy.
Similarly now, where you can print money and credit, you can create money and credit, and it could have its effects. But to answer your question about do oil shocks or Fed policy have an effect? The answer is both because, for other reasons, the tightening of money and credit reduces demand for things, and as a result of reducing the demand for things, it weakens the economy.
Both an oil price shock or some other shock or a Federal Reserve tightening can cause the economy to weaken. That’s the answer to your question. Then it would have different implications, depending on whether the central banks provided more or less money and credit.
There is much more at the link! And if you would like to donate to support Conversations with Tyler, here is the link.
Omicron in China
China’s efforts to keep the new coronavirus strain out of its borders have failed, with the country reporting its first case of the Omicron variant in the coastal city of Tianjin on Monday (Dec. 13).
The timing and location of the new case are not ideal for China’s leadership. Tianjin is right next door to Beijing, which is due to hold the Winter Olympics in a matter of weeks.
The news coincides with an expanding cluster of cases of the Delta variant in another coastal province, Zhejiang. The outbreak has seen at least a dozen publicly traded companies immediately suspend production in the province, according to a Guardian report.
Here is the full story. Casualties issues aside (which remain unclear), this development may also be of considerable import to the political economy of China, a country that has promised near-zero Covid to its citizens, and derived legitimacy from its degree of success so far. Yet China has low levels of natural immunity, and the effectiveness of its vaccine investments to date remains uncertain against Omicron, or for that matter against Delta. And here is The Zvi’s update on Omicron more generally.
Emergent Ventures winners, seventeenth cohort
Caleb Watney and Alec Stapp, to found a think tank related to progress studies.
Joe Francis, a farmer in Wales, to write a book on the economic and historical import of slavery in the American republic.
Ananya Chadha, freshman at Stanford, general career development, her interests include neurology and electrical engineering.
Eric Xia, Brown University to develop word association software and for general career development. He is “making a metaphysical sport” and working on word.golf.
Isaak Freeman, from southeast Austria, in a gap year after high school, general career development.
Davis Kedrosky, undergraduate at UC Berkeley, for economic history and general career development. Home page here, Substack here.
Katherine Dee and Emmet Penney, for general career development including collaboration. Among other topics, Katherine has worked on reimagining tech and Emmett has worked on promoting nuclear fusion.
Grant Gordon, to remedy hunger and nutrition problems in East Africa and also more broadly.
Sofia Sigal-Passeck, Yale University, “Co-founder and Chief Executive Officer of Uniphage, a biotechnology start-up which aims to eradicate bacterial diseases using the combined power of bacteriophages and artificial intelligence.”
Brian Potter, to improve productivity in construction, through both writing and practice. Here is his Substack.
Daniel Liu, attending UCLA, to study computational biology and for general career development.
Molly Mielke, founder and CEO of Moth Minds, a new company to find talent and revolutionize philanthropy: “Moth Minds is building the foundation that enables anyone to start their own grants program based on finding work that gets them excited about the future.”
Here are previous Emergent Ventures winners.
A cautionary note on Omicron
From my email from Ratufa:
I wanted to point out an issue with some of the metrics that are being used to assess the severity of Omicron.
The growth rate of an outbreak impacts the observed ratios of outcomes. Early in an outbreak those ratios will be biased towards lesser severity for faster spreading strains because more severe outcomes take longer to develop.
For example, it takes on average two days to be admitted to an ICU after hospital admission. The SA Omicron outbreak looks to have a growth rate of .21/day and the original Delta outbreak one of .1/day. Based on that we would expect the proportion of ICU admissions to hospital admissions to be ~20% lower [1-e^(-2*.11)] than Delta early in the pandemic. And incidental admissions have the potential to confound that number even more.
The impact on hospitalizations and deaths is more dramatic. Positive tests tend to lead hospitalizations by about 5 days and deaths by 2 to 3 weeks. So we would expect the ratio of hospitalizations to positive tests to be ~40% lower and deaths/positive tests to be ~80% lower than in the delta outbreak holding severity constant. Though both those estimates are quite sensitive to the lag and estimate of r.
The growth effect probably doesn’t explain the majority of the difference in outcomes that have been observed. But it is potentially material. And makes me more skeptical of claims of lesser severity I’ve seen so far.
One scenario for Omicron
That is the theme of my latest Bloomberg column, here is one excerpt:
How will institutions react to a proliferation of cases?
Imagine that a significant percentage of students in a school test positive, but no one is seriously ill. Will that school feel compelled to shut down and move to remote learning?
One possibility is that administrators will realize that virtually everyone is going to catch omicron anyway, articulate that reality to their constituencies, and plough ahead with face-to-face instruction. An alternate scenario is that the mere mention of Covid will prove so scary that closure will be inevitable. After all, how much will be known a month or two from now about the prospects of getting Long Covid from omicron? I am expecting a lot of school closures.
Another habit that will be hard to break is tracking the severity of the virus by counting cases. Until now, cases have been pretty good predictors of subsequent hospitalizations and then deaths. If cases become more detached from bad outcomes, will institutions and authorities be able to respond rapidly to that new reality? By the time they adjust, if they do, omicron might have come and gone.
To those who are inclined to worry, it will be scary how quickly omicron cases accumulate. It might feel as if the apocalypse has arrived, even if a lot of that short-term case activity is simply an acceleration of illness rather than an increase in the year’s total. (How scared would we get if most of the year’s murders happened in the first six or eight weeks of the year?) In any case, hospitals will have to be ready. But it is likely that a lot of health-care professionals might test positive early next year as well.
There is much more at the link.
Solve for the Swiss suicide equilibrium
A 3D-printed capsule is set to “revolutionize” assisted suicide. It may be legally operated in Switzerland. This is according to an expert opinion obtained by Exit International – the organization that developed the “Sarco” machine – and was first reported by Swiss Info.
In 2020, around 1300 people died in Switzerland through euthanasia. They were cared for by the two largest euthanasia organizations in the country: Exit (no connection to Exit International) and Dignitas. The current common method is the ingestion of liquid sodium pentobarbital. After taking the drug, the person falls asleep within two to five minutes before slipping into a deep coma and dying soon after.
The capsule called “Sarco” offers a different approach to a peaceful death, without the need for prescription substances.
“It is a 3D printed capsule that can be activated from inside by the person who wants to die. The machine can be taken to any place to die. This can be in an idyllic outdoor setting or, for example, in the rooms of an euthanasia organization.” (Philip Nitschke)
The capsule is mounted on a device that floods the interior with nitrogen and very quickly reduces the oxygen content from 21 to one percent.
The person feels a little disoriented and may also feel slightly euphoric before losing consciousness. The whole process takes about 30 seconds. Death occurs from hypoxia and hypocapnia, a lack of oxygen and carbon dioxide, respectively. “There is no panic, no feeling of suffocation,” Nitschke added.
Here is the article, via Neville. Whether or not you think this particular device has a future, the point is more general. Technological advances come to many areas, not just the ones that make the cover of Wired magazine.
China fact of the day
The scale isn’t small, and it seems to be rising: “From July to Nov. 15, LGFVs bought 13.38% of land parcels by value across the country, up 4.38 percentage points from the January-to-June period.”
Here is more from Michael Pettis.
Headlines that made no sense until recently
Singapore suspends crypto exchange over spat with K-pop group BTS
Bitget was threatened with legal action by Korean boy band’s agency for promoting digital currency Army Coin
Here is the FT story. On the same front page is “US defence chief warns of China ‘rehearsals’ for attack on Taiwan” and “US says Russia could invade Ukraine in early 2022.” Those have made sense for some while now.
Not the final word, but could be worse…
A more sanguine perspective from Gauteng, the epicenter of Omicron https://t.co/FGWJXCxcwJ by @MRCza @fareedabdullah0 via @PeterHotez pic.twitter.com/0cvsRCvJSk
— Eric Topol (@EricTopol) December 4, 2021
And here is an update on patient profiles from South Africa: they don’t seem to have major oxygen problems.
Bari Weiss interviews me (pre-Omicron)
Here is the link, enjoy!