Category: Current Affairs
After I cited low ten-year securities yields, Arnold asked for my basic model of inflation, here was my first email:
- Price level dynamics and money supply processes are murky, at least in recent times
- The median voter hates inflation
- The Fed won’t let inflation happen
…is my model.
I would add a dose of “inflationary pressures really do seem to be distributed pretty unevenly.”
End of email! Here was my second email to Arnold:
I think the Fed knows the true model in gross terms.
I also think there is a good chance the Fed will create a recession in limiting inflation.
But look at Japan. The EU. Even Italy. It’s not just the US.
Temporary inflation pressures all over the place, due to Covid and post-Covid adjustments. No fiscal financial crises. No long-term inflationary expectations of much note. Not in the developed nations.
The stock of saved wealth is now quite high relative to debt and deficits, especially if you count human capital.
So both the basic model and the markets predict no catastrophe, and also no run-away inflation. And central banks know how to boost the demand for money when needed.
Seigniorage returns from inflation are especially low in the contemporary environment, checking another motive for inflation. No “Assignats” revenue is in the works here.
I just don’t see what we’ve got “in the toolbox” to override all of that.
End of email! I should note that I agree with Summers that inflation is higher than it needs to be, that is bad, and it is because we overshot on our combined monetary/fiscal response.
I’ll also repeat my standard challenge: are you short the long bond? Are you buying those puts? I’m not so convinced if all you’ve got is “I’m not buying so many equities any more!”
Here is the audio and transcript. Here is part of the summary:
Zeynep joined Tyler to discuss problems with the media and the scientific establishment, what made the lab-leak hypothesis unacceptable to talk about, how her background in sociology was key to getting so many things right about the pandemic, the pitfalls of academic contrarianism, what Max Weber understood about public health crises, the underrated aspects of Kemel Mustapha’s regime, how Game of Thrones interested her as a sociologist (until the final season), what Americans get wrong about Turkey, why internet-fueled movements like the Gezi protests fizzle out, whether Islamic fundamentalism is on the rise in Turkey, how she’d try to persuade a COVID-19 vaccine skeptic, whether public health authorities should ever lie for the greater good, why she thinks America is actually less racist than Europe, how her background as a programmer affects her work as a sociologist, the subject of her next book, and more.
Here is one excerpt:
COWEN: Max Weber — overrated or underrated as a sociologist?
TUFEKCI: Part of the reason he’s underrated is because he writes in that very hard-to-read early 19th-century writing, but if you read Max Weber, 90 percent of what you want to understand about the current public health crisis is there in his sociology. Not just him, but sociology organizations and how that works. He’s good at that. I would say underrated, partly because it’s very hard to read. It’s like Shakespeare. You need the modern English version, conceptually, for more people to read it.
I would say almost all of sociology is underrated in how dramatically useful it is. Just ask me any time. Early on, I knew we were going to have a pandemic, completely based on sociology of the moment in early January, before I knew anything about the virus because they weren’t telling us, but you could just use sociological concepts to put things together. Max Weber is great at most of them and underrated.
COWEN: Kemal Mustafa — overrated or underrated?
TUFEKCI: Why? My grandmother — she was 12 or 13 when she was in the Mediterranean region — Central Asia, but Mediterranean region, very close to the Mediterranean. She was born the year the Turkish Republic had been founded, 1923, and she was 13 or so. She was just about to be married off, but the republic was a little over a decade — same age as her. They created a national exam to pick talented girls like her. The ones that won the exam got taken to Istanbul to this elite, one of the very few boarding high schools for girls.
The underrated part isn’t just that such a mechanism existed. The underrated part is that the country changed so much in 13 years that her teacher was able to prevail upon the family to let her go. To have a 13-year-old be sent off to Istanbul, completely opposite side of the country, to a boarding school for education — that kind of flourishing of liberation.
I’m not going to deny it was an authoritarian period, and minorities, like Kurds, during that period were brutally suppressed. I can’t make it sound like there was nothing else going on, but in terms of creating a republic out of the ashes of a crumbling empire — I think it’s one of the very striking stories of national transformation, globally, within one generation, so underrated.
There are numerous interesting segments, on varied topics, to be found throughout the dialog.
We have vaccine abundance in the United States but not test abundance. Germany has test abundance. Tests are easily available at the supermarket or the corner store and they are cheap, five tests for 3.75 euro or less than a dollar each. Billiger! In Great Britain you can get a 14 pack for free. The Canadians are also distributing packs of tests to small businesses for free to test their employees.
In the United States, the FDA has approved less than a handful of true at-home tests and, partially as a result, they are expensive at $10 to $20 per test, i.e. more than ten times as expensive as in Germany. Germany has approved over 50 of these tests including tests from American firms not approved in the United States. The rapid tests are excellent for identifying infectiousness and they are an important weapon, alongside vaccines, for controlling viral spread and making gatherings safe but you can’t expect people to use them more than a handful of times at $10 per use.
We ought to have testing abundance in the US and not lag behind Germany, the UK and Canada. As usual, I say if it’s good enough for the Germans it’s good enough for me.
Addendum: The excellent Michael Mina continues to bang the drum.
As the pandemic evolves, so is the tendency of people to take moral positions they would not normally endorse. Most notably, many left-wing commentators are becoming moral scolds, stressing ideals of individual responsibility.
Consider these words:
“So it’s time to stop being diffident and call out destructive behavior for what it is. Doing so may make some people feel that they’re being looked down on. But you know what? Your feelings don’t give you the right to ruin other people’s lives.”
If I had read that paragraph two years ago, I might have thought it was a conservative columnist lamenting inner-city crime, or perhaps complaining about the behavior of homeless people in San Francisco. But no: It is Paul Krugman discussing those who will not get vaccinated or wear masks. He calls it “the rage of the responsible,” and it is emblematic of a broader set of current left-wing attitudes, most of all toward the red state responses to the pandemic.
To be clear, I agree with Krugman’s point, and I frequently express similar sentiments. All the same, I wonder about the rules here. When exactly are “the responsible” allowed to express their quiet rage, on which issues and on which terms?
The alternative to this rage is the language of victimhood. For example, many on the left tend to portray the homeless as hostages to circumstances largely beyond their control: the high cost of housing, unjust eviction policies, a tattered social welfare state, perhaps mental illness or drug addiction.
There is some truth in all those hypotheses. Still, when it comes to the homeless, am I also allowed to express the quiet rage of the responsible? Or is only the rhetoric of victimhood allowed?
There is no doubt that homeless people suffer very real injustices. But it could be argued that allowing oneself to become homeless is a greater abdication of responsibility than refusing to be vaccinated. It is also worse for your health and bad for the community, as anyone from San Francisco can tell you.
One rejoinder might be that a pandemic is different. Maybe so, but if this were the 1980s, during the peak of the HIV-AIDS epidemic, one could imagine a Moral Majority advocate expressing sentiments similar to Krugman’s about gay men who engage in unsafe sex. Today such a view would be considered uncouth, at least in the mainstream media, and that’s not only because there are now effective treatments against HIV-AIDS. This kind of scolding has mostly gone out of fashion, especially when the recipients have been victims of prior or current social discrimination.
Or consider the question of suicide. There was a time in America when it was common to view suicide as a violation of Christian doctrine. Now there is largely sympathy for those who have killed themselves. Is this change for the better? Maybe, but it’s not clear that this issue has been given serious evidence-based consideration. Scolding sometimes helps to limit the number of wrong deeds, and everyone does it to some degree, even when it is sometimes not appropriate.
Then there are alcohol and drug abuse, which have some features of epidemics in that they exhibit social contagion. Your drunkenness, for example, on average encourages some of your friends to experiment with the same. But scolding alcoholics also is out of fashion, even though the social costs of alcohol abuse are extremely high, especially when considered cumulatively. As a teetotaler, I sometimes express my own quiet rage of the responsible, and my reaction is mostly considered a strange curiosity.
It is not only left-wing thinkers who have ended up in strange ideological positions. Governor Ron DeSantis of Florida, a conservative Republican and one of America’s leading right-wing politicians, has essentially expanded public health-care coverage in his state by setting up mobile units to administer monoclonal antibodies to Covid-19 sufferers. I’m all for that. At the same time, I notice he continues to oppose Medicaid expansion in Florida.
What explains the attitudinal shifts we are seeing? One possibility is that left-wing thinkers are getting more puritanical and are more comfortable in their new role as scolds, including with respect to sex and vaccination and mask-wearing. That would leave Trumpist Republicans as the defenders of medical choice and the sexual libertinism of the 1960s and 1970s.
Another possibility, not mutually exclusive, is that few of us are intellectually consistent, and so our scolding is increasingly shaped by affective political polarization. The left will scold the practices of Trump supporters, while the right will scold the woke, and views on any particular issue will be adjusted to fit into this broader pattern. If an issue is not very partisan, such as alcohol abuse or suicide, scolding simply will decline.
Here is an article on the movement to treat vaccinated patients first. Fine by me! But what exactly are the egalitarians supposed to say? Is meritocracy now allowed to rear its ugly head? Or do no other social outcomes have anything to do with your merit? Only this one? Really?
“A random observation, in four sentences:
- I continue to see huge numbers of Australians (e.g. politicians like Dan Andrews, the Victorian Premier, and also huge numbers of random people on my facebook) say “if we don’t continue to lockdown, the health system will be overwhelmed; we have no choice”.
- Most of the at-risk population in Australia has already been vaccinated with at least one dose, which reduces hospitalisation/mortality risk by something like 70% (or perhaps even better in practice; the SMH today reports 94 people in ICU, 83 unvaccinated, 11 have one dose, and ~50% of adults have 1 dose and obviously are very negatively selected on age)
- The US never saw widespread overwhelming of the hospital system (lots of media reports of “hospitals in X about to hit capacity”, but it to date has always been one of those “just wait two weeks” things)
- People in Australia widely believe the quality of the US hospital/healthcare system is substantially inferior to the single payer hospital/healthcare system in Australia
It would seem extremely difficult for these four things to mutually coexist.”
TC again: Here is a short video from Australia, how about some AstraZeneca and a bit of testing regime instead? GG is right that the video resembles a bad dystopian science fiction movie from past decades. You will note that some segments of the American intelligentsia are so invested in criticizing the U.S. “red state” approach, and so warm toward collectivist mandates, that they won’t raise a peep about what is going on here.
“The Tax Policy Center estimates that last year nearly 107 million households, or about 61 percent, owed no income tax or even received tax credits from the government,” Howard Gleckman, a senior fellow at the Tax Policy Center, noted last week. “The spike is likely to be temporary, however. The share of non-payers will decline to about 102 million or 57 percent this year.”
n recent pre-pandemic years, the percentage of tax returns with no income tax liability has been closer to 44 percent in Tax Policy Center’s figures, though it has trended upward over time.
“The percentage of filers with no income liability has generally increased from where it was nearly 40 years ago,” the National Taxpayers Union Foundation reported in 2018. “This trend is indicative of a progressive income tax code under which higher-income earners pay a larger share of taxes while low-income earners are generally shielded from significant income tax liabilities.”
Here is more from Reason, via Ray Lopez. In so many other areas, the pandemic has accelerated trends that already were present…
Germany has decided to stop using the coronavirus infection rate as its yardstick for deciding if restrictions should be in force to contain the spread of the virus, Chancellor Angela Merkel said on Monday.
The seven-day incidence rate was a key measure in determining whether restrictions could be imposed or lifted, with infection thresholds of 35, 50 and 100 per 100,000 people triggering the opening or closure of different parts of society.
But as the number of people who are fully vaccinated rises, calls have grown for the incidence rate to be dropped as a measure to determine whether lockdowns are necessary.
“We decided today that we no longer need comprehensive protective measures when the number of cases or incidence is 50, because a large proportion of the people are vaccinated,” Merkel said.
When will California do the same? Here is the full story.
Trade will be a particular source of difficulty. The last IMF report on the country prior to the collapse of the government counted imports at about $7 billion annually, a huge fraction of Afghanistan’s $19 billion GDP. Imports exceeded exports by about a factor of five. While that high level of imports was sustainable under the unusual circumstances of the U.S. presence, it won’t be sustainable going forward.
So on top of its other problems, Afghanistan will need to balance its trade deficit, a deeply painful process that will, one way or another, reduce the number of imports available to Afghan civilians. Given that its currency reserves have been frozen to prevent the Taliban from accessing them, it will need to balance its trade deficit quickly, without any adjustment period.
That is a key theme of my latest Bloomberg column, here is one excerpt:
In the U.S., President Joe Biden’s administration is now pushing third booster shots for people who already have been vaccinated. That might be a good idea, but it too creates additional uncertainty for travel and migration — and for social interaction more broadly. If three doses are so important, should people be allowed to travel (or for that matter interact indoors) with only two doses? The bar is raised yet again.
Of course the issues do not end with the third dose. If the efficacy of the second dose declines significantly in less than a year, might the same happen with the third dose? How long before four doses are necessary, or maybe five? Or what if yet another significant Covid variant comes along, and only some people have a booster dose against that strain? What then counts as being “sufficiently vaccinated”?
Many Americans seem to be keen to get their third dose, but by the nature of counting that number is fewer than the number willing to get two doses. Furthermore, many people might just tire of the stress of dealing with an ongoing stream of obligatory booster shots and stop at one or two.
The sad reality is that the “two-dose standard” may not last very long, whether abroad or domestically (the same is true of the even weaker one-dose standard with Johnson & Johnson and AstraZeneca). Vaccine mandates will become harder to define and enforce, will be less transparent, and will probably be less popular.
If you tell people that three doses are needed for safety, but two doses are enough to get you into a concert or government building, how are they supposed to sort out the mixed messages? It is not obvious that enough people will get the third dose in a timely manner to make that a workable standard for vaccine passports.
Add to that the problems with the Johnson & Johnson vaccine, which originally the government urged people to get. Now those people are not being given comparable chances to obtain boosters — in fact, they are not yet being given specific guidance at all. Are they orphaned out of any new vaccine passport system, or will (supposedly dangerous?) exceptions be made for them? Or do they just have to start all over?
The big international winner from all this is likely to be Mexico, which has remained an open country and is not relying on vaccine passports. In general I do not admire Mexico’s lackadaisical Covid response, but the country may end up in a relatively favorable position, most of all when it comes to tourism and international business meetings.
As for the U.S. and Europe, the temptation to escalate required safety measures is understandable. But the previous vaccine standards were largely workable ones. If they are made tougher, they might break down altogether.
Here is the source. The surprises are to me how early the plunge came, how in percentage terms it appears manageable (0.013 to 0.0124 is noticeable but not earth-shattering), and the rebound at the very end. Caveat emptor of course, and almost certainly these markets have a low level of liquidity and possibly are manipulated as well.
About half is about India, including on how to construct an ideal India trip and also on the legacy of British colonialism. The other half is his very careful, memory-rich questions about earlier MR posts. I was happy with how it turned out…
An example of Islamist governance can be found on the stretch of road from Kabul to the Mile 78 border crossing in south-west Farah province that borders Iran.
The road has more than 25 government checkpoints and a fee is charged at multiple points on the journey. By contrast, the Taliban who police the same road have far fewer checkpoints and give a receipt, so only a single payment is necessary.
Ibraheem Bahiss, an Afghanistan consultant at International Crisis Group, said the Taliban sought to portray themselves as better administrators. “Increasingly they began co-opting government infrastructure to offer [improved] service deliveries,” said Bahiss, explaining that the Taliban in some areas ensured that teachers and nurses showed up to work.
In recent years, the Taliban has widened its tax base from centuries-old taxes of oshr, a one-tenth tithe of harvest produce, and zakat, a religious tax of 2.5 per cent of disposable income for the poor, although collection is often lower.
In Nimroz province, levies on transit goods such as vehicles and cigarettes formed 80 per cent of Taliban revenues, ODI research concluded.
Illegal mining and taxes on imported fuel are further sources of funds. Taliban earnings on fuel imported from Iran were as high as $30m last year, according to the Alcis consultancy.
Here is the full FT story. You will note that the “bandits” side of the Taliban are able to raise this revenue, in part, because Afghanistan suffers from the misfortune of being a landlocked country. With sea routes as a possible alternatives to goods and services, such fiscal systems would be harder to pull off, for both the Taliban and the previous government, I might add. Landlocked countries often have it tough. (By the way, much of the rest of the article considers drugs as a revenue source.)
Various web sources, but none of this seems controversial:
1. US GDP is now higher, in fact a fair bit higher, then when the pandemic began.
2. US labor force participation is about 1.5% lower than when the pandemic began.
Was there really slack to the tune of a few million people in Jan of 2020?
Has inflation really changed enough to make the GDP numbers misleading?
Has total factor productivity improved that much in that time, under those stresses?
Or is this all a sign that the structure of the economy is more stratified than we think – that there are millions of people in more-or-less filler jobs who can be cast out and the economy just keeps on running along? Yes, there are all sorts of reports of labor shortages, and all manner of supply chain hiccups which seem to often be associated with off shoring, but general activity is still high. (Or is it? Are the numbers reporting “vapor GDP?” – or are the inflation adjustments really out of whack so real GDP is not what we think it is?)
That is all from Bryan Willman.
The fact that they are sold out is perfection.
Hat tip: Paul Novosad.