The Fed’s Year-Ago Achieved Soft Landing:—& Why Our Transitory Inflation Was a Feature, Not a Bug.

Time to Update My Inflation-Talk Talking Points. & so, as of October 8, 2024, the sitch. For my fall round of what-is-the-economic situation talks…
The U.S. economy’s rapid post-pandemic recovery defied expectations, with inflation surprising many. Was it a failure of monetary policy or a triumph of strategic patience? Here’s why I think the Fed’s approach was the right one, relying on Friedrich von Hayek’s economic principles to explain why our transitory burst of inflation was a desirable catalyst for successful recovery & growth.
As of mid-2023, inflation had cooled, and the economy achieved a rare soft landing. This success wasn’t just luck; it was the outcome of the Federal Reserve’s calculated patience in navigating unprecedented supply shocks. Had the Fed acted sooner to tighten monetary policy, it would have unduly constrained the market’s ability to dynamically reallocate resources. Conversely, loosening policy earlier might have risked a return of no-longer-desirable inflation. The careful, strategic patience of Jay Powell’s Fed has proved nearly optimal—a matter of skill, plus lots of luck.

The general belief that the short-run Phillips Curve was flat meant that the sheer magnitude of the reopening inflation came as a substantial surprise to many:

And yet the inflation proved transitory—so transitory that, as far as inflation is concerned, the economy touched down on its soft landing by June 2023, with inflation afterwards bouncing up and down above and below target, but with no statistically significant deviations in either direction to ring any kind of alarm.

Moreover, throughout the inflation, medium-term expectations of future inflation in the bond market remained nailed to where they need to be for the Fed to costlessly attain its 2%/year PCE and 2.5%/year CPI target for the annual inflation rate by simply waiting for supply shocks to die away—in fact, expectations have consistently been a hair low:

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And so:

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Two Cheers for Nate Silver & Co.: Polls, Predictions, & the Persistent Problem of Political Noise

A plea for people to subscribe to and read Nate Silver & Eli McKown-Dawson’s Silver Bulletin <https://www.natesilver.net/p/nate-silver-2024-president-election-polls-model> as a vaccination against all the polling & pundit election bullshit this fall: Why Silver’s election forecasting remains essential amidst the polling-noise election-misinformation tsunami…
Nate Silver’s election forecasts have always revealed an essential truth: the polls don’t change much day-to-day, & almost all breathless stories by reporters, pollsters, & pundits mislead readers into attributing substantive significance to what is overwhelmingly likely to be mere statistical noise. Before we can even start to try to shift away from horse-race political journalism to public-policy and real life-impact political journalism, we need to get many more people reading the Silver Bulletin…

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I find Nate Silver these days to be annoyingly and gullibly tech-bro adjacent, hence misleading once he gets out of his wheelhouse.

But Nate Silver in his wheelhouse!

Pay attention, because this is important: I find him—I still find, as I have long found him—an indispensable guide to keeping a sense of proportion in this election fall. It is true that if you follow Nate Silver, you find yourself obsessing about election polls. But you will only obsess about election polls for about four minutes a day. That is what it will take you, reading Silver and McKown-Dawson’s daily “Silver Bulletin Presidential Election Forecast” <https://www.natesilver.net/p/nate-silver-2024-president-election-polls-model> to learn that there is, essentially, no news but only olds in the polls: .

Tracking back to when the Silver Bulletin started its model of Harris-Trump at the end of July, so far it has told us:

  • 2024-09-28 to 2024-10-08: Toss-up

  • 2024-09-27: Toss-up (but you would rather be playing KH’s hand in this contest)

  • 2024-09-17 to 2024-09-26: Toss-up

  • 2024-09-15 to 2024-09-16: Toss-up (but you would rather be playing DT’s hand in this contest)

  • 2024-09-05 to 2024-09-14: 3-2 Trump

  • 2024-09-04: Toss-up (but you would rather be playing DT’s hand in this contest)

  • 2024-07-31 to 2024-09-03: Toss-up

  • 2024-07-29 to 2024-07-30: Toss-up (but you would rather be playing DT’s hand in this contest)

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On only seven of seventy-odd days do Silver and McKown-Dawson say that the most recent bunch of polls suggests a little movement in the race—and it is only a little movement. Telling people that almost all of the time the polls are essentially saying very close to the same thing they said yesterday is a valuable service. That “calm down” and “we are ignorant of where the polls are missing the mark” are the most important things for people to get from the polls this year. Silver and McKown-Dawson give them to us. And virtually nobody else does.

Indeed, there is only one thing Silver and Eli McKown-Dawson have said about his average of nation-level and state-level polls that I would take serious exception to.

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BlueSky Is Much Better than Twitter: Ring Lore Edition

I think many more people should come over to BlueSky. I, at least, am having much more fun…

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‪Charlie Jane Anders: My latest newsletter <https://buttondown.com/charliejane/archive/why-are-toxic-superfans-such-a-nightmare-for/> is about the toxic so-called “superfans” who torment Hollywood. Why are they such a problem? Because they have the power to hurt movies and TV shows, but they have zero power to make anything successful. <https://bsky.app/profile/charliejane.bsky.social/post/3l5wsbwqdzd2s>

Brad DeLong: My take on toxic superfans is this:

There is absolutely no reason to believe that the Red Book of Westmarch is at all accurate about the Second Age.

Written in Rivendell under the thumb of Elrond, in the Shire where history scrolls were simply not available, and then edited in Gondor under the watchful eyes of the royal court, it is extremely unlikely that anything even slightly critical of the queen’s father (Elrond) and grandmother (Galadriel) would have ever made it into the book.

Thus The Lord of the Rings: The Rings of Power is likely to have at least as accurate a take on what actually went down in the Second Age of Middle Earth as do the toxic superfans who take The Red Book of Westmarch to be inerrant gospel.

‪Charlie Jane Anders: I love this take so much! Also I’ve been very grateful to mostly escape the haters when it comes to Rings of Power. I’ve been enjoying it just as a fun fantasy show, on its own merits.

‪Annalee Newitz‬: Honestly tired of elf-funded disinformation being reported as news.

‪Tom Doyle‬: The layers of BS had gotten so thick that Gandalf had to play research librarian and find the original documents to figure out for certain which ring was Frodo’s.

Brad DeLong: You win! I mean, wearing one of the nine has pretty clear… effects on your physical and metaphysical form; the three are accounted for; of the seven… how certain is Gandalf that Sauron has three and that four were consumed by dragons?… pretty certain. And there were only twenty Great Rings to start with:

‘How long have you known all this?’ asked Frodo again.

‘Known?’ said Gandalf. ‘I have known much that only the Wise know, Frodo. But if you mean “known about this ring”, well, I still do not know, one might say. There is a last test to make. But I no longer doubt my guess.

‘When did I first begin to guess?’ he mused, searching back in memory. ‘Let me see—it was in the year that the White Council drove the Dark Power from Mirkwood, just before the Battle of Five Armies, that Bilbo found his ring. A shadow fell on my heart then, though I did not know yet what I feared.

I wondered often how Gollum came by a Great Ring, as plainly it was—that at least was clear from the first. Then I heard Bilbo’s strange story of how he had “won” it, and I could not believe it. When I at last got the truth out of him, I saw at once that he had been trying to put his claim to the ring beyond doubt. Much like Gollum with his “birthday-present”. The lies were too much alike for my comfort.

Clearly the ring had an unwholesome power that set to work on its keeper at once. That was the first real warning I had that all was not well. I told Bilbo often that such rings were better left unused; but he resented it, and soon got angry. There was little else that I could do. I could not take it from him without doing greater harm; and I had no right to do so anyway. I could only watch and wait.

I might perhaps have consulted Saruman the White, but something always held me back.’

‘Who is he?’ asked Frodo. ‘I have never heard of him before.’

‘Maybe not,’ answered Gandalf. ‘Hobbits are, or were, no concern of his. Yet he is great among the Wise. He is the chief of my order and the head of the Council. His knowledge is deep, but his pride has grown with it, and he takes ill any meddling. The lore of the Elven-rings, great and small, is his province. He has long studied it, seeking the lost secrets of their making; but when the Rings were debated in the Council, all that he would reveal to us of his ring-lore told against my fears. So my doubt slept—but uneasily. Still I watched and I waited. ‘And all seemed well with Bilbo. And the years passed. Yes, they passed, and they seemed not to touch him. He showed no signs of age…

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Tom Doyle: Yeah, is the implication that Celebrimbor or Sauron might’ve dashed out a few other Great Rings in the chaos that were unaccounted for in the ring poem and Gandalf’s math? The TV series shows the appropriate chaos and destruction of records. And Occam’s razor is a few thousand years in the future.

Brad DeLong: But it is very clear in the Lore—at least the official RBoW Lore—that there were only 20 great rings. There were other rings of lesser power. Instead of Círdan’s ring Narya—the Ring of Flame—you might have the ring Úvanima Ursu—the Ring of Uncomfortable Warmth. Or instead of Galadriel’s ring Nenya—the Ring of Water—you might have Linya Nimpa—The Ring of Slight Dampness.

‪Tom Doyle‬: Ha, I agree—doesn’t seem to be an easy way to retcon Gandalf’s delay in coming to the most likely conclusion. Unless this is part of how the One Ring protected itself—deflecting minds from seeing it for what it is when it didn’t want to be seen. Then Gandalf’s perception becomes extraordinary…


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Sundowning in America: A Series: Part III

Trump on how immigrants have bad genes, and Vance on how state police should keep a menstruation registry…

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Sundowning in America: ChatGPTrump1.0, prompted with a question about a $25,000 first-time homebuyer credit, winds up saying that immigrants have bad genes:

Donald Trump: That [credit] is going to drive the prices up, yeah. Your price is going to be $100,000 dollars more now. No, no, everything they want to do is wrong. First of all, you have to let the private sector do it. You just have to let them do it. She wants to go into government housing. She wants to go into government feeding.

She wants to feed people. She wants to feed people governmentally. She wants to go into a communist party type of a system. When you look at the things that she proposes, they’re so far off. She has no clue.

How about allowing people to come through an open border, 13,000 of which were murderers. Many of them murdered far more than one person, and they’re now happily living in the United States.

You know, now a murderer, I believe this, it’s in their genes. And we’ve got a lot of bad genes in our country right now. They left, they had 425,000 people come into our country that shouldn’t be here that are criminals. And you know one of the worst stats? 325,000 young children are missing. Can you imagine?…

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Sundowning in America: Remember, JD Vance is on record wanting to criminalize abortion nationwide, and to allow state police to establish state-level menstruation registries:

Matt Christy: Sen. Mike Braun said interracial marriage ruling should be left to states: ‘During the press call, [Indiana Senator Mike] Braun [®] had been explaining how he felt Roe v. Wade, the ruling that legalized abortions, should never have been a federal decision and been left to states to decide. A reporter then asked Braun if he applied the same reasoning to decisions like Loving v. Virginia, which struck down state laws that made interracial marriages illegal. Braun responded:

“When it comes to issues, you can’t have it both ways. When you want that diversity to shine within our federal system, there are going to be rules and proceedings, they’re going to be out of sync with maybe what other states would do. It’s the beauty of the system, and that’s where the differences among points of view in our 50 states ought to express themselves”… <fox59.com/indiana-news/sen-mike-braun-s…>


Sundowning in America: JD Vance, remember, was not just a normal “Never Trump” guy, but had turned it up to 11:

JD Vance: ‘On Donald Trump:

  • [He] just so thoroughly failed to deliver on his economic populism (excepting a disjointed China policy)….

  • [He’s] Emperor Trump…. I turned down my appointment from the emperor….

  • I’m a “Never Trump” guy…. I never liked him….

  • I understand where Trump’s voters come from. But I also don’t like Trump himself, and that made me realize that maybe I’m not quite part of either world totally….

  • My god what an idiot….

  • [Trump could be] America’s Hitler… [or he’s a] cynical asshole like Nixon…

  • Mr. Trump is unfit for our nation’s highest office….

  • I can’t stomach Trump. I think that he’s noxious and is leading the white working class to a very dark place….

  • if I [had] fe[lt] like Trump [had had] a really good chance of winning, that I might have [had] to hold my nose and vote for Hillary Clinton….

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Notes ScratchPad: The Presidential Race Is Nearly a Tossup—Meaning That Somebody Has It 80% in the Bag, But Polling Uncertainties Mean We Do Not Know Who

So pay the polls no attention for the next two weeks, and then come back. Plus who really made Biden decide to drop out—it was small & large donors. Plus MOAR. A scratchpad…

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Journamalism: Dan Drezner is very smart and very reliable. He writes:

Dan Drezner: What if October is… Boring?: ‘It’s been a fat-tailed presidential election so far…. An awful lot of Big Events that transformed the 2024 U.S. presidential election…. There has been an awful lot of speculation about which October surprises could tip the election one way or another. This New York Times story by Shane Goldmacher and Reid Epstein <270towin.com/2024-countdown-clock from 48 hours ago represents the perfect distillation of this genre <270towin.com/2024-countdown-clock> of <270towin.com/2024-countdown-clock> story:

“Vice President Kamala Harris has cast herself as a candidate of the future, but she has been yanked back by the problems of the present… war… strike… hurricane… combined to knock Ms. Harris off a message that has been carefully calibrated…”.

You get the idea…. maybe—just maybe—it’s time… to take a breath…. Look at that FiveThirtyEight chart. Even with all of the shocks of August and September, there wasn’t a lot of movement in either direction… <danieldrezner.substack.com/p/what-if-oc…>

Now do not get me wrong. The election is almost certainly not close. If we knew everything about the state of the electorate right now, we would almost surely judge the probabilities as putting it 80% in the bag. But we do not know everything, and in particular we do not know where the systematic polling error lies, and how large it is.

But Dan is right. From our ignorant perspective, it is very close to a tossup, and will probably stay that way down to close to the wire.

Nate Silver and Eli McKown-Dawson right now have it thus:

Nate Silver & Eli McKown-Dawson: Silver Bulletin 2024 Presidential Election Forecast: ‘1:30 p.m., Friday, October 4. Another day… still very little change…. Harris… has a 56 percent chance of winning the election to Trump’s 44 percent chance… [with] a 21 percent chance Harris wins the popular vote but loses the Electoral College… <natesilver.net/p/nate-silver-2024-presi…>

That is all the time you need to spend on the polls. Maybe come back and revisit <natesilver.net/p/nate-silver-2024-presi…> for five minutes in two weeks, or one week if you have anxiety disorder. Otherwise go do other, productive things.

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Public Reason: I think this from Seth Masket is wrong. It was not the “party”, not the professional Democratic politicians and staffers, who successfully pressured Biden to step aside. Biden had, after all, successfully resisted such pressures applied sotto voce in 2022, 2023, and the first half of 2024. What did it was the donors. The massive flight downballot of both large and small donors is what done it. And that was an uncoördinated non-party action—just people giving at all levels deciding that they needed to direct their money elsewhere:

Seth Masket: Did the Parties Decide in 2024?: ‘How well does this model of elite coordination describe what we’ve seen from the two parties’ presidential nominations lately? It did a pretty good job describing how Democrats picked, say, Hillary Clinton in 2016 or Joe Biden in 2020, giving their eventual nominee many structural advantages and nudging other candidates out of contention long before anyone started voting in Iowa or New Hampshire. But it falls well short of describing the much more aggressive version of party activity we saw among Democrats this past July. Even U.S. parties at their strongest have rarely had the kind of muscle needed to push an incumbent president out…. Direct pressure from top party elites… the desertion of many Democratic members of Congress, a decline in public approval, and a widespread consensus… that Biden had massively and viscerally bombed at the June debate… convinced the president to step aside… <hypertext.niskanencenter.org/p/did-the-…>

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Neofascism: It now seems long, long ago that Noah Smith told me that Elon Musk should buy Twitter—either he would destroy it and new and much better things would grow up in the Tweeting space, or he would find for it a profitable business model that would radically improve it as it found valuable things to its user base and so made it more worthwhile. In retrospect, that was a very bad take. Elon Musk appears to have lit $34 billion of his and his investors’ money on fire in order to create a worse misinformation engine, but while the thing is much less salient and has died as a profit-making entity or as an entity providing value to stakeholders, it still exists as a shitposting, misinformation-spreading entity:

Matt Egan: CNN: Elon Musk’s X is worth nearly 80% less than when he bought it, Fidelity estimates: ‘Fidelity discloses what it believes <cnn.com/2024/01/02/tech/fidelity-again-…> is the value of its shares of X, and those estimates serve as a closely watched barometer for the overall health of the company…. Analysts say Fidelity’s plunging price tag for X likely reflects shrinking ad revenue at the company, which no longer publicly releases quarterly financial metrics…. Musk faced a backlash from brands <cnn.com/2023/11/17/tech/lionsgate-suspe…>, some of which halted spending on X, after the billionaire embraced an antisemitic conspiracy theory <cnn.com/2023/11/17/tech/lionsgate-suspe…> favored by White supremacists.

Musk later apologized for what he called his “dumbest” ever social media posting. However, during that apology <cnn.com/2023/11/17/tech/lionsgate-suspe…>, Musk also told fleeing advertisers: “Go f**k yourself”… <cnn.com/2024/10/02/business/elon-musk-t…>

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Neofascism: Every single news outlet should right now be saying this once a week. Hell, they should be saying this once a day. That they are not shows that they are deeply, deeply broken systems and people:

Heather Cox Richardson : October 6, 2024: ‘This morning began with a CNN headline story by fact checker Daniel Dale, titled “Six days of Trump lies about the Hurricane Helene response.” Dale noted that Republican nominee for president Donald Trump has been one of the chief sources of the disinformation that has badly hampered recovery efforts. 

Trump has claimed that the federal government is ignoring the storm’s victims, especially ones in Republican areas, and that the government is handing out only $750 in aid (in fact, the initial emergency payment for food and groceries is $750, but there are multiple grants available for home rebuilding up to a total of $42,500, the upper limit set by Congress). He has also claimed—falsely—that the Federal Emergency Management Agency is out of money to help because the administration spent all its money on Ukraine and undocumented immigrants.

Trump’s lies are not errors. They are part of a well-documented strategy to overturn democracy by using modern media to create a false political world. Voters begin to base their political decisions on that fake image… <heathercoxrichardson.substack.com/p/oct…>

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Neofascism: I do think that Brian Buetler has this absolutely nailed as to what the plan is, what the assignment is, and how many people understand it and are enthusiastically onboard. It reminds me of 2002 in some way—the 45th Fighting Keyboarders have a misinformation mission again!:

Brian Buetler: MAGA’s Hurricane Helene Lies Are A Trial Run For The Election: ‘The through-line is sowing chaos and hurting people for personal gain: When Donald Trump started telling conspicuous lies about the federal response to Hurricane Helene, all of MAGA understood the assignment.

His supporters understood they should spread rumors or fabricate anecdotes consistent with Trump’s claims. They should portray their own confusion as government malice or incompetence. They should claim to have witnessed FEMA abandoning <x.com/jamessurowiecki/status/1842605704…> Republican-heavy regions and illegal immigrants walking away with relief money first hand. They should even use artificial intelligence technology to fabricate images that reinforce these lies.

Elon Musk and Trump’s other ultra-wealthy supporters understood it as their solemn duty to draw as much attention to these lies as possible.

Anyone who sought information about the recovery on social media has been bombarded with them for over a week now; Musk’s Twitter is a particularly prolific font of disinformation, because he spends all day plucking rumor, lies, and innuendo from the stream and retweeting them to is 200 million followers. He takes special care to algorithmically boost this content of his, even to people who aren’t regular Tiwtter users <x.com/jamessurowiecki/status/1842605704…>, and who don’t follow his account…. <offmessage.net/p/maga-hurricane-helene-…>


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Prosperity since 1900: Democratic Presidencies Rule!

Sam Williamson ex-Miami of Ohio & now <http://measuringWorth.com> gives us the numbers, and I reflect on them. Some presidents were really unlucky. For the others, the question, briefly, is this: Why do Democratic presidencies rule—with the exception of Barack Obama’s?
My view: If the true explanation for Democratic presidencies’ ruling is multivariate, we have no chance of finding it. There is one possible candidate univariate explanation: It is that confidence that economic policy will be competent and directed toward full employment is a major key…

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Sam Williamson has revised his data piece on relative American economic performance as measured by real income growth during the different 20th and 21st century presidencies:

The best performances came under Roosevelt, Johnson, Truman, and Kennedy/Johnson. You can argue that good Johnson performance came at the price of creating inflationary problems for his successor, and that Roosevelt should not receive any substantial credit because his terms started at the nadir of the Great Depression and ended in the forced boom of World War II. Those are points, but I have always seen them as greatly overstressed in most of the literature:

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Most of Us Do Not Recognize How Hard the Corrupt Supreme Court Republican Majority, the "New York Times", & so Many Others Are Working to Elect Donald Trump

Yes, and grave moral fault attaches to them all…
Brian Buetler’s analysis of Jack Smith’s prosecution shows that Smith offers not just a criminal case against Donald Trump but a vivid portrait of a neofascist presidency gone rogue—a neofascist movement protected by the corrupt Republican Supreme Court majority, the New York Times, and so many, many others today. Disgraced ex-New York Times honcho Dean Baquet has offered pathetic excuses—”nobody thought that what we did would have consequences”—for his actions in 2016. Nobody is offering any excuses for their actions today…

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This AM we have the smart Brian Buetler:

Brian Buetler: Jack Smith’s Roadmap To Donald Trump’s Corrupt Mind: ‘In addition to placing Trump on trial, he’s teaching Democrats how to think like Trump, and be prepared. Are they listening?… The six Republican justices intervened in extraordinary fashion, first to pause Trump’s criminal proceedings for months, then to provide him the presumption of immunity for any crimes he committed during his presidency… ensur[ing] that Trump would not face trial for attempting a coup before the 2024 election—if ever…. Thanks to John Roberts et al, presidents can break laws that carry criminal penalties with complete impunity, so long as they cook up pretextual public-policy purposes for their violations. If they use their official powers to violate the law for personal gain, they may face legal jeopardy, but only if prosecutors can find evidence of their crimes outside the confines of the executive branch. The only incidental upside is that the official-acts immunity doctrine obligated Smith to lay out his evidence in detail—to demonstrate that Trump’s conduct did not stem from his official duties, and that the government’s evidence does not intrude on intra-executive branch deliberation.

We learn… that Trump blew off multiple direct admonitions from his vice president that they had lost the election legitimately. We also learn that Trump’s decision to resort to mob violence to pressure Pence one final time was premeditated. This evidence may be admissible insofar as their discussions pertained to election certification—a process in which the president has no role, and the vice president has only a ministerial role in his capacity as president of the Senate. By contrast, Smith can also substantiate that when Trump learned Pence’s life was in danger, his response was, “who cares”—but he can’t introduce this evidence at trial, because the witness who provided it was a White House aide, deduced to be Trump’s personal assistant, Nick Luna. That’s where mainstream media enters the picture. Smith’s latest bombshells could have reoriented the whole election around Trump’s efforts to overturn the last one. Instead…

Notice a subtle difference?… <https://www.offmessage.net/p/jack-smiths-roadmap-donald-trump>

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Then-New York Times editor Dean Baquet has claimed that it was all the pollsters’ fault—that if he had known that Donald Trump had had a serious chance of winning the election, his New York Times would have done things “a lot differently”:

I don’t have regrets about the Hillary Clinton e-mail stories…. My God, we were writing stories about Donald Trump harassing women…. I don’t buy that we were tougher on Hillary Clinton than we were on Donald Trump…. I don’t think that anybody had their arms wrapped around the mood of the country that allowed for the election of Donald Trump, including us. I don’t think people—including the New York Times—quite had a handle on the anger, the amount of racial animosity. I don’t think any of us thought that Donald Trump was going to be elected President. Anybody who says they did, I don’t buy it. If I had to do that over again, oh, my God, I would do that very, very, very differently. I mean, we treated Trump seriously. We treated him as an investigative story. But I would have covered the country a lot differently in the months leading up to the election of Donald Trump… <https://www.thewrap.com/new-york-times-dean-baquet-hillary-clinton-email-stories/>

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Let me spell out what Dean Baquet is saying here:

  • I was “tough on Trump”: I made sure that every column-inch critical of Hillary Rodham Clinton was matched by a column-inch equally critical of Donald Trump.

  • But it never crossed my mind he would win the election.

  • So I thought this “balance” would insulate me from criticism for being pro-Democrat before the election.

  • And so I thought I would then be in a much stronger position with more credibility to cover the Hillary Rodham Clinton administration.

  • Anyone who says that they thought Trump might win the election is a liar, and using 20-20 hindsight: “Anybody who says they did, I don’t buy it.”

  • But “my God, I would do that very, very, very differently… a lot differently…”

So Dean Baquet has his excuse—pathetic as it is.

What is the New York Times’s excuse today?

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PROJECT SYNDICATE: Column Draft: For Now, Enjoy the Soft Landing, &—Across All Dimensions—the Amazing Strength of the Post-Plague American Economic Recovery

Remarkable, surprising strength in the American economy’s post-COVID plague recovery. Employment in September, seasonally adjusted, was 326,000 more than we thought last month that employment had been in August. And the unemployment rate—which was 3.8% a year ago and had risen to 4.3% as of July—was back down to 4.1% in September.
Recovery after the COVID-19 plague has, truly, been nothing short of extraordinary. Such resilience underscores the broader strength across the economy—both in income and production—defying repeated fears of recession. As macroeconomic policy navigated through the challenges of shifting demand patterns, inflation, and supply-chain disruptions, the U.S. economy has emerged remarkably strong. Yet there are always questions: Was this soft landing driven by fiscal policy expansion more powerful than expected, by a new post-secular stagnation equilibrium in interest rates with a higher r*, by warranted expectations of future growth from a forthcoming AI-driven boom, or by irrational exuberance yet again? it is always, in macroeconomic forecasting, safe to be a downer Eeyore, for there is always a “challenge”, if not a disaster, anticipated or surprising, rushing towards us as we go through our tunnel of ignorance on the railroad track of time…

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The COVID plague that began in 2020 created a short-run and a medium-run challenge for American economic policy.

The short-run challenge was how to maintain consumers’ incomes and macroeconomic balance in the face of enormous and rapid lockdown- and supply-chain disruption-generated shifts in aggregate supply, neither falling into too big a depression nor goosing the economy with so much liquidity as to cause too much inflation.

The medium-run challenge was that the COVID plague induced a great structural wheel of the American economy away from the purchase of services—especially in-person services—and towards the purchase of durable goods: what happened during the height of the plague was that we crammed a couple of decades’ worth of societal learning about how to use the internet to do our shopping into two years, plus we learned that doing more of our consumption at home backed by our stocks of consumer durables was in many respects a more comfortable way to live.

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WEEKLY BRIEFLY NOTED: FOR 2024-10-04 Th

My weekly read-around…
Only two moments mattered in the vice-presidential debate, and they were both Walz moments; the plague-induced wheeling of the economy towards goods production that made inflation what the market system wanted and needed; Richard Koo says China’s balance-sheet recession” has already started;
very briefly noted; SubStack Notes;
key moments in the vice-presidential debate; Kimberly Clausing & Maury Obstfeld on “The Atlantic” going fully into the tank to misinform about Trump & his tariffs; reviewing William Taylor’s new horses book; Yastreblyansky on the state of the race; Michale Strain (who knows better) doing Trump’s bidding by both-sidesing policy proposals; & weekly briefly noted for 2024-09-28 Sa…

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ONE IMAGE: One of the Two Moments That Mattered in the US Vice-Presidential Debate, as a Meme:

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A Second Image: The Plague-Induced Wheeling of the American Economy Toward Physical Goods Production:

The major thing that made the market system want and need a burst of inflation in order to rebalance aggregate supply across sectors in the aftermath of the COVID plague:

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ONE Video: China’s “Balance-Sheet Recession” Has Already Started:

Richard Koo & Jack Farley

<https://overcast.fm/+AA1cWwqwdks>

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Very Briefly Noted:

  1. War: And so we continue down the path that leads nowhere but the high likelihood of the nuclear destruction of Tel Aviv, Damascus, and quite perhaps more in less than two generations:
    Dan Drezner: The Middle East Earthquakes: ‘The hard-working staff here at Drezner’s World would strongly prefer not writing about the…Middle East…. The October 7th assault and the war in Gaza are just littered with violations of the laws of war; Benjamin Netanyahu is Israel’s leader and if Netanyahu said the sky was blue I would go outside for independent confirmation; Arab allies of the United States behave just as badly as Israel; The Middle East is always the region that brings out the hypocrisy in U.S. foreign policy…. Biden… unwilling to jawbone Israel. Iran…on its back foot. The Arab world…content to… let Israel punish Hezbollah and Hamas, two groups that are almost as despised in Riyadh as in Jerusalem. This leaves Bibi in charge, and Bibi’s primary motivation is staying in power. For now, that means extending… conflict…. [Do] tactical successes translate into strategic stability…. [With] Prime Minister Netanyahu and the Ayatollah Ali Khamenei, strategic stability is not going to happen anytime soon… <https://danieldrezner.substack.com/p/big-developments-in-the-middle-east>

  2. Neofascism: And by now our police are so terrified of going out into the world—especially in rural areas:
    Greg Siskind: ‘While everyone is focusing on this [attempted-assassin with an AK-47] whack job’s political beliefs, I’m also pretty concerned that a guy with 8 previous criminal convictions including for barricading himself inside a business with a gun in Greensboro was able to get his hands on an AK-47… <https://x.com/gsiskind/status/1835478991446176076>

  3. Economics: You won’t find even a hint of this—true—analysis anywhere in the sanewashing press. I talked to three different reporters last week, all of whom who did not know how to write a “comparing the candidates’ economic policies piece”, because the only truthful way to do it would to say “Trump has no economic policy we can identify”, and I got the very strong feeling that their bosses would think that was “unfair”:
    David Dayen: Donald Trump Doesn’t Know What Donald Trump Is Doing: ‘Tariffs are a good example of the fact-free abandon of today’s Republican Party… [and] now comprise [their] entire economic policy… : a cure for every ailment…. Trump’s incoherent-sounding answer at the Economic Club of New York last week about child care was merely Trump seeing tariffs as bringing in enough cash to handle the problem. The way he thinks about this is the way a gangster used to think about protection money: Trump will get rich (oh, and sure, the country will too) by sticking up other countries…. An entire party… [is] in a fact-free zone, [where] words are mashed together to the point of incoherence, and promises can be big and bold without a thought of whether they’re true and correct… <https://prospect.org/economy/2024-09-11-donald-trump-doesnt-know-what-donald-trump-is-doing/>

  4. Economic History: I would not say “probably arose”, I would say “perhaps arose”. I guess it was equally likely a way to get everyone on the same page with respect to what the tasks of the Roman Republic were going to be in the current year. And it was certainly something that was in the “violate this”—as in the destruction of Hasdrubal’s army—and you will readily receive forgiveness if you had a good reason, which strongly suggests to me that it was for coördination rather than an absolute limitation:
    Fred K. Drogula: Commanders and Command in the Roman Republic & Early Empire: ‘L. Postumius… prosecuted and condemned… for using his imperium to coerce his soldiers into working… on his farm…. Cicero accurately called it “stupid” (ἀβδηριτικόν) that Pompey had asked him to take command of Sicily in 50 BC, since he (Cicero) had no authorization… to exercise the imperium that he had received for his Cilician provincia in Sicily…. The consuls… it was not within their authority to determine where or for what purpose they would use their imperium…. The provinciae were almost always military… [but] other… tasks… investigat[ing] suspicious activities… combat[ting] a locust plague…. The provincia… probably arose in the early republic as one method by which the developing state achieved a monopoly of control over the exercise of military authority by its aristocracy. Rather than weaken the effectiveness of their generals… the Romans instead chose to define and limit the use of that absolute authority…. Drogula, Fred K. 2015. Commanders and Command in the Roman Republic and Early Empire. Chapel Hill: University of North Carolina Press…
    <https://archive.org/details/commanderscomman0000drog>

  5. Central Country: It is interesting how eager financial markets are to believe that the Politburo has moved completely off of this policy:

    Chris Anstey: Why China’s Sluggish Growth Isn’t Rattling Xi Jinping: ‘⁠Xi isn’t particularly unhappy… because… “new productive forces”—[they] are doing well. Housing… isn’t the foundation on which he wants to build China’s economic future. Advanced manufacturing, high-tech goods and green energy and transport are…. And they are powering ahead… <https://read.readwise.io/new/read/01j8av4fbsxjh4teyqmyy3ym5j>

  6. The recent policy turn seems to me to be much more focused on financial markets and asset than on actually getting people into jobs. The régime’s hope that this will be enough—that it can avoid actually putting people to work building more consumer durables, non-durables, and services for private domestic consumption—seems to me more likely than not to be a vain hope:
    Minxin Pei
    : The Game Isn’t Over for China, But It Is ‘Garbage Time’: ‘Many Chinese see no hope for an economic recovery as long as the same leaders stick to the same policies that led to the slump…. On the surface, such pessimism is driven by economic woes…. The malaise, however, has deeper political roots. The country has gone through much worse economic times before without despairing…. At the end of the 1990s… ordinary Chinese remained optimistic about the future. The difference is that those citizens believed in the competence of the reformist then-premier Zhu Rongji… <https://www.bloomberg.com/opinion/articles/2024-09-22/has-china-s-economy-entered-the-garbage-time-of-history>

  7. Attention-Info-Biotech Economic Mode of Production: I guess I should double my daily weight-lifting routine, shouldn’t I?
    Jo Ellison: Everyone’s on Ozempic. So why will no one talk about it?: ‘It’s stunning to see colleagues suddenly transform into the incredible shrinking woman—or man. What I find curious about this new wave of waifs is how coy they are about talking about the drug. I’ve lost count of the number of newly emaciated editors and stylists extolling their current diet and brand new fitness regimens…. Nathan Curran…. The only downside he had noticed was that, unless patients made significant lifestyle changes in accordance with the rapid weight loss, they would have a lot of wasted muscle or “skinny fat” to deal with.… That so few of them want to discuss their drug use just goes to show how pervasive sizeism remains. Culturally, we are still dismissive of anyone who has simply shrugged off weight without having to “do the work”… <https://www.ft.com/content/498c2c5e-fb9c-461e-8e9c-5429696b56a6>

  8. Intellectual Grifters: The jobs were “bullshit” from the perspective of not being useful for society, but just neutralizing other jobs that were also not useful for society. It always seemed to me that Graeber had made a big error in claiming that they were “bullshit” for the organization, and it was another nail in the coffin as far as the possibility that I might believe that he cared to try think things through was concerned:

    Byrne Hobart: “Bullshit Jobs” Is a Terrible, Curiosity-Killing Concept: ‘The strongest single argument against [David] Graeber’s [Bullshit Jobs] book is: did anyone at Bain or McKinsey read it? What about KKR and Blackstone? Did any owner of any business of any size read it and say: “What a sec! That’s right! Most jobs really are fake jobs designed to make rich people feel good about themselves. But what makes me feel good about myself is having more money, so I’m going to start  firing people and keeping the money.” The closest you can get is Elon Musk at Twitter, which did reveal that the service could keep running, and ship new features, with a lower headcount. But that happened at a company that was notoriously inefficient, for years, and one where it’s widely-agreed that they unnecessarily blew their lead in short-form many-to-many communications, and took too long to get into messaging. If there’s one large-scale example of the thesis playing out, and the thesis holds that it’s describing a ubiquitous phenomenon, something doesn’t add up… <https://www.thediff.co/archive/bullshit-jobs-is-a-terrible-curiosity-killing-concept/>

  9. MAMLMs: As far as making money off of MAMLMs is concerned, Ben Stancil is right in noting that it is not write-once run-everywhere with zero marginal costs of serving an additional user. It is, rather, table stakes to keep your other tech oligopoly profits from vanishing at the hands of someone using MAMLMs to breach your market-power moat and take your existing oligopoly profits away. Thus I see MAMLMs as bad news for investors and stock-option holders, but good news for users—if we can keep them from being used by grifters, and figure out what they are genuinel able to do that is useful:
    Ben Stancil: Do AI companies work?: ‘The market needs to be irrational for you to stay solvent…. Even if the industry doesn’t keep building new models, or if we hit a technological asymptote, the value of old models still decays pretty quickly…. [And] open source… Llama and Mistral… are, at worst, a step or two behind…. If you are OpenAI, Anthropic, or another AI vendor, you have two choices. Your first is to spend enormous amounts of money to stay ahead of the market. This seems very risky though: The costs of building those models will likely keep going up; your smartest employees might leave; you probably don’t want to stake your business on always being the first company to find the next breakthrough. Technological expertise is rarely an enduring moat.  Your second choice is…I don’t know?… AI companies seem to be an extreme example of the market misclassifying software development costs as upfront investments rather than necessary ongoing expenses… <https://benn.substack.com/p/do-ai-companies-work>

  10. Slouching Towarsds Utopia Reviews: Say, rather, that left-neoliberalism would be the least terrible of a set of mostly utterly discredited aging economic philosophies, all past their expiry dates—if left-neoliberalism were stable, but it isn’t: the past generation’s experience has taught us that it has a very strong tendency to slide into right-neoliberalism:

    Venkatesh Rao: Book Review: Slouching Towards Utopia: “‘By untheorized, I mean that DeLong does not offer a theoretical model or historicist-ideological end-of-history type account of “slouching progress.” There is just the history narrated through that lens, serving as an implicit argument for a pragmatic managed economics as the essential work of governance. Though he identifies as a left-neoliberal partisan, this story of slouching cannot be read as the a redemptive narrative of the triumphal ascent of left-neoliberalism. Indeed, one could read the book as arguing that left-neoliberalism is at best the least terrible in a field of mostly utterly discredited aging economic philosophies, all past their expiry dates… <https://studio.ribbonfarm.com/p/book-review-slouching-towards-utopia>

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https://www.youtube.com/watch?v=G7H9ynrHkxA&t=2s","target":"_blank","rel":"nofollow ugc noopener","class":"note-link"}}],"text":"https://www.youtube.com/watch?v=G7H9ynrHkxA&t=2s"}]}]}]},"restacks":2,"reaction_count":7,"attachments":[{"id":"a6999f7c-238c-4ed8-b4a5-e5452739f6d6","type":"link","linkMetadata":{"url":"https://www.youtube.com/watch?v=G7H9ynrHkxA&t=2s","host":"youtube.com","title":"- YouTube","description":"Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube."},"explicit":false}],"name":"Brad DeLong","user_id":16879,"photo_url":"https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea5ae644-9822-4ca5-ac6b-e18c017d8fbc_1189x1208.png","user_bestseller_tier":1000}}" data-component-name=“CommentPlaceholder”>
https://talkingpointsmemo.com/edblog/jd-vance-menstrual-surveillance-hawk","target":"_blank","rel":"noopener noreferrer nofollow","class":"note-link"}}],"text":"https://talkingpointsmemo.com/edblog/jd-vance-menstrual-surveillance-hawk"},{"type":"text","text":"&#8230;. The Biden administration pushed for updated HIPAA regulations to prevent sheriff’s departments… from pulling women’s medical records for their menstrual surveillance programs…. Vance was one of only 28 members of Congress (and only 8 senators) to sign a letter protesting the new regs, which, per the letter, “interfere with valid state laws protecting life.”… Trump spokesman Jason Miller… “[Trump has] made it very clear that he’s not going to go and weigh in and push various states on how they want to go and set up their particular rules and restrictions. That’s going to be up to the states.” So he went there. It’s totally up to the states… <"},{"type":"text","marks":[{"type":"link","attrs":{"href":"https://talkingpointsmemo.com/edblog/trump-camp-says-state-menstrual-surveillance-programs-are-a-ok/sharetoken/689979aa-a731-46f1-a61c-faaf84ab8127","target":"_blank","rel":"noopener noreferrer nofollow","class":"note-link"}}],"text":"https://talkingpointsmemo.com/edblog/trump-camp-says-state-menstrual-surveillance-programs-are-a-ok/sharetoken/689979aa-a731-46f1-a61c-faaf84ab8127"},{"type":"text","text":">"}]}]}]},"restacks":3,"reaction_count":2,"attachments":[{"id":"1a047cb7-b8cd-4048-9cc5-284fc832128f","type":"link","linkMetadata":{"url":"https://talkingpointsmemo.com/edblog/trump-camp-says-state-menstrual-surveillance-programs-are-a-ok/sharetoken/689979aa-a731-46f1-a61c-faaf84ab8127","host":"talkingpointsmemo.com","title":"Trump Camp Says State Menstrual Surveillance Programs are A-OK","description":"One of the most toxic and politically explosive parts of the current abortion rights debate is tied the complexities and perhaps inanities of leaving national abortion policy up to individual states.","image":"https://substack-post-media.s3.amazonaws.com/public/images/5e3efc0e-c7b6-4884-98b0-1989870004b8_804x522.jpeg","original_image":"https://talkingpointsmemo.com/wp-content/uploads/2024/07/GettyImages-2163330588.jpg?w=804"},"explicit":false}],"name":"Brad DeLong","user_id":16879,"photo_url":"https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea5ae644-9822-4ca5-ac6b-e18c017d8fbc_1189x1208.png","user_bestseller_tier":1000}}" data-component-name=“CommentPlaceholder”>

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Xi Jinping as Aging Emperor

I need a specialist in Zhongnanhai—in the network of relationships and factions within the high councils of the Chinese Communist Party. Why is the news of the purging of Chinese economist Zhu Hengpeng surfacing right now, just as the PBOC & the politburo appear to be adopting his economic-policy recommendations? Are these connected? Unconnected?

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Chinese economist Zhu Hengpeng criticized Xi Jinping’s economic policies, and apparently vanished last spring. Now his vanishing is being publicized—just as there is what is being sold as a major shift in Chinese economic policy away from the previous austere focus on green manufacturing exports and new productive forces as the only allowable drivers of demand going forward. Is there any connection here? And how does this interact with what we have all been expecting to see in terms of cracks developing in China’s “sultanist” régime’s functioning as the paramount leader ages?

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Notes ScratchPad: Deadly Low-Quality Journamalism from Malcolm Gladwell; Mush from Neofascist Fellow-Traveler Speaker Mike Johnson; & MOAR...

A scratchpad…

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Journamalism: Exceptionally low-quality non-thought from Malcolm Gladwell. 200,000 people convinced by grifters to let COVID kill themselves so they can make small amounts of money should horrify Malcolm Gladwell. It doesn’t. Instead, there is “something beautiful about opening up access” to commit large and deadly frauds. And “uncurated expertise” is one hell of an oxymoron, and in this case a very deadly one:

Peter Hotez: ‘This from Mr. Gladwell’s NYT interview today. Perhaps he doesn’t realize the scope of what happened. It’s not “a lot of people” it’s 200,000 Americans who died needlessly because of a politically-driven/predatory antivaccine disinformation campaign. They were victims of predation… <x.com/PeterHotez/status/183925987016117…>

Malcolm Gladwell: ‘People increasingly want uncurated expertise. Now does that sometimes create problems? Yeah, a lot of people didn’t take the Covid vaccine and died as a result. That’s really unfortunate. I’m am fully aware of hat happens when you let a hundred flowers bloom. But I am also aware that at times there is something beautiful about the fact that we are opening up access to people in a way we never did before…


Neofascism: Fellow-traveler Mike Johnson, a true Franz von Papen for our days—but much more gutless than Franz von Papen was:

Catherine Rampell: ‘Happy “I Didn’t See the Tweet” season! <x.com/crampell/status/18392828920666728…>

Acyn: ‘[Speaker of the House Mike] Johnson: “Clay Higgins is a dear friend of mine and a colleague from Louisiana, and a very frank and outspoken person. He’s also a very principled man. I didn’t even see it but he tweeted something today about Haitians.”

Reporter: “He told them to get out of the country by Jan 20th”

Johnson: “Ok. He was approached on the floor by colleagues who said that was offensive. He said he went to the back and he prayed about it, and he regretted it, and he pulled the post down. I’m sure he probably regrets the language he used. But you know, we move forward. We believe in redemption around here”…


MAMLMs: SubStack’s MAMLM has views on what I liked to read on it last summer:

SubStack MAMLM: Top Substacks

Dan Davies - “Back of Mind” by

A newsletter of quiet contrarianism, slow analysis and ambient ideas

Top post this summer: horses for courses

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Start your day with pragmatic takes on politics and public policy.

Top post this summer: I was wrong about Biden

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Top post this summer: Chartbook 298 Built not Born - against “interregnum”-talk (Hegemony Notes #2)

These are its descriptions, not mine…


Neofascism: Flooding the political zone with lies you admit to be lies is, I suppose, an “ethos”. Maybe we should call it that?:

John Ganz: Only in America: ‘What really seems crazy to me now is that there was ever a “fascism debate” at all. While we have Robinson and Vance accusing the Haitian migrants in Springfield of spreading disease while openly admitting that the stories are lies, what else can you possibly call it? Okay, maybe you still don’t want to say that word. Can we at least agree it all sounds totally psychotic? I used to say it was the politics of national despair, but the politics of national psychosis might be more accurate. In 1933, the British ambassador to Berlin, Sir Horace Rumbold, cabled back to London the following warning: “I have the impression that the persons directing the policy of the Hitler government are not normal.” We are not in 1933 by any means, but these people certainly give the same impression… <unpopularfront.news/p/only-in-america>


Neofascism: The truly deplorable JD Vance and Donald Trump—and all their truly deplorable allies—are trying via stochastic terrorism to take America into a very bad place: in one which they break the country, take the much smaller half for themselves, and try to make that much smaller half hate their own country—and especially hate some of the greatest parts of it:

Bill Kristol & Andrew Egger: Vance, Trump, and The Politics of Hate: ‘Republican political operatives profess to be unhappy that Trump and Vance have veered away from… the border… [and] have gotten “distracted” into a debate about legal Haitian migrants who’ve come to Springfield to work legally. Or is it a distraction? Might Vance and Trump know what they’re doing? Perhaps a pure play on racism and nativism is more effective politically than a somewhat complicated debate about the border—especially after Trump killed the border bill…. It’s striking that Trump and Vance are willing to make this campaign so clearly a referendum on nativism and racism…. Such efforts have been aided by sophisticated allies who don’t quite join in the campaign, but certainly don’t go out of their way to denounce it or repudiate it…. In the ranks of the Republican establishment and conservative elites… you hear… in the face of disgusting bigotry and dangerous incitement… the sounds of silence… <thebulwark.com/p/vance-trump-and-the-po…>

and:

Dan Drezner: Donald Trump and JD Vance Are Attempting Domestic Terrorism by Proxy: ‘The GOP ticket is wreaking violent havoc in its own backyard…. To wind the clock back a month… legal Haitian immigrants into the small town of Springfield, Ohio… a complex picture…. Ten years ago, Springfield was hemorrhaging population and vitality. A concerted effort by state and local authorities to attract manufacturing investment paid off—and a lot of those factories hired legal Haitian immigrants over the past few years…. On the plus side, the town is growing again and the Haitians have created thriving cultural neighborhoods in the town. On the minus side, city services like hospitals and schools are now overburdened. This caused local officials to request more federal support. It also caused some angry locals to pop off on social media and at public forums. Enter JD Vance and Donald Trump, who saw a city that spoke to their campaign theme of immigration restrictionism and then poured kerosene on the entire town….

Springfield officials pushed back hard…. The Springfield Police Department… the Republican mayor… the Republican governor of Ohio… “Look, there’s a lot of garbage on the internet and, you know, this is a piece of garbage that was simply not true. There’s no evidence of this at all.” He also praised the Haitian residents of Springfield as being partially responsible for Springfield’s “great resurgence…. Trump and Vance have been unapologetic….

The threats of violence have caused the Republican elected officials in Springfield to plead for the GOP ticket—which includes the junior senator from Ohio—to shut the hell up…. Vance told CNN’s Dana Bash that he didn’t care whether the stories were accurate or not: “If I have to create stories so that the American media actually pays attention to the suffering of the American people, then that’s what I’m going to do.” As Jamelle Bouie noted in the New York Times, Vance’s position is both morally and factually indefensible…. Trump and Vance’s willingness to lie, deceive, and stigmatize minorities is behind the threats of violence affecting Springfield, Ohio this week. They are attempting domestic terrorism by proxy… <danieldrezner.substack.com/p/donald-tru…>


Economics: The last piece of information that one could really call “news” about where the economy is right now and where it is going came out on September 6, ten days ago now. Since there has been no information about the economy, interest rates—which are based on Wall Street assessments of where it is and expectations of where it is going—should have been constant since then. Right? Right? Wrong!. Safe real future wealth ten years out is now 0.7% more valuable in today’s dollars than it was on September 6—a very big move over a no-information time. Why?

The answer is that the thinking of the Federal Reserve has become an additional source of uncertainty. But the Fed is supposed to damp economic uncertainty, not amplify it:

David Goodman: 25 or 50?: ‘For markets, the big question going into the week is whether the Fed will opt for a 25- or 50-basis-point cut on Wednesday. Traders see that as a very close call, although they slightly boosted bets on a larger move today after virtually discounting the possibility entirely last week. That brought the yield on two-year US bonds back toward the lowest level in two years and weighed on the dollar. Analysts at Edmond de Rothschild summed up the mood, writing that “there has rarely been so much uncertainty over central bank intentions”… <bloomberg.com/news/newsletters/2024-09-…>


Economics: I would say the U.S. touched down on its soft landing fifteen months ago, decelerated on the runway, and is now taxiïng to the terminal. And my colleagues and fellow panelists on the FT-Booth survey appear to agree:

Colby Smith: US economy is heading for soft landing, FT survey says: ‘GDP to keep expanding while unemployment will remain relatively low, economists predict…. GDP growth will be 2.3 per cent in 2024 and 2 per cent in 2025, according to the median estimates…. Unemployment will rise to 4.5 per cent by the end of this year, slightly above the current rate of 4.2 per cent…. The core personal expenditures [chain price] index—the Fed’s preferred inflation gauge—will fall to 2.2 per cent from 2.6 in July [on a trailing year basis], the [average of the] economists predicted….

“It’s a shockingly smooth landing,” said Dean Croushore, who served as an economist at the Fed’s Philadelphia Reserve Bank for 14 years and participated in the survey. “Fundamentally, things are still pretty strong across the board.”… The Fed has made clear it does not want to see the labour market worsen beyond current levels…. The Fed next week is widely expected to cut interest rates from the 23-year high of 5.25-5.5 per cent it has held since last July, although the decision to cut by half a percentage point or a more traditional quarter-point remains a close call…<https://www.ft.com/content/022bb11b-c340-4059-b9b7-30481a02174c>

I don’t think it is a close call in the minds of the FOMC meeting participants. I place great weight on Chris Waller’s statements that “he was ‘open-minded about the size and pace of cuts’ and would back a larger cut ‘if the data suggests the need’. But he said he expected any move would be ‘done carefully’.” The thing is: Waller’s analyses strongly suggest, to me at least, that the Federal Funds rate right now, given the data, should be 1.0%-points below where it now is, at least. Yet he does not feel impelled to say that the Fed should move quickly to place the Federal Funds rate where his models, at least as I read them, say it should now be. That is very puzzling to me. But it is what it is.


History: I do not get this at all!:

Matthew Walther: The Rise of Post-Literate History: ‘Riley-Smith was a sounder and more scrupulous historian than Runciman; he was careful, precise, analytical, but he wrote with considerably less élan than his predecessor, for whom the Crusades were essentially a series of barbarian invasions—the sacking of the refined and cosmopolitan East by the uncouth and venal younger sons of minor French lords. This vision—which owes as much to Sir Walter Scott as it does to the author’s continent-spanning archival research—was all but totally dispelled in a series of books written between over the span of half a century by Riley-Smith, who, at the time of his death in 2016, was universally considered the preeminent authority on the Crusades in the English-speaking world. Yet it is Runciman’s version of the Crusades that has endured and proved more culturally pervasive…. To write as well as Runciman did, while politely disdaining what he called “the mountainous heap of the minutiae of knowledge,” is to guarantee one’s place among the elect of Clio. But suppose some golden-voiced follower of Riley-Smith’s were to emerge. Could he finally displace Runciman? I suspect the answer is no…. The exigencies of modern academic publishing, declining levels of general culture… less like sloppiness or indifference and more like a positive hostility toward good writing among peer reviewers… the atrophying of readers’ own attention spans… it seems to me unlikely that we will ever see a classic on the order of Runciman capture the public imagination. Historiography is becoming stuck… <https://www.compactmag.com/article/the-rise-of-post-literate-history/>

Runciman’s history is a history of the Latin Kingdom of Jerusalem, of its remnants after its fall, and of the expeditions of west European warriors to Middle East that at least purportedly attempted to support and save it.

In Riley-Smith’s view, “crusades” are a very different thing than Runciman’s narrative story centered on the Latin Kingdom of Jerusalem and of the catastrophes of 1187 at Hattin and 1204 at Constantinople. For Riley-Smith, “crusades” are “a subcategory of Christian holy war… distinguished… from other wars by… key procedural elements… proclamation by the pope… explicit association with the liberation of sacred land… vows of a special kind made by the fighters, who enjoyed in consequence particular temporal (i.e., worldly) and spiritual privileges…” The crusades thus include: “the first crusade… early crusader states… anti-Jewish violence in Europe… Sicily… the Iberian peninsula… north Europe… additional crusades in Europe… papal enemies… heretics… papal adversaries… the Atlantic…. the Great Schism… Hussite crusades… against the Ottomans… [the] Reformation… the Caribbean and the Americas…” To say that Riley-Smith by using the word “crusade” to mean something very different than Runciman did has in some way “totally dispelled” Runciman’s Grand Narrative of the “sacking of the refined and cosmopolitan East by the uncouth and venal younger sons of minor French lords”—that seems to me to demonstrate an astonishing lack of understanding.


Economic History: If you want to say that humanity as an anthology intelligence faces a resource-scarcity production problem, a wealth-distribution problem, and a wealth-utilization problem, are not all three of those “economic problems”? They just require a different kind of economics in order to think about them than the one we have today:

Paul Crowe: ‘Something that stuck with me is a line from Clark’s Farewell to Arms where he says (something like) “from the perspective of economic history there are really only two important events in human history, the neolithic revolution and the industrial revolution.” That and the hockey-stick graphs. It is, of course, a massive generalization and simplification, but that is the nature of such course take-aways.

My other candidate would be the 1500 turning point for Europe: when the “west” began to become the “west” as we tend to think of it today – along with all the complexities and contradictions that talking about “the west” involves.

Maybe one more with an eye to the future: Keynes’ very provocative and oracular pronouncement (for we his grandchildren) that we have solved the economic problem and must now turn to the permanent problem… <braddelong.substack.com/p/econ-135-cour…>


Journamalism: Does anybody want to argue that Jeremy W. Peters, Jack Healy and Campbell Robertson should not immediately leave the journalism profession, this hour?

Jeremy W. Peters, Jack Healy & Campbell Robertson: Pundits Said Harris Won the Debate. Undecided Voters Weren’t So Sure: ‘Voters said the vice president talked about a sweeping vision to fix the country’s most stubborn problems. But they wanted the fine print… <nytimes.com/2024/09/11/us/politics/unde…>

As Kieran Healy says:

Kieran Healy:The image of a substantial contingent of “undecided” voters watching the debate, listening to Trump go on about cat-eating immigrants, thoughtfully stroking their chins, and remarking to their spouse that they should like to hear more “fine print” from Harris on policy is quite delightful, really… <threads.net/@kjhealy/post/C_xtSdcRosV>


Economics: The “shelter” index as reported by the BLS continues to be at substantial variance with reality—reporting price increases in housing costs that are simply not happening out there in the world. Even so, reported numbers and the 0.5%-point per year gap between the CPI and the Federal Reserve’s PCE chain-inflation price index tell us that inflation has been at the Federal Reserve’s target level for more than a year. The touchdown part of the economy’s soft landing took place last summer. And if one marks the shelter component down to reality, the inflation reality right now is that it is at a level lower than the target the Federal Reserve seeks to hit:

BLS: ‘The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2[247] percent on a seasonally adjusted basis…. Over the last 12 months, the all items index increased 2.5 percent…. The index for shelter rose 0.5 percent in August and was the main factor in the all items increase…. The index for all items less food and energy rose 0.3 percent in August…. The all items less food and energy index rose 3.2 percent over the last 12 months… <bls.gov/news.release/cpi.nr0.htm>

So why—with the labor market weakening, and thus further downward pressures on the inflation rate gathering—is policy not in neutral? Yes, Chris Waller says that now is not a time for patience but for action in reducing interest rates. But surely the action needed is a monetary policy that is neutral, or even a little bit stimulative, rather than to take steps over the next year to shift from a substantially restrictive monetary policy to a moderately restrictive one. Isn’t it?

And, of course, things are complicated by the Federal Reserve’s failure to provide meaningful forward guidance. To what level—were inflationary and deflationary shocks to balance each other over the next five years—does the Federal Reserve believe it should guide interest rates in the future, and how long does it think it ought to take to get there? “We are going to ease for a while, until we decide it is time to stop” is not, I think, the kind of “data dependence” that makes anybody happy.


American Nationalism: What happens when we move from Andrew Jackson the campaigner and Jacksonianism the movement to Andrew Jackson the administrator and the policies of the Jackson administration? I find myself largely at sea. It is very hard, very hard indeed to figure out what was actually going on inside the Jackson administration. If you have a good source you trust—or think you do—I would love to know what it is. He hated Nicholas Biddle. He hated John C. Calhoun. He hated the Five Civilized Tribes. And did anything else really drive his personal policy? And how did that mix into what was the mélange that became his administration’s policy? Everyone writing I have studies brings their own spin—usually for reasons strongly connected with the contemporary politics of their day—and selects the items they like best from the buffet:

Brad DeLong: “The Hunters of Kentucky”: The Jacksonian Thread of American Nationalism: ‘What I see as the third of the major strains of American national identity—behind Massachusetts-Puritan and Virginia-Cavalier: Kentucky-Frontier. No, Andrew Jackson’s victory at the Battle of New Orleans wasn’t due to a band of mythical sharpshooters—the “Hunters of Kentucky”—but within a decade, that legend became an inseparable part of Jackson’s image. & it became unwise to dispute it in an American bar. & so by 1829 for Jacksonians Jackson’s inauguration was the moment when America was rescued from both external and internal enemies, & it was only by trusting & following his policy twists-&-turns & taking his shifting set of enemies as their own that they could be & remain truly free. This was & is the Kentucky-Frontier strain of American nationalism, and it is powerful & mythical to this day, & its mythical nature does not reduce its power… <braddelong.substack.com/p/the-hunters-o…>


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What Would Marcus Aurelius Think of Donald Trump?

Can we call Donald Trump “happy”? I think the clear answer is “no”…
Russ Buettner and Susanne Craig’s Lucky Loser shows that beneath Trump’s public bravado and the myth of a business empire lies a hollowed-out financial reality. Yet Trump somehow managed to build a lasting illusion of success rather than an immense squandering of his opportunity given the enormous New York real-estate boom of his career. Yet he is a success because he has managed to use low cunning and the relentless pursuit of appearances over substance to be perceived as a success—though it is a kind of success that that very few indeed who know even part of the real story could in any sense admire…

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This came out rather well, I think:

Brad DeLong: Lucky Loser Review—How Donald Trump Squandered His Wealth: ‘Donald Trump started his career at the end of the 1970s, financed by his father Fred Trump…. Rough calculations say that, had he simply taken the money, leveraged it not imprudently… passively invested it in Manhattan real estate… partie[d], womanised, played golf, collected his rent cheques… reinvested… his fortune could have amounted to more than $80bn by… 2017. And yet… Forbes pegged him at $2.5bn—which… is really anything between $5bn (£4bn) and zero (or less)…. [So] Russ Buettner and Susanne Craig call Trump… one of the world’s biggest losers… [by] manag[ing] to destroy the vast majority of his potential net worth….

[Yet] there Trump was at the start of 2017, in spite of everything, stunningly successful. Buettner and Craig call this an “illusion”. I profoundly disagree. To repeatedly save yourself from bankruptcy—to somehow manage to hand responsibility off to the people you do business with while you hotfoot it out of the picture—demonstrates considerable skill and ingenuity of some sort. Trump has exhibited great (if low) cunning and resilience….

Many of us hope that Trump’s story will end with a proper comeuppance, restoring the appropriate and just moral order of the universe… [as] galaxy-scale hubris… call[s] forth… nemesis. Until then, we must regard him as a remarkable success—although few philosophers would judge Trump’s brand of success as the kind worth having…

<https://www.theguardian.com/books/2024/sep/26/lucky-loser-review-how-donald-trump-squandered-his-wealth>

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I still have no idea how somebody can lose money in a government-sponsored casino monopoly in Atlantic City. Or fail so completely at having his wealth lifted up by the truly extraördinary boom in Manhattan real-estate that was coterminous with his career. In the end, the only real asset he had was the fake reputation as a sophisticated, clever, dominant manager that was produced by the clever cutting of television snippets by the film editors of The Apprentice. And yet that has proved, so, far—together with the deplorable cowardice of the professional Republicans from Mitt Romney on—to be enough. So far.

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The Second-International Socialists of the Late 1800s Atop Mt. Nebo: A Sketch of How They (More-or-Less) Viewed the World

Looking ahead to when, after the midterm, I get to humanity’s true watershed boundary-crossing of 1870: how I now think I will present things, summing up the history of human economic growth to that moment; setting forth the optimism of the Second International’s socialists; & posing the problem of how thereafter it all went so wrong…
Here is where I am now, but it is not so much what they expressly believed and wrote, but what they should have given their historical situation…

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Delegates to the 1907 Stuttgart Congress of the Second Socialist International

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  • Since at least the spread of agriculture up to 1770, human society everywhere was caught in the Malthusian Trap.

  • Humanity’s ensorcellment by the Devil of Thomas Robert Malthus meant that between 30% and 80% of the resources of the non-élite had to go to getting bare necessities—2000 calories a day plus essential nutrients, enough clothing and heating that you were not often desperately cold, enough shelter that you were not often desperately wet—so that human population could reproduce itself with a very small extra margin on average to support slow population growth.

  • In such a world, the only way (other than finding yourself on the conquest frontier of an expanding aggressive civilization, and thus resource-rich) to plausibly get enough for yourself and your family was to join the gang that was your society’s élite that took one-third of the crop and the crafts by fraud and force.

  • Become the Man, either as one of their bosses, one of their tame accountant-propagandist-bureaucrats, or one of the thugs-with-spears who worked for them: Talleyrand claimed to Napoleon that you could not sit on bayonets, but as long as your tame accountant-propagandist-bureaucrats can help you successfully convince the thugs-with-spears that they gain more by remaining part of your élite coalition rather than joining another, he was very wrong.

  • How about devoting your and your fellows’ brains to becoming much more productive? As a rule, that just made you a very soft and attractive target indeed for the thugs-with-spears.

  • To first order, therefore, we characterize all past human agricultural societies as societies of domination: in them the principal focus of those who were in a position to direct the energy of humanity as an anthology intelligence was to systematize the taking of one-third of what the producers made, and to justify this taking to themselves and their victims by some version of “if God did not intend them to be sheared, he should not have made them sheep”.

  • But in 1870 and after technological progress achieved critical mass.

  • Thereafter human technological prowess doubled every generation.

  • That meant a truly human world—one that was rapidly solving the problem of baking a sufficiently large economic pie so that everyone could have enough. And after the problem of producing enough for all had been solved, the problems of slicing and tasting it—equitably distributing and properly utilizing our wealth—should be easy to make and live in.

  • Yes, there was still the holdover legacy of the past societies-of-domination: a way had to be found to convince the heirs of past élites that in the forthcoming societies of abundance playing the old game was not worth the candle, or at least to move the heirs of past élites out of the way.

  • Yes, there was the brand-new problem of all of the revolutions of rising expectations: when your conception of material-consumption utopia rises from three hot meat meals a week with ample mead, feasting in Roger’s Stag-Hall on the coast of the Baltic Sea, to low-cost low-latency gigabit internet—well, ludicrous as it would seem to all past human generations, what people regard as enough may recede almost as fast as material prosperity advances.

  • But these, Freddie from Barmen might have said, were mere speedbumps on the superhighway leading us to utopia.

  • The lived experience of existing in a Steampower Society would, Friedrich Engels thought, rapidly make it blindingly obvious to everyone that: (a) collectively, as a species-being, as an anthology intelligence, the knowledge base of human society was a mighty and rapidly advancing godlike force indeed; (b) but individually none of us was very special, or essential, for we all put on our identical blue denim overalls one leg at a time; © administration involved the boring adding, subtracting, multiplying, and dividing of numbers, the issuing of receipts, and the mind-numbing finding of errors in double-entry systems; (d) all sane people would rather be making something in company with their fellows rather than being a low-level accounting microprocessor alone.

  • Hence (e) we would all realize that we should (i) rotate through the paper-pushing jobs that were now the administration of things rather than the domination of men, (ii) share everything equally, (iii) wear our identical blue denim overalls, (iv) call one another “comrade”, and (v) live happily ever after in the abundance of the free society of associated producers.

  • This would happen inevitably, with only minor “pro-slavery rebellion” resistances.

  • This would happen just as the lived experience of living in a post-feudal commercial society had made it blindingly obvious that all were created equal endowed with inalienable rights to life, liberty, and the pursuit of happiness through property and the voluntary making of contracts—including that very big contract that was the social contract—and so triggered the earlier round of liberal-democratic revolutions.

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What do you all think? Is this the right way to present it?

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WEEKLY BRIEFLY NOTED: FOR 2024-09-19 Th

My weekly read-around…
Yasheng Huang on the history of China; income inequality in the US and Scandinavia since WWII; Monty Python on our debt to the Romans; SubStack Notes; very briefly noted; & Fed Governor Michelle Bowman does Trump’s bidding; the market expectations of Fed policy rollercoaster; reading about Rome; Fed-watcher uncertainty; Cicero is not a man you want at your back in a tight spot; & weekly briefly noted for 2024-09-13 Fr…

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ONE AUDIO: History of China

Second-best recent thing on it I have heard recently…

On Humans: ‘The West has ruled history — at least the way history has been written. This is a shame. To tell the story of humans, we must tell the story of us all. So what about the rest? What themes and quirks does their history hide? And what forces, if anything, prevented them of matching Europe’s rise? I aim to cover these topics for several countries and cultures over the next year. But I wanted to start with China. To do so, I’ve teamed up with Jordan Schneider, the host of ChinaTalk. Our guest is MIT professor Yasheng Huang (黄亚生). Huang is the author of Rise and Fall of the EAST – one of my all-time favorite books on China’s past and present. 

In this episode, we explore the deep currents shaping China’s history. We trace the forces shaping China’s early mastery of technology to its falling behind Europe in the modern era. We also discuss the surprising role that standardized exams have played in Chinese history, and why certain democratic elements in China’s past actually bolstered the emperor’s authority.  The episode covers all of Chinese imperial history, ending with a brief note on the early 20th Century. In part 2, will zoom into China’s economic miracle and its uncertain future.

<https://overcast.fm/+AA8kS_UCixc>

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ONE VIDEO: What Have the Romans Ever Given Us?

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SubStack NOTES:

danieldrezner.substack.com/p/donald-…>","body_json":{"type":"doc","attrs":{"schemaVersion":"v1"},"content":[{"type":"paragraph","content":[{"type":"text","marks":[{"type":"bold"},{"type":"italic"}],"text":"Neofascism"},{"type":"text","text":": "},{"type":"text","marks":[{"type":"italic"}],"text":"The truly deplorable JD Vance and Donald Trump—and all their truly deplorable allies—are trying via stochastic terrorism to take America into a very bad place: in one which they break the country, take the much smaller half for themselves, and try to make that much smaller half hate their own country—and especially hate some of the greatest parts of it:"}]},{"type":"blockquote","content":[{"type":"paragraph","content":[{"type":"text","marks":[{"type":"bold"}],"text":"Bill Kristol & Andrew Egger"},{"type":"text","text":": Vance, Trump, and The Politics of Hate: ‘Republican political operatives profess to be unhappy that Trump and Vance have veered away from… the border… [and] have gotten “distracted” into a debate about legal Haitian migrants who’ve come to Springfield to work legally. Or is it a distraction? Might Vance and Trump know what they’re doing? Perhaps a pure play on racism and nativism is more effective politically than a somewhat complicated debate about the border—especially after Trump killed the border bill…. It’s striking that Trump and Vance are willing to make this campaign so clearly a referendum on nativism and racism…. Such efforts have been aided by sophisticated allies who don’t quite join in the campaign, but certainly don’t go out of their way to denounce it or repudiate it…. In the ranks of the Republican establishment and conservative elites… you hear… in the face of disgusting bigotry and dangerous incitement… the sounds of silence… <"},{"type":"text","marks":[{"type":"link","attrs":{"href":"https://www.thebulwark.com/p/vance-trump-and-the-politics-of-hate?publication_id=87281&post_id=148959253&isFreemail=false&r=d0v&triedRedirect=true","target":"_blank","rel":"nofollow ugc noopener","class":"note-link"}}],"text":"https://www.thebulwark.com/p/vance-trump-and-the-politics-of-hate?publication_id=87281&post_id=148959253&isFreemail=false&r=d0v&triedRedirect=true"},{"type":"text","text":">"}]}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"and:"}]},{"type":"blockquote","content":[{"type":"paragraph","content":[{"type":"text","marks":[{"type":"bold"}],"text":"Dan Drezner"},{"type":"text","text":": Donald Trump and JD Vance Are Attempting Domestic Terrorism by Proxy: ‘The GOP ticket is wreaking violent havoc in its own backyard…. To wind the clock back a month… legal Haitian immigrants into the small town of Springfield, Ohio… a complex picture…. Ten years ago, Springfield was hemorrhaging population and vitality. A concerted effort by state and local authorities to attract manufacturing investment paid off—and a lot of those factories hired legal Haitian immigrants over the past few years…. On the plus side, the town is growing again and the Haitians have created thriving cultural neighborhoods in the town. On the minus side, city services like hospitals and schools are now overburdened. This caused local officials to request more federal support. It also caused some angry locals to pop off on social media and at public forums. Enter JD Vance and Donald Trump, who saw a city that spoke to their campaign theme of immigration restrictionism and then poured kerosene on the entire town…. "}]},{"type":"paragraph","content":[{"type":"text","text":"Springfield officials pushed back hard…. The Springfield Police Department… the Republican mayor… the Republican governor of Ohio… “Look, there’s a lot of garbage on the internet and, you know, this is a piece of garbage that was simply not true. There’s no evidence of this at all.” He also praised the Haitian residents of Springfield as being partially responsible for Springfield’s “great resurgence…. Trump and Vance have been unapologetic…. "}]},{"type":"paragraph","content":[{"type":"text","text":"The threats of violence have caused the Republican elected officials in Springfield to plead for the GOP ticket—which includes the junior senator from Ohio—to shut the hell up…. Vance told CNN’s Dana Bash that he didn’t care whether the stories were accurate or not: “If I have to create stories so that the American media actually pays attention to the suffering of the American people, then that’s what I’m going to do.” As Jamelle Bouie noted in the New York Times, Vance’s position is both morally and factually indefensible…. Trump and Vance’s willingness to lie, deceive, and stigmatize minorities is behind the threats of violence affecting Springfield, Ohio this week. They are attempting domestic terrorism by proxy… <"},{"type":"text","marks":[{"type":"link","attrs":{"href":"danieldrezner.substack.com/p/donald-…?publication_id=1010841&post_id=148932939&isFreemail=false&r=d0v&triedRedirect=true","target":"_blank","rel":"nofollow ugc noopener","class":"note-link"}}],"text":"danieldrezner.substack.com/p/donald-…?publication_id=1010841&post_id=148932939&isFreemail=false&r=d0v&triedRedirect=true"},{"type":"text","text":">"}]}]}]},"restacks":1,"reaction_count":12,"attachments":[{"id":"e006ccb3-6c67-41c0-b0e3-f625a99634d2","type":"post","publication":{"apple_pay_disabled":false,"apex_domain":null,"author_id":46261221,"byline_images_enabled":true,"bylines_enabled":true,"chartable_token":null,"community_enabled":true,"copyright":"Daniel W. 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https://www.ft.com/content/022bb11b-c340-4059-b9b7-30481a02174c","target":"_blank","rel":"noopener noreferrer nofollow","class":"note-link"}}],"text":"https://www.ft.com/content/022bb11b-c340-4059-b9b7-30481a02174c"},{"type":"text","text":">"}]}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"I don’t think it is a close call in the minds of the FOMC meeting participants. I place great weight on Chris Waller’s statements that “he was ‘open-minded about the size and pace of cuts’ and would back a larger cut ‘if the data suggests the need’. But he said he expected any move would be ‘done carefully’.” The thing is: Waller’s analyses strongly suggest, to me at least, that the Federal Funds rate right now, given the data, should be 1.0%-points below where it now is, at least. Yet he does not feel impelled to say that the Fed should move quickly to place the Federal Funds rate where his models, at least as I read them, say it should now be. That is very puzzling to me. But it is what it is."}]}]},"restacks":2,"reaction_count":6,"attachments":[{"id":"d5db737e-d31b-4130-9d61-0df8eafcab99","type":"link","linkMetadata":{"url":"https://www.ft.com/content/022bb11b-c340-4059-b9b7-30481a02174c","host":"ft.com","title":"Subscribe to read","image":"https://substack-post-media.s3.amazonaws.com/public/images/7bff0420-ac52-43e8-9638-c626a31e0915_36x50.svg","original_image":"https://www.ft.com/__origami/service/image/v2/images/raw/https://barrier-page-components.s3.eu-west-1.amazonaws.com/assets/icons/primary_product_icon_trial.svg?source=next-barrier-page&format=svg"},"explicit":false}],"name":"Brad DeLong","user_id":16879,"photo_url":"https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea5ae644-9822-4ca5-ac6b-e18c017d8fbc_1189x1208.png","user_bestseller_tier":1000}}" data-component-name=“CommentPlaceholder”>
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Very Briefly Noted:

  1. Economics: The peculiar thing is that China did a very, very good job indeed at handling the negative aggregate demand shock of the GFC back in 2008 and 2009. It seems that Xi Jinping and company want investment in building up “new productive forces” and subsidized exports to the rest of the world to make up the aggregate-demand slack created by the collapse of real estate construction, and the political disfavoring of consumer internet. But the rest of the world appears to have decided that the political economy, economic growth, network, and national security consequences of allowing a further boom in Chinese exports are simply too great for it to be accommodated. “New productive forces” are much more a plan to someday have a plan than actual jobs for actual workers. And the government seems ideologically opposed to boosting households’ consumer standards of living. Not to say that I know enough about the subject to have even an idea about what the ending to this particular story might be:
    Noah Smith: Xi Jinping vs. macroeconomics: ‘Macro will not be mocked, sir…. China’s online boosters may gush about how high-tech and modern China is, and how wonderful its products are, but Chinese people themselves are very unhappy about how their economy is doing right now…. Youth unemployment… 21%. The Chinese stock market… in the dumps…. Two fundamentally different theories of… recessions… Xi Jinping has probably latched onto the wrong one…. The first… some real cost to reallocating resources from one industry to another…. [Or] the slowdown in real estate is part of an economy-wide [negative] “productivity shock”…. Xi’s response to China’s growth slowdown has been to try to shift real resources out of the “bad” sector (real estate) and into a sector he thinks is “good” (manufacturing)…. The alternative theory… “Keynesian”… includ[ing] Milton Friedman… a lack of aggregate demand…. Everyone is trying to save more money at the same time…. How could China get aggregate demand back on track?… A big consumption-based stimulus package…. Keynesian problems need Keynesian solutions. Macro will not be mocked… <https://www.noahpinion.blog/p/xi-jinping-vs-macroeconomics>

  2. American bankers not understanding that a trustworthy and trusted regulatory framework is their seed corn, and eating it:
    Daniel Davies: Basel III: The US has started a race to the bottom: ‘Banks have played silly endgames on capital. They win silly prizes as a result…. Nobody knows the extent of US commercial real estate risks…. When it comes to capital, bankers seem to be incapable of seeing the big picture. A few basis points on a ratio make hardly any difference in the long term. But a reputation for financial stability is incredibly valuable; the fate of Credit Suisse is a warning that when it is lost, everything is gone. On nearly every results call since the crisis, Jamie Dimon of JPMorgan has taken the opportunity to remind investors of his company’s “fortress balance sheet”…. Regulation is not a constraint on the financial industry; it is part of the infrastructure… <https://www.ft.com/content/b112fe68-7b86-45f1-a524-768dd418eb12>

  3. Economic History: All pre-industrial societies—and many societies in our age of modern economic growth—were and are primarily societies of domination, in which the big business of the government and of the élite at the top is figuring out how to sustainably take a third or more of what is produced by others for themselves by fraud and force. It is true that in our age it takes a lot less social pressure to do this: the working class is not driven to despair at the edge of starvation because we are so comparatively and absolutely wealthy. But how then do we do history? Do we note Aristotle’s declaration that in a time of low productivity any form of civilization requires that some get enough for themselves and their families, for previous eras did not have “instrument[s that] could accomplish [their] own work, obeying or anticipating the will of others, like the [blacksmithing] statues of Daidalos, or the three-wheeled catering serving-carts of Hephaistos, which, says the poet: ‘of their own accord entered the assembly of the Gods’… [no] shuttle[s] would weave and… [no] plectrum[s] touch the lyre without… hand[s] to guide them…”, and damn them all as having nothing to teach us? Or do we put the working class off to one side and talk of civilizations as being better or worse to the extent to which the members of the élite treated each other more or less humanely?:

    Amicus: On The Abolitionism of the Ancients (There Was Never Such a Thing) ‘I have a certain fondness for antiquity, despite all it really is. Homer’s bronze-age barbarism is alloyed with a supramodern maturity of spirit…. But it was also a brutal slave society, a barely-human nightmare to put the modern age to shame; it cannot be excused and it cannot be redeemed…. For every cultured Hellene made a household slave whose treatment might, in the right half-light, just barely seem humane, thousands lived and died in darkness to keep the master’s table laden high with silverware and salt…. Homer too is more humane than we might have expected from his age: poor Briseis gets little mention, except as Agamemnon’s spoils—until that is, she speaks, and fears her future as a slave. But then Achilles takes up the spear again, and again the laws go silent…. By code and custom, to the victors go the spoils, first among them the defeated—so it may have been in Homer’s age, so it was in Caesar’s…. Thirty percent of the city of Rome lived in chains at the empire’s height; they lived, on average, to the age of seventeen. And these were the lucky ones: out of the fields, out of the mines, out of the pits and quarries. We have little detailed evidence of how victims of the latifundia would fare; the welfare of their farm equipment is not a historian’s concern. And then at last there were the mines… <https://homosum.substack.com/p/on-the-abolitionism-of-the-ancients>

  4. Political Economy: One of the dodges at the heart of liberalism is that authority is derived from and limited by “the consent of the governed”—simply an unproblematic part of the contract-framework by which we make all of our little agreements with each other, with one kind of those contracts is to hire a straw boss of some sort to coördinate groups of humans and to motivate us when we are not being our best self. That dismissal of authority and hierarchy is clearly, clearly an inadequate way of thinking about the problems here, But what would be a better way?:

    Henry Farrell: Patrick O’Brian is a Great Conservative Writer: ‘His concern is the problem of right authority…. There is an argument, which emerges again and again throughout the books about right authority. Stephen usually takes the position that authority is a profoundly corrupting force…. “‘[Happy ships] depend upon the whim, the digestion and the virtue of one or two men, and that is iniquitous. I am opposed to authority, that egg of misery and oppression…’.” O’Brian… lays out a conservative… understanding of authority that ought properly be organic, based on a recognition of relations of authority and power that liberals might prefer to pretend do not exist. A good captain—a good exerciser of authority—ought [to] accept their role and their isolation both, without losing all human connection. They should be “taut”, perhaps sometimes even a “right hard horse”, but they should never be a tyrant…. The various ships described in his books, with their various captains and officers, are so many miniature societies, so many exercises of authority. We can discern the many different ways in which authority goes wrong, and the occasional ways in which it can go right… <https://www.programmablemutter.com/p/patrick-obrian-is-a-great-conservative>

  5. Public Reason: Grasping at straws much here? I would live to hope that this is so:
    Lucian K. Truscott IV: There is something happening in the Republican Party: ‘Here is what I think…. One by one, some Republicans are starting to tinker with the calculus of the last eight years that there is only one way to be a Republican and to get ahead in the Republican Party and that is through Donald Trump…. Both Cheneys have announced that they will vote for Kamala Harris; so has Adam Kinzinger, who spoke at the Democratic National Convention.  And now there are Republican senators who have said they will not vote for Trump:  Romney and Collins and Murkowski and Moran from Kansas, of all places; Cassidy from Louisiana (!); and Young from Indiana…. Mike Pence, has come out against him along with dozens of former cabinet and White House officials, former Republican members of the House and Senate, and yesterday, former Bush Attorney General Alberto Gonzales announced he supports the Harris-Walz ticket. There is a list of former Republican governors who oppose Donald Trump that is too long to go into here, and so is the list of former Republican state senators and representatives. It’s not a tidal wave, but it is movement in the Republican Party away from Donald Trump, and that should not be ignored… <https://luciantruscott.substack.com/p/there-is-something-happening-in-the>

  6. A nice argument that there is no such thing as “liberalism”. There are only attempts to deal with the transformation from ancient-agrarian to commercial-imperial society, steampower society, and beyond—attempts that are more than the so-called “conservative” one of closing our eyes and pretending none of it happened in the hope that it will just go away:

    Amicus: Liberalism Is a Plural Noun: ‘Consider rights…. For Bentham, these are legal constructs with a practical aim…. For Thomas Paine, rights were written into the laws of nature…. For William Lloyd Garrison… rights… [were] a higher law, written in the hearts of men. These are not the same concept. They bear a loose family resemblance—but no more so to one another than to the right of labor to all that it creates, or the right of the politai of Athens to speak and be heard…. Are these thinkers part of a single liberal tradition, while Athens remains pre- and the utopian socialists non-? Continuity can disqualify Pericles, but not Proudhon; an austere individualism can bar them both, but catches Hobbes and Tocqueville too. Hobbes… we can do without…. Perhaps we can even dispense with Tocqueville. But if Paine and Bentham are not both liberals, then of what use is the word?… There is a common thread that… you can call… “liberalism”… but… it’s just modernity. Marx belongs to it as much as Mill; it claims Proudhon, and Owen too. The inheritance of Rousseau and Montesquieu is the common heritage of all mankind, and its proper heirs are all those who would defend Man qua Man against all the creatures of the past. There is no such thing as liberalism: only liberalisms, or else the Enlightenment, of which the Left is the best and truest heir. But that story, too, will have to wait… <https://homosum.substack.com/p/liberalism-is-a-plural-noun>

  7. The extent to which Donald Trump’s debate performance was worse than awful is being undercovered massively by the mainstream media, isn’t it?:
    James Fallows: Election Countdown, 55 Days to Go: The Debate: ‘Last night I saw the best presidential-debate performance in my memory. And the worst. Conveniently, I could watch them both at the same time…. Some overnight nit-pick articles (for instance, this Pitchbot-style one from the NYT) complained that voters still needed to hear more details about Harris’s economic and foreign-policy plans. Fine. Programmatic details are not what these debates are for—and anyway, she packed in as many of them as this format could handle…. Her other mission was to prompt Trump to behave at his worst—to bait or trigger him on his most sensitive points. Oh boy, did she do that…. Every minute of what Trump said could be used in a DNC ad…. Davis and… Muir were excellent, better than any other debate team in recent memory. They had serious questions; they asked them with a minimum of grandstanding; and several times they came back to ask for follow-ups…. They broke important new ground in showing how live-TV moderators could call out the most egregious falsehoods, tersely and firmly, as they occurred…. Debates that have “mattered,” have often done so in providing what we now call a “permission structure”… <https://fallows.substack.com/p/election-countdown-55-days-to-go>

  8. There is still very good reason to hope that Republicans will simply stop funding Trump-Vance and turn downballot, as Democratic big donors and grassroots donors did en masse after Biden’s debate flameout:
    Dan Drezner: Will the Second 2024 Debate Fallout Echo the First?: ‘History is not repeating itself but it could be rhyming: In the wake of Donald Trump’s Very Bad, No Good, Almost an Aaron Sorkin Caricature of a debate performance earlier this week, it is worth remembering exactly why Joe Biden’s Very Bad, No Good, Horrible debate performance caused him to exit the race…. Debate performance… co-partisans fracturing… disgruntled staffers… spilling the tea…polling [going] south…. Biden saw the handwriting on the wall and stepped aside. That five-step process [that] took less than a month…. Trump has fulfilled step one—everyone not named “Trump” knows that he screwed the pooch in the debate. The question is whether steps two through four will repeat themselves (step five ain’t happening). How much will recent history rhyme?…. We are starting to see the beginnings… two and three…. After Trump ruled out participating in another presidential debate… stories out about Senate Republicans urging Trump to debate Harris again…. And now both Trump’s staff and supporters are trying to suggest that the fault lies with one of Trump’s informal advisors, the 9/11 conspiracy theorist and super-racist Laura Loomer…. The reporting on Loomer’s coziness Trump is also… let’s say “suggestive.” As intelligence analyst J.M. Berger noted on BlueSky, “the crop of Loomer stories today read the way reporters write when they definitely know something but are not able to source it yet.”… Now it’s a question of seeing whether history will actually start to rhyme. The Harris campaign is not acting like it, which is prudent. The rest of us can wonder… <https://danieldrezner.substack.com/p/will-the-second-2024-debate-fallout#footnote-anchor-1-148850334>

  9. Neofascism: OK. Tell me: Once you claim that not “kidnap[ping] Jewish children who had been baptized [by servants] in secret” is a violation of natural law, hpw are not encouraging the victims of your grift to do so?:
    Korey Mass: Debate Over Kidnapping A Jewish Boy Revives Questions About Catholicism’s Compatibility With Political Liberty: ‘In… First Things…Dominican theologian Romanus Cessario defended the papacy’s forcible removal of a six-year-old boy from his natural family in 1858…. Harvard’s Adrien Vermuele… bluntly declared that “Pius IX’s actions were valid,” while also noting that the real debate “seems to be about whether to say so publicly.”… If removing a baptized child from non-Catholic parents was truly just in the nineteenth century, then it remains so today…. Reno… says publishing Cessario’s essay was not meant “to encourage Catholics to kidnap Jewish children who had been baptized in secret.” Nonetheless, such a disclaimer clearly evades the substantive issue… <https://thefederalist.com/2018/02/15/debate-kidnapping-jewish-boy-revives-questions-catholicisms-compatibility-political-liberty/>

  10. Cognition: A nice argument that the “risk vs. uncertainty” discourse is really about situations in which (a) you should or must take your shot, (b) you should wait and gather more information, or (c ) refuse to play because the game is rigged against you by a more-informed counterparty:
    Gregory Byshenk: ‘“But when your counterparty is Nature herself, does it make any sense to sharply distinguish between risk and uncertainty?…” It seems to me that there are multiple issues… what we know (or have good reason to believe)… what we do with what we know, and… whether what we do is by choice or necessity…. Drezner and Grimmer… are essentially dealing with the first[:]… is there good reason to believe that the polling models are accurate, and are accurately representing risk and uncertainty? If… the answer… is an unqualified ‘no’… the danger… is that we accept their “guesses”… as reasonable measures…. The second issue is what we might do based upon our knowledge or lack thereof, and why. It seems clear that making a bet with some counterparty is always a matter of choice…. Where uncertainty is high, we might conclude that the counterparty has knowledge that we lack, and choose not to accept any odds that they might offer…. In choosing to make such a bet, one is not evaluating the uncertainty (per se), but the state of the counterparties knowledge. At other times, the question is: “do we need to act?” If we do… then we have no choice but to act based upon the best reasons we have…. It seems to me something of a mistake to conflate betting markets… with forced decisions… <https://braddelong.substack.com/p/scratchpad-2024-08-29-why-republicans/comment/68112760>

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    SubStack Posts:

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    On The Abolitionism of the Ancients (There Was Never Such a Thing)
    I have a certain fondness for antiquity, despite all it really is. Homer’s bronze-age barbarism is alloyed with a supramodern maturity of spirit, and despite the vast supply of senseless violence there remains one humane and decent thread woven without compromise through the tragic view of life…
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We Have Trump Fed Governor Appointee Michelle Bowman as the First Governor Vote Against an FOMC Decision since... 2005

Well, Well, Well: distinctly odd. Those holding small-scale community-banker seats on the Board of Governors are rarely the interest-rate hawk fringe outliers on the FOMC. The lived experience of serving as a community banker means that repayment risk drives their institution’s typical portfolio to suffer substantially in recession. And I certainly did not see her as the inflation-hawk fringe of the FOMC… before November 2020…

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I confess to substantial curiosity about whether Fed Governor Michelle Bowman will stay hawkish on monetary policy should Donald Trump become president again on January 21, 2025…

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Trump-appointed Federal Reserve Governor Michelle Bowman dissented from the Federal Reserve’s decision at its September 18, 2024 meeting to cut the Federal Fund interest rate by 0.50%-points. She is the very first Fed Governor to vote against an FOMC decision since… 2005.

Before she was appointed a Fed Governor, she was, starting at age 24: a staffer for Senator Bob Dole of Kansas over 1995-1996, counsel to the U.S. House Committee on Transportation and Infrastructure and the Committee on Government Reform and Oversight over 1997-2002, director of congressional and intergovernmental affairs at the infamous Bush Federal Emergency Management Agency (FEMA) in 2002, a deputy assistant secretary and policy advisor to Homeland Security Secretary Tom Ridge over 2003-2004, leading a London-based government and public affairs consultancy over 2004-2010, vice president of Farmers & Drovers Bank (25 employees, assets of $185 million) in Council Grove, Kansas (population 2,140) over 2010-2017, and then, last, State Bank Commissioner of Kansas over 2017-2018.

Back before 2001 she did not strike me as a monetary-policy hawk. Higher real interest rates choke off bank business, and reduce the value of their longer-duration assets relative to their short-duration liabilities.

Since 1993 there have been only six dissents from the Chair’s position by the six other Fed Governors, compared to 71 from the rotating five voting Fed Bank Presidents. The convention is strongly that Governors vote with the Chair to avoid the potential hit to the Fed’s legitimacy from the possibility that a Bank President who is legally a private banker casts a vote that determines what has become core government policy. Moreover, there has been only one hawkish Governor dissent—until now. The convention is that Governors dissent only in extremis, when they think the center of gravity of the committee is not taking risks to employment seriously enough.

But right now the guy who appointed here, Donald Trump, is for higher interest rates to keep employment from being too high to serve his purposes:

Right now, you have to keep rates where they are until you bring the economy and it could drop. Inflation is a country buster. It’s interesting. You study inflation more than I do but I’ve studied inflation plenty. And you look back to old Germany, you look back to so many countries, it eventually breaks a country. And so you know, you can’t. They have a dream that they want to lower interest rates but they are very tough right now. Now, I would have a plan to lower costs. It doesn’t have to be interest rates. Costs. Because if you could lower costs, you could then lower interest rates. But interest rates are very high now and it’s hard for them. I know they want to try and do it. Maybe they will do it prior to the election, prior to November 5, even though it’s something that they know they shouldn’t be doing… <https://www.bloomberg.com/features/2024-trump-interview-transcript/>

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And yet if he manages to return to office:

Interest rates are going to fall. Interest rates will naturally follow…. We’re going to get the energy [price] down. We’re going to get the food prices down. We’re going to do a lot of cutting [of interest rates] also, and we’re going to make our country very livable… <https://www.rev.com/blog/transcripts/trump-speaks-at-phoenix-rally>

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Let’s see what those intellectual property thieves at <http://perplexity.ai> have to say about this:

Please search the speeches of Fed governor Michelle Bowman. During the Trump administration, was she dovish—for lower interest rates—or hawkish—for higher interest rates? During the Biden administration, has she been dovish—for lower interest rates—or hawkish—for higher interest rates?

Based on the search results and my analysis of Michelle Bowman’s statements and voting record, here is an overview of her monetary policy stance during the Trump and Biden administrations:

Trump Administration (2018-2020)

During the Trump administration, Michelle Bowman generally aligned with the Federal Reserve’s overall dovish stance, supporting lower interest rates:

  • Bowman took office as a Fed governor in November 2018, near the end of Trump’s term.

  • She consistently voted in favor of the Fed’s interest rate cuts in 2019 and the emergency rate cuts in early 2020 in response to the COVID-19 pandemic.

  • There is no evidence in the search results of Bowman dissenting or pushing for higher rates during this period.

Biden Administration (2021-present)

Under the Biden administration, Bowman has taken a more hawkish stance, generally favoring higher interest rates to combat inflation:

  • In August 2023, Bowman expressed concerns that the fight against inflation was not yet fully resolved, suggesting a preference for maintaining higher rates.

  • In August 2024, she stated that while inflation had made progress, it remained “uncomfortably above the Committee’s 2 percent goal.” She advocated for patience in lowering rates, warning against overreacting to single data points.

  • Most notably, in September 2024, Bowman became the first Fed governor since 2005 to dissent against an interest rate decision. She voted against a 50 basis point rate cut, preferring a smaller 25 basis point reduction.

  • Bowman has consistently emphasized the risks of premature rate cuts, stating that the Fed needs to be cautious in considering adjustments to the current policy stance.

In summary, Bowman appears to have shifted from a generally dovish stance during the Trump administration to a more hawkish position under Biden, particularly as inflation became a significant concern. Her recent dissent in favor of a smaller rate cut underscores her current hawkish leanings.

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Watching the Fed: Anticipated Rate-Cut Rollercoaster

With Nick Timiraos & Colby Smith—& Tim Duy—now in charge of how I interpret Fed messaging.… The Federal Reserve initiated its 2024 monetary-policy easing cycle with a 50-basis-point rate cut, a decision hailed as the committee consensus coalescing around the view of Chair Jerome Powell. But, Eeyore-like, Mohamed El-Erian points to the ongoing narrative swings as signs of serious flaws in communications doctrine at the Fed…

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Last Monday September 16 the very sharp Tim Duy nailed it as to what the Federal Reserve was going to do today, September 28:

Tim Duy: Fed Watch, 9/16/2024: ‘The Fed will most likely kick off this easing cycle with a 50bp cut this week…. With the July employment report. At that time, we switched our call to a 50bp rate cut in September with the guidance that even if the Fed opted for 25bp, it would hike rates 50bp at least once before the end of the year…. The data since then only bolstered the case to lead with [0.]50[%-points]…. [But] here is absolutely no question that speakers steadfastly denied that the labor market had “deteriorated,” the new standard to justify a [0.]50[%-points]… cut…. Governor Chris Waller, who had three hours with the August employment report…. His guidance describes leading with a [0.]25[%-points]… cut and escalating to [0.]50[%-points]… if necessary…. By last Thursday [September 12], market pricing had decayed to just -[0.]28.5[%-points]… for the September meeting…. The stage was set for the Fed to cut 25[%-points]…. That afternoon, however, Wall Street Journal reporter Nick Timiraos released an article…. Financial Times reporter Colby Smith followed up… and markets perceived that as confirmation that the Fed had engaged in covert communications during the blackout…. The central guidance… was suddenly downplayed in the press. Fed speakers clearly guided markets to [0.]25[%-points], but the press overall now describes this meeting as a close call between [0.]25[%-points] and [0.]50[%-points]. It very much was not a close call on the [previous] Friday [September 6 when Waller spoke]… <http://sghmacro.com>

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Nailed it.

To the wall:

Enda Curran: Fed’s Half-Point Rate Cut Is a Victory for Powell: ‘That the Fed thinks it’s brought inflation under control without having blown up the labor market and can now lower borrowing costs is a significant moment in US economic history. “This was a huge victory for Jay Powell,” KPMG Chief Economist Diane Swonk told Bloomberg Television, making the point that the Fed chair succeeded in getting fellow policymakers to agree to a 50-basis-point move…. Projections released by the Fed show a narrow majority, 10 of 19 officials, favors lowering rates by at least an additional half-point over its two remaining 2024 meetings… <https://www.bloomberg.com/news/newsletters/2024-09-18/fed-s-half-point-rate-cut-is-victory-for-chair-jerome-powell?cmpid=BBD091824_businessweek>

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Nick Timiraos and Colby Smith are now 100% in charge of my understanding of what forward guidance the Federal Reserve is trying to provide about its monetary policy.

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Reading About Rome

A note on my current course: Economic Growth in Historical Perspective...

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Due to an oversight, I do not have any readings explicitly focused on Rome for my classes this semester—even though I spend 8% of my class time this semester on Rome. I, you see, use it as the example of a society of domination in the long Malthusian agrarian age—a society that is very successful, a successful “efflorescence”, along many dimensions.

So, below the fold: A brief list of what I currently find most useful, moving rapidly from the simple to the very complex. I follow it with a very brief account of my current thinking: Rome’s vast territorial expansion, economic integration, and infrastructural development represent one of the most significant “efflorescences” in agrarian-age history.

The big question is: Did this efflorescence translate into a net improvement in human flourishing, or did it merely make the Roman élite the beneficiaries of a Malthusian society of domination that was even more of a shitshow than was usual in the long agrarian age? Regrettably, I have to confess that I do not know—although I do think that, fifty years after the conquest frontier washed over your region, it was probably a net improvement for human flourishing as long as the Pax Romana could last.

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Fed Watching in Mid-September 2024: Genuinely Uncertain Whether Interest Rates Are Going to Fall 0.25%-Points or 0.50%-Points Later This Week

A disturbing position for me to find myself in. Usually I have views of likely actions on the part of the FOMC. My views may be wrong ex post, but they are views and well-reasoned views. This week I find that I do not…

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Federal Reserve future policy action tea-leaf reading seems unusually difficult.

And not just this week.

Market expectations about where the economy and the Fed are going have swung remarkably widely recently. We have now had seventeen months since the economy touched down on what appears to be a remarkably smooth and soft economic landing. The Federal Reserve has left the interest rates it controls untouched throughout this period. And yet there have been these very wide swings in the interest rates that matter most for the economy, even though they have been accompanied by no FOMC policy actions whatsoever:

The ten-year inflation-adjusted safe real interest rate—the interest rate that matters for construction, the exchange rate, and net exports. But the Federal Funds rate has been constant throughout this period as market expectations jump up and down…

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But Federal Reserve future policy action tea-leaf reading is especially difficult this week.


The very sharp Tim Duy of SGH Macro Advisors <https://www.sghmacro.com> thinks, however, that the Fed is more likely to cut interest rates not by 0.25%-points but by 0.5%-points this week, basing his view on the appearance of two news articles from last Thursday:

Nick Timiraos: The Fed’s Rate-Cut Dilemma: Start Big or Small?: ‘Starting with a 50-basis-point cut could communicate greater alarm about the economy or lead markets to anticipate a faster pace of rate cuts, which in turn might ignite market rallies that make it harder to finish the inflation fight…. If the risks are truly balanced between higher inflation and weaker labor market conditions, as Fed officials have said they believe is the case, then the Fed should want rates much closer to a neutral level, said William Dudley, who served as New York Fed president from 2009 to 2018. Given that all Fed officials believe that rate is below 4%, it doesn’t make sense to move in 25-basis-point increments. “Logic says they should be going faster,” he said. For those reasons, [Esther] George said she would find it hard to oppose a larger cut right now. “You can make a very good case for 50, to say, ‘Just as we went quickly’” to raise rates above a neutral setting, “we’re now well above it, and so we can take a couple of bites at this apple”… <https://www.wsj.com/economy/central-banking/fed-interest-rate-cut-size-861c9600>

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and:

Colby Smith: Federal Reserve wrestles with how aggressively to cut interest rates: ‘A half-point rate cut in September would let the Fed return borrowing costs to normal levels more quickly, removing restraint on the economy and protecting the labour market from further weakness. Krishna Guha, vice-chair of Evercore ISI, said a half-point move next week “would take less risk with the soft landing”… <https://www.ft.com/content/bcff6242-2442-4369-8c15-8524c6bea60f>

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The thinking? That Governor Chris Waller’s September 6 employment-release day “The Time Has Come” speech at Notre Dame <https://www.federalreserve.gov/newsevents/speech/waller20240906a.htm> closed the door to an 0.5%-point September cut nearly all the way. And then the Fed was supposed to go into pre-meeting communications blackout. But then someone told both Nick Timiraos and Colby Smith to take another look and pointed them at different parts of the previous messaging. The line is “once is happenstance, twice is coïncidence, three times is action”. And here we have only twice. But it does feel like more than coïncidence.

Usually Tim is right. But in the past I have always had a view (a) about whether his analysis is better than mine and (b) about whether he is right.

Right now I do not have a view on either of these things.

I confess that not only do I genuinely not know whether the Fed is more likely to cut interest rates by 0.25%-points or by 0.50%-points at its meeting later this week, but that also I do not see anybody who I trust to be likely to have a more informed view than I do about what their choice will be—except, of course, for the FOMC meeting participants and their senior staffs.

My principal takeäway from all this is that it shows that there is a rather urgent Federal Reserve communications task here. Federal Reserve communications policies need to change to get the Fed out of the box it has trapped itself in. In a good world, expectations of future Federal Reserve policy would be anchored by clear messaging about:

  1. What the Fed thinks the level of r* is—that is, if nothing big hits the economy over the next several years and the economy attains true “equipoise”, to what level the Fed thinks it will try to guide the level of interest rates.

  2. How long the Fed thinks it will take to get close to r.

  3. How large the range of uncertainty is about r.

Thus I am on Team John Williams here:

John Williams: R: A Global Perspective: ‘R is either explicitly or implicitly at the core of any macroeconomic model or framework one can imagine. Pretending it doesn’t exist or wishing it away does not change that… <https://www.newyorkfed.org/newsevents/speeches/2024/wil240703>

And I think this needs to be faced squarely. Otherwise we get into situations like this, in which an absence of a medium-run anchor for policy guidance leads market psychology to focus squarely and improperly on the very short run, when it ought to take a longer view of things.

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READING: Cicero at His Most Ciceronian, in a Sense...

Cicero cannot decide what to do, and so the actions he eventually takes are half-hearted and ineffective…

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In the TV miniseries Rome, Marcus Tullius Cicero was played by David Bamber. Back in 1995 David Bamber had stolen every single scene he was in in the Pride & Prejudice miniseries by his portrayal of the obsequious and socially awkward moron who is the Bennet’s cousin Mr. Collins. He brings a good deal of that energy to his portrayal of Cicero, who is not a man you want on your side when the chips are down.

The situation in Rome in the year -49 is this: A strongly unconventional high politician holding proconsular office—C. Iulius Cæsar provinciae Galliae et Illyrici pro console.—faces the expiration of his term, and thus of his immunity as a holder of mperium from judicial prosection. Cæsar knows that, because of his actions in office earlier in year -59, he has enemies. He knows that his adversaries will try and convict him of crimes after he lays down his power…

We have a primary source for the start of the Roman Civil War in addition to G. Iulius Cæsar’s deceptively powerful plain-spoken “just the facts” narrative in his Commentaries on the Civl War—a narrative that is also a clever and sophisticated lawyer’s brief. Our one other primary source: Marcus Tullius Cicero’s letters to his BFF Titus Pomponius Atticus.

Cæsar, in his The Civil War, makes himself out to be reasonable, rational, decisive, and clever. Cicero, in his Letters to Atticus is a contrast. He lets his hair down. He is writing to someone he trusts to love him without reservation. He is completely unconcerned with making himself appear to be less flawed than he appears. And the impression he leaves is absolutely dreadful: he makes himself out to be erratic, dithering, and idiotic.

Here is Cicero’s most infamous letter to Atticus, as he tries to decide what to do as the Roman Civil War between Cæsar and Pompey begins. Cicero had three choices:

  1. follow the cause—in his case, that of the optimates who were clinging to Pompey—and damn the man (Pompey) as having lost it and caused the Civil War because he would brook no equal;

  2. follow the man—Cæsar—and damn the cause (as Asinius Pollio is said to have done) of sacrificing Republican norms to Cæsar’s dignitas, as Cæsar started the Civil War because he would brook no superior; or

  3. howl at the moon, and try to build a coalition to get both to stand down and then retire, and probably get killed.

And Cicero cannot decide what to do, and so the actions he eventually takes are half-hearted and ineffective…

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A PREY to the gravest and most depressing anxieties, though I am precluded from discussing the question with you personally, I have, nevertheless, resolved to seek your advice.

The whole question in debate is this: if Pompey quits Italy, which I suspect that he is about to do, what do you think I ought to do?

To assist you in giving me advice, I will state briefly what occurs to my mind on either side:

Pompey’s very great services in securing my restoration and the intimacy existing between us, as well as the interests of the Republic themselves, lead me to the conclusion that my policy or, if you choose, my fortune must be united with his. Then there is this: if I stay here and desert that company of most loyal and illustrious citizens, I must come under the power of one man [C. Julius Cæsar]: and although he shews by many instances that he is well disposed to me—and you yourself know what precautions I took in that direction, because I suspected the storm that was hanging over our heads—yet I must look at the matter in two lights: first, how far I can trust him; and, secondly, however certain I may be that he will be my friend, whether it is the action of a brave man and a good citizen [for me] to remain in a city, in which, after having enjoyed the highest offices and commands, after having performed the most important services, and been invested with the most august priesthood, he is to become a mere name [alternatively: become a slave], and to incur danger, not perchance unaccompanied by some disgrace, if Pompey ever restores the constitution.

So much for that side.

Now for the other.

Our friend Pompey has shewn neither wisdom nor courage in anything that he has done: I may add that he has acted in every case against my counsel and advice. I put out of the question the old scores: how he fostered Caesar against the Republic, promoted, armed him; assisted him in the passing of laws by violence and against the auspices; supported the addition of farther Gaul to his provinces; married his daughter; acted as augur at the adoption of Publius Clodius; shewed greater zeal in effecting my recall than in preventing my exile; supported the extension of Caesar’s provincial government; championed his cause at every point in his absence; actually in his third consulship, when he started being a defender of the constitution, yet urged the ten tribunes to propose the bill allowing Caesar’s candidature in his absence; confirmed the same privilege in a certain law of his own, and resisted the consul Marcus Marcellus when he proposed to fix the end of Caesar’s government on the 1st of March.

Well, to pass over all this, what could be more discreditable, more ill-considered, than this departure from the city, or I should rather call it this most shameful, most unprincipled flight? What terms could there be that were not preferable to the abandonment of one’s country? The terms offered were bad. I confess it: but could anything be worse than this?

But (you say) he will recover the Republic. When? What preparation has been made for realizing that hope? Is not Picenum lost? Is not the road to the city laid open? Is not all money public and private, handed over to his opponent? In fact, there is no cause to support, no forces to support it, no rallying point for those who wish the constitution maintained. Apulia has been selected, the most sparsely peopled district of Italy, and the most widely removed from the point of attack in this war: it is evident that, from sheer desperation, the object in view is flight and the facilities of a sea-coast.

I undertook Capua with reluctance, not because I desired to shirk that duty, but because it was in a cause in which there was no openly expressed grievance on the part of the orders in the state or of private individuals, though there was some-far from keen, as usual—on the part of the Optimates; and because, as I saw for myself, the multitude and the lowest of the people were inclined to the other side, while many were eager simply for change. I told Pompey himself that I would undertake no duty without a guard and money. Accordingly, I had practically nothing to do at all, because, from the first, I saw that his sole object was flight.

If I am to follow that flight now, whither am I to go? Not with him; for when I started to join him, I learnt that Caesar was in such a position that I could not reach Luceria safely. I should have to sail by the Mare Inferum, without definite direction and in the worst possible weather. Again, am I to take my brother, or only my son without him, or how? Either alternative involves very great difficulty, and the keenest distress of mind. Again, what kind of attack will he employ against us and our property in our absence? Something more violent than in the case of others, for he will perhaps think that he has a chance of winning popularity by damaging us. Consider, again, these fetters—I mean my laurelled fasces—what a nuisance to carry them out of Italy! Moreover, what place, even suppose I enjoy a calm passage, will be safe for me till I reach Pompey? By what route, again, or whither to go, I have no idea.

If, on the other hand, I keep my ground and find some footing on this side, I shall have done what L. Philippus did during the tyranny of Cinna, as well as L. Flaccus and Q. Mucius. Though it turned out unhappily in the case of the latter, he used, nevertheless, to say that he foresaw the result (a result which did actually happen), but preferred it to approaching the walls of his native city in arms. Thrasybulus acted differently and perhaps better.

But yet there are good grounds for Mucius’s line of policy and opinion, as well as for that of the other, namely, to temporize, when necessary, and not to let slip an opportunity when it is given. But even if I adopt this course, those same fasces involve a difficulty. For suppose he is my friend, which is uncertain, but suppose he is, he will offer me the triumph. Not to accept I fear will get me into trouble with him, to accept I fear will appear scandalous to the loyalists. “What a difficult and insoluble problem !” you say. And yet I must solve it. For what can possibly be done else?

Don’t think me more inclined to remain, because I have used more words on that side. It may very well be, as happens in many investigations, that one side has the superiority in words, the other in truth.

Wherefore please give me your advice, on the understanding that I am considering a most important matter with impartiality.

There is a vessel at Caieta ready for me, and another at Brundisium. But here come couriers, as I am in the act of writing these words at Cales before daybreak: here comes a letter stating that Caesar has reached Corfinium, that Domitius is inside Corfinium with a strong force eager to fight. I can’t believe that our friend Gnaeus will go so far as to abandon Domitius, though he has sent Scipio in advance to Brundisium with two cohorts, and has written to the consuls saying that he wishes the legion enrolled by Faustus to be taken to Sicily by a consul. But it will be shameful if Domitius is abandoned when imploring to be relieved.

There is a certain hope, no great one in my mind, but warmly entertained in these parts, that Afranius has fought a battle with Trebonius in the Pyrenees; that Trebonius has been repulsed; that your friend Fadius also has come over with his cohorts. The chief hope, however, is that Afranius is on his way hither with large forces. If that is the case, we shall perhaps stay in Italy.

However, since Caesar’s line of march was uncertain, as he was thought to be intending to go either in the direction of Capua or Luceria, I am sending Lepta with a letter to Pompey, and am returning myself to Formiae to avoid falling in with anyone. I wished you to know this, and I am writing in a somewhat quieter frame of mind than I mentioned just Now: my object being not to put forward a judgment of my own, but to ask yours… <https://www.bradford-delong.com/2020/07/marcus-tullius-ciceros-take-on-the-first-three-months-of-49-liveblogging-the-fall-of-the-roman-republic.html>


And MOAR from Cicero starting in late December of the year -50:

Marcus Tullius Cicero: at Formiae, to Titus Pomponius Atticus at Rome; 27 Dec -50 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%207.9>: ‘Please consider… and at the same time “solve this strictly political problem.”… Consider, I say, which of these evils, some one of which we must confront, you think the least. You will no doubt say “to persuade him [Caesar] to hand over his army, and so become consul.“… For us, however, as certain persons think, nothing is more to be dreaded than his becoming consul. “But I would prefer his being consul on these terms to his being so with an army,” you will say. Certainly. But even on “these terms,” I tell you, there is one who thinks it a grave evil…. Imagine him consul a second time after our experience of his former consulship! “Why, comparatively weak as he was then,” you say, “he was more powerful than the whole state.” What, then, do you think will be the case now?… Pray make any suggestion that occurs to you: for my part, I am on the rack day and night….


Cicero: at Formiae, to Atticus at Rome; 08 Feb -49 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%207.21>: ‘I arrived at Capua for the 5th of February, in accordance with the order of the consuls…. What I ascertained while at Capua was that the consuls are no good: that no levy is being held anywhere…. As to our leader Gnaeus [Pompeius]—what an inconceivably miserable spectacle! What a complete breakdown! No courage, no plan, no forces, no energy! I will pass over his most discreditable flight from the city, his abject speeches in the towns, his ignorance not only of his opponent’s, but even of his own resources…. Caesar himself urges me to promote peace. But his letter is dated before he began his violent proceedings. Dolabella and Caelius both say that he is well satisfied with my conduct. I am on the rack of perplexity. Assist me by your advice if you can, but all the same look after your own interests to the utmost of your power. In such a total upset I have nothing to say to you. I am looking for a letter from you….


Cicero: at Formiae, to Atticus at Rome; 10 Feb -49 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%207.23>: ‘On the 9th of February, in the evening, I received a letter from Philotimus saying that “Domitius has a strong force; cohorts from Picenum, under Lentulus and Thermus, have effected a junction with Domitius’s army; Caesar’s advance can be stopped: he is himself afraid of that; the courage of the loyalists at Rome is raised; the disloyal are in dismay”…. I fear that these are dreams. However, Manius Lepidus, L. Torquatus, Gaius Cassius, who are staying with me at Formiae, are quite restored to life by Philotimus’s letter….


Cicero: at Formiae, to Atticus at Rome; 23 Feb -49 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%208.7>: ‘There is only one thing left to complete our friend’s [Pompey’s] disgrace-failure to relieve Domitius. “But nobody doubts that he intends going to his relief.” I don’t think he will. “Will he, then, abandon such an illustrious citizen, and those whom you know to be with him, and that when he himself has thirty cohorts?” Yes, he will, unless I am entirely mistaken. He has become alarmed beyond belief. He looks to nothing except flight; in which you think—for I see what your opinion is—that I ought to be his companion. I, however, know from whom to fly, but not whom to follow. As to my remark, which you praise and declare to be memorable, that I preferred defeat with Pompey to victory with those others, it is quite true: I do prefer it—but it is with the Pompey as he was then, or as I thought him…


Cicero: at Formiae, to Atticus at Rome; 01 Mar -49 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%208.13>: ‘We are hanging entirely on news from Brundisium…. Do you see upon what sort of man [Caesar] the Republic has fallen? How clear-sighted, how alert, how well prepared! By heaven, if he puts no one to death, nor despoils anyone of anything, he will be most adored by those who had feared him most. The burgesses of the country towns, and the country people also, talk a great deal to me. They don’t care a farthing for anything but their lands, their poor villas, their paltry pence. And now observe the reaction: the man in whom they once trusted [Pompey] they now dread: the man they dreaded [Caesar] they worship. What grave mistakes and vices on our side are accountable for this I cannot think of without sorrow….


Cicero: at Formiae, to Atticus at Rome; 18 Mar -49 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%209.10>: ‘The one thing that torments me is that I did not follow Pompey, like any private in the ranks, when, in every part of his policy, he was losing his footing, or rather rushing headlong to ruin. On the 17th of January I could see that he was thoroughly frightened…. From that moment he forfeited my confidence, and never ceased committing one blunder after another. Meanwhile, never a line to me… It was the nature of the war, beyond measure sanguinary and widespread… that I shrank from with horror…. How often did I hear [Pompey say] “Sulla could do it, why not I?” For myself I was haunted with the reflexions: it was unrighteous of Tarquinius to stir up Porsena and Octavius Mamilius against his country; impious in Coriolanus to seek aid from the Volsci… Hippias, son of Pisistratus, who fell in the battle of Marathon bearing arms against his country, was Criminal…. However dangerous the experiment of attempting to fly hence, that experiment shall at least be made. I ought, perhaps, to have done so before. But the considerations I have mentioned held me back…


Cicero: at Formiae, to Atticus at Rome; 26 Mar -49 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%209.16>: ‘I received a letter from him [Caesar] on the 26th, in which he now talks of looking forward to my “resources,” not my “aid”…. I had written to compliment him on the moderation of his conduct at Corfinium, and he answered me as follows: “CAESAR IMPERATOR TO CICERO IMPERATOR: You judge me quite accurately—for my character is well known to you—when you say that nothing is more remote from my disposition than cruelty. For myself, as I take great delight in this policy for its own sake, so your approval of my action gives me a triumphant feeling of gladness. Nor am I shaken by the fact that those, who were allowed to go free by me [after they had surrendered], are said to have departed with the intention of renewing the war against me: for there is nothing I like better than that I should be what I am, they what they are. I should be much obliged if you would meet me at the city, that I may, as ever, avail myself in all matters of your counsels and resources. Let me assure you that nothing gives me more pleasure than the presence of your son-in-law Dolabella…“.


Cicero: at Arpinum, to Atticus at Rome; 28 Mar -49 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%209.18>: ‘I FOLLOWED your advice in both particulars: for I spoke [to Caesar] in such a manner as rather to gain his respect than his thanks, and I stuck to the resolution of not going to Rome. I found myself mistaken in one respect—in thinking that he would be easily satisfied. I never saw anything less so…. “My motion [in the Senate] will be this,” said I, “that the senate disapproves of any[one] going to Spain [to fight] or taking armies across to Greece, and,” I added, “I shall make many regretful remarks as to Gnaeus [Pompeius].” Thereupon he said, “Of course, I don’t wish such things said [on the Senate floor].” “So I supposed,” said I, “but I must decline being present there, because I must either speak in this sense, and say many things which I could not possibly pass over, if present, or I must not come at all.” The upshot was that, by way of ending the discussion, he requested that I would think it over. I couldn’t say no to that. So we parted. I feel certain, therefore, that he has no love for me. But I felt warm satisfaction with myself, which hasn’t been the case for some time past. For the rest, good heavens! What a crew! What an inferno! to use your word. What a gang of bankrupts and desperadoes!…

Cicero: at Arpinum, to Atticus at Rome; 01 Apr -49 <http://perseus.uchicago.edu/perseus-cgi/citequery3.pl?dbname=LatinAugust2012&getid=1&query=Cic.%20Att.%209.19>: ‘BEING debarred from Rome, I gave my son his toga virilis at Arpinum in preference to any other place, and my fellow townsmen were gratified at the compliment: though I observed everywhere that both they and others whom I passed in my journey were in low spirits and much dejected. So melancholy and shocking is the contemplation of this tremendous disaster…. Don’t imagine that there is a single scoundrel in Italy who is not to be found among them. I saw them en masse at Formiae. I never, by Hercules! believed them to be human beings, and I knew them all: but I had never seen them collected in one place. Let us go, then, whither we have resolved to go, and leave all that is ours behind us. Let us start to join him [Pompey], to whom our arrival will give greater satisfaction than if we had been together from the first. For at that time we were in the highest hopes, now I, at any rate, have none; nor has anyone except myself left Italy, unless he regarded Caesar as his personal enemy. Nor, by Hercules! do I do this for the sake of the Republic, which I regard as completely abolished: but to prevent anyone thinking me ungrateful to the man [Pompey], who relieved me from the miseries which he had himself inflicted upon me: and at the same time because I cannot endure the sight of what is happening, or of what is certain to happen…

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READING: Two Recent Speeches from Senior Federal Reserve Policymakers That I See as Quite Important

Federal Reserve Bank of New York President John Williams on July 3, 2024; & Federal Reserve Governor Chris Waller on September 6, 2024: on the importance of r, the rate of interest that, when the economy is in equipoise, makes Say’s Law of macroeconomic balance true in practice even though it is false in theory; and how the Federal Reserve has over the past seventeen months kept the rate of interest well above what we have very good reason to think is the level of r

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R-Star: A Global Perspective

July 03, 2024

John C. Williams, President and Chief Executive Officer[, Federal Reserve Bank of New York].

Remarks at the ECB Forum on Central Banking, Sintra, Portugal.

As prepared for delivery <https://www.newyorkfed.org/newsevents/speeches/2024/wil240703>:


For over 125 years, economists have grappled with a dilemma: How can a concept at the very heart of monetary theory be so vexing to quantify? I’m talking, of course, about r-star, the natural rate of interest. The quotations listed in Table 1 reflect the age-old challenges surrounding it.1 Recently, r-star has been in the spotlight once again.

Today, my remarks will focus on longer-run r-star, which is the real interest rate expected to prevail when shocks to the economy have receded and the economy is growing at its potential rate.

Before I go further, I’ll provide the standard Fed disclaimer that the views I express today are mine alone and do not necessarily reflect those of the Federal Open Market Committee (FOMC) or others in the Federal Reserve System.


Three Approaches

Subsequent to Milton Friedman’s claim to the contrary,2 there are now three common approaches to inferring r-star from data: using a statistical method to extract a longer-run trend, basing it on financial market or survey data, or looking at r-star’s effects on economic data. Each provides useful information, but each also poses significant challenges. As discussed in one of my papers with Thomas Laubach, univariate statistical methods do not adequately control for economic factors that influence interest rates. And these estimates can be overly influenced by large macroeconomic disturbances, such as the inflation of the 1970s or the pandemic.3 Financial market and survey data are subject to measurement issues and, in any case, tell us what people are thinking about r-star, rather than act as an independent source of information on r-star. This is what I have referred to as a “hall of mirrors.”4

For these reasons, I will focus my remarks on estimates of r-star gleaned from macroeconomic models that do not rely on financial market or survey data—in particular, the Holston-Laubach-Williams (HLW) model, which infers the natural rate of interest through the behavior of interest rates, inflation, and GDP.5 Or, as the economist John H. Williams put it, “by its works.”6


A Global Supply and Demand for Savings

Our estimates of r-star in the euro area and the United States fell dramatically over the quarter century leading up to the pandemic, and they are currently near the estimates from prior to the pandemic. Figure 1 shows the time series of r-star estimates for the euro area and the United States. I’ll focus first on the euro area.

The estimate of r-star in the euro area is 0.5 percent in 2023, equal to its average over the five years prior to the outbreak of COVID. This assessment of a very low r-star is broadly consistent with analysis by ECB economists using a variety of models.7

The sizable decline in estimates of r-star during the decades prior to the pandemic is common to many advanced and emerging economies. It reflects developments related to the global supply and demand for savings.8 These include falling birth rates and relatively low productivity growth that both reduce demand for savings, as well as increases in longevity and wealth inequality that increase the supply of savings. I emphasize the word global, because in a world of open capital markets, one should expect r-star to be highly correlated across countries. Indeed, there is evidence that r-star estimates are highly interconnected in advanced economies, although local factors play a role as well.9

The role of common and idiosyncratic factors is seen by comparing the estimates for the euro area to those for the United States, also shown in Figure 1. Although the two sets of estimates display some shorter-term wiggles, the dominant shared feature is the sustained two-percentage-point decline in r-star over the past 30 years. The same pattern is true of our estimates for Canada. Hence, according to these estimates, the low r-star regime endures.


Is R-Star Rising?

This finding runs counter to recent commentary suggesting that r-star has risen due to persistent changes in the balance between the supply and demand for savings, such as higher investment in AI and renewable energy, as well as larger government debt. In fact, some measures of longer-run r-star have risen to levels well above those directly prior to the pandemic. For example, market-based measures of five-year, five-year-forward real rates for the euro area and the United States have risen well above the HLW estimates, as shown in Figure 2.

Two things stand out from this figure. First, until recently, far-forward real rates displayed a broadly similar pattern of decline as the model estimates of r-star. Second, the market-based measures are volatile. Indeed, in the years before the recent rise, they had fallen to very low levels, well below the corresponding model estimates. This points to a significant time-varying risk premium, which interferes with taking market-based measures at face value in assessing what markets are telling us about their perceptions of r-star. For example, based on the D’Amico, Kim, and Wei term structure model, the estimated rise in U.S. far-forward expected real yields since the onset of the pandemic is significantly smaller than that implied by a direct read of real yields.10

Where does this leave us regarding r-star? Although the value of r-star is always highly uncertain, the case for a sizable increase in r-star has yet to meet two important tests. First, owing to the interconnectedness of r-star across countries, plausible factors pushing up r-star on a sustained basis are likely to be global in nature. This highlights a tension between the evidence from Europe that r-star is still very low and arguments in the United States that r-star is now closer to levels seen 20 years ago.

Second, any increase in r-star must overcome the forces that have been pushing r-star down for decades.11 In this regard, recent data reinforce the continuation of pre-pandemic trends in global demographics and productivity growth. One lens through which to see this is our model estimates of potential GDP, or y-star, which is a key factor that affects r-star. Many of the explanations arguing for a higher r-star would likely show up in higher potential output growth. However, the HLW estimates of euro area and U.S. trend potential GDP growth in 2023 are nearly unchanged from their respective 2019 values. This is consistent with other estimates of potential GDP growth for the euro area and the United States.12


R-Star and Monetary Policy

I will end with a brief comment on the usefulness of estimates of r-star for policymaking. First, as the Swedish economist Knut Wicksell and others have stressed, r-star is either explicitly or implicitly at the core of any macroeconomic model or framework one can imagine. Pretending it doesn’t exist or wishing it away does not change that. In that context, it is important that we do our best to understand the factors that affect r-star and the uncertainties related to it, so that we have the best understanding possible of the forces affecting the longer-term evolution of the economy.

Second, and equally important, as shown in my work with Athanasios Orphanides, the high degree of uncertainty about r-star means that one should not overly rely on estimates of r-star in determining the appropriate setting of monetary policy at a given point in time.13 Instead, such determinations must be, and are, based on a wide range of information and assessments, including those related to risks.

Presentation


1 The original sources of the quotations are the following:
Knut Wicksell, 1898. Interest and Prices: A Study of the Causes Regulating the Value of Money. Translated by R. F. Kahn, London: Macmillan, published 1936.
Gustav Cassel, 1928. “The Rate of Interest, the Bank Rate, and the Stabilization of Prices,” The Quarterly Journal of Economics 42(4): 511–29.
John H. Williams, 1931. “The Monetary Doctrines of J. M. Keynes,” The Quarterly Journal of Economics 45(4): 547-87.
Milton Friedman, 1968. “The Role of Monetary Policy,” The American Economic Review58(1): 1–17. 
Thomas Laubach and John C. Williams, 2003. “Measuring the Natural Rate of Interest,” The Review of Economics and Statistics 85(4): 1063-70.
The first four quotations were originally compiled in Athanasios Orphanides and John C. Williams, 2002. “Robust Monetary Policy Rules with Unknown Natural Rates,” Brookings Papers on Economic Activity, 2: pp. 63-145.

2 Milton Friedman, 1968. “The Role of Monetary Policy,” The American Economic Review 58(1): 1–17.

3 Thomas Laubach and John C. Williams, 2016. “Measuring the Natural Rate of Interest Redux,” Business Economics, 51: 51-67.

4 John C. Williams, 2017. Comment on “Safety, Liquidity, and the Natural Rate of Interest,” by Marco Del Negro, Marc P. Giannoni, Domenico Giannone, and Andrea Tambalotti, Brookings Papers on Economic Activity, 1: pp. 235-316.

5 Kathryn Holston, Thomas Laubach, and John C. Williams, 2017. “Measuring the Natural Rate of Interest: International Trends and Determinants,” Journal of International Economics 559-75; Kathryn Holston, Thomas Laubach, and John C. Williams, 2023. “Measuring the Natural Rate of Interest after COVID-19,” Federal Reserve Bank of New York, Staff Reports, no. 1063.

6 John H. Williams, 1931. “The Monetary Doctrines of J. M. Keynes,” The Quarterly Journal of Economics 45(4): 547-87.

7 Claus Brand, Noëmie Lisack, and Falk Mazelis, 2024. “Estimates of the Natural Interest Rate for the Euro Area: An Update,” European Central Bank, Economic Bulletin, Issue 1, Box 7.

8 See John C. Williams, 2018. “The Future Fortunes of R-star: Are They Really Rising?,” Federal Reserve Bank of San Francisco, FRBSF Economic Letter (May 21).

9 Kathryn Holston, Thomas Laubach, and John C. Williams, 2017. “Measuring the Natural Rate of Interest: International Trends and Determinants,” Journal of International Economics 559-75. Philip Barrett, Christoffer Koch, Jean-Marc Natal, Diaa Noureldin, and Josef Platzer, “The Natural Rate of Interest: Drivers and Implications for Policy,” World Economic Outlook, Chapter 2. International Monetary Fund: April 2023.

10 Stefania D’Amico, Don H. Kim, and Min Wei, 2018. “Tips from TIPS: The Informational Content of Treasury Inflation-Protected Security Prices,” Journal of Financial and Quantitative Analysis, 53(1): 395-436.

11 Or as Ken Rogoff and co-authors have claimed, for centuries. See Kenneth S. Rogoff, Barbara Rossi, and Paul Schmelzing, 2024. “Long-Run Trends in Long-Maturity Real Rates 1311-2022,” American Economic Review (forthcoming).

12 In fact, the HLW estimate of the level of y-star is now close to its pre-pandemic trend in the United States, and only slightly below it in the Euro Area.

13 Athanasios Orphanides and John C. Williams, 2002. “Robust Monetary Policy Rules with Unknown Natural Rates,” Brookings Papers on Economic Activity, 2: pp. 63-145; Athanasios Orphanides and Jhon C. Williams, 2007, Robust monetary policy with imperfect knowledge,” Journal of Monetary Economics, 54 (2007) 1406–1435.

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September 06, 2024

The Time Has Come

Governor Christopher J. Waller

At the University of Notre Dame, Notre Dame, Indiana

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Thank you, Eric, and thank you for the opportunity to speak to you today.1 My topic is the outlook for the U.S. economy and the implications for monetary policy, a set of judgements that have, of course, been influenced by this morning’s jobs report. When I scheduled this speech several months ago, I knew it might be challenging to speak a few hours after the release of such an important piece of data. But we like to say that monetary policy must be nimble, so that means policymakers must be nimble also. Not Simone Biles nimble, but nimble. As you will hear, I believe the data we have received this week reinforces the view that there has been continued moderation in the labor market. In light of the considerable and ongoing progress toward the Federal Open Market Committee’s 2 percent inflation goal, I believe that the balance of risks has shifted toward the employment side of our dual mandate, and that monetary policy needs to adjust accordingly.

Looking back at the economic data over the first six months of 2024, it portrayed an economy slowly cooling and not showing signs of significant weakening. The labor market had been gradually moderating for the past year or so, and although inflation rose in the first quarter, it then retreated in the second, and there was a widespread view heading into the second half of the year that the FOMC was on track to achieve a much desired but unusual “soft landing.”

Then the July jobs report came in unexpectedly soft. Job creation slowed and the unemployment rate increased by two tenths of a percentage point to 4.3 percent, the highest since October 2021. There was speculation that weather-related issues might have distorted these results and, in fact, the unemployment rate ticked down in this morning’s release. But, overall, the August report along with other recent labor data tend to confirm that there has been a continued moderation in the labor market.

The ups and downs in the data over time highlight what I consider the right approach to meeting the FOMC’s dual mandate goals—I believe we should be data dependent, but not overreact to any data point, including the latest data. When we faced a period of banking instability in the spring of 2023, there were calls from some to stop rate hikes despite inflation still running over 5 percent. But there were other tools in hand to deal with that stress, monetary policy did not overreact, and the FOMC continued tightening policy. When inflation fell unexpectedly in the second half of last year, we did not overreact and immediately cut the policy rate. Then when inflation accelerated in the first quarter, we did not overreact and raise rates despite some calls to do so. I will be looking at these last two employment reports in combination with all other data as we head into the September FOMC meeting to decide the best stance of policy. I believe our patience over the past 18 months has served us well. But the current batch of data no longer requires patience, it requires action.

Today’s jobs report continues the longer-term pattern of a softening of the labor market that is consistent with moderate growth in economic activity, the details of which I will get into in a moment. As I said at the outset, considering the progress we have made on getting inflation back to target, I believe that the balance of risks is now weighted more toward downside risks to the FOMC’s maximum-employment mandate.

While the labor market has clearly cooled, based on the evidence I see, I do not believe the economy is in a recession or necessarily headed for one soon. The collective set of economic data indicates to me that the labor market and the economy are performing in a solid manner and the prospects for continued growth and job creation are good, with inflation near 2 percent. I continue to believe that this can occur without substantial harm to the labor market. But I also believe that maintaining the economy’s forward momentum means that, as Chair Powell said recently, the time has come to begin reducing the target range for the federal funds rate.

In the rest of my remarks, I will lay out my reasons for believing that the economy and employment will likely keep growing as inflation moves toward 2 percent. The first of these is the large body of evidence that economic activity is continuing to grow at a solid pace. Real gross domestic product (GDP) grew at a 2.2 percent annual rate in the first half of this year and recent data indicates that growth is continuing at around this pace in the third quarter.

Retail sales were stronger than expected in July and showed that households continue to spend as their finances, in the aggregate, remain healthy. The increase was fairly broad based across goods categories. While many online retailers offered discounts last month, this was not a dominant factor in the solid results. Although manufacturing output fell in July and the August Institute for Supply Management manufacturing survey pointed to weak production and new orders, the similar survey for the larger, nonmanufacturing sector was consistent with a modest expansion of activity.

As for the labor market, on balance, the data that we have received in the past three days indicates to me that the labor market is continuing to soften but not deteriorate, and this judgement is important to our upcoming decision on monetary policy. As I said earlier, Wednesday’s report on job openings in July was consistent with a moderating labor market. Meanwhile, the four-week moving average of initial claims for unemployment insurance has risen gradually since January but has changed little on net in the past two months, with initial claims remaining fairly low.

The jobs report for August, released this morning, supported the story of ongoing moderation in the labor market. After rising to 4.3 percent in July, the unemployment rate ticked down to 4.2 percent in August. Taking a longer perspective, the unemployment rate over the past 16 months has increased gradually but fairly steadily from 3.4 percent to 4.2 percent in today’s release. Payrolls rose by 142,000 in August compared with 89,000 in July, leaving the three-month average payroll gain at 116,000, compared with the 267,000 average in the first quarter and 147,000 in the second. Accounting for revisions to the jobs numbers that we received in August, that level is a bit below what I see as the breakeven pace for job creation that absorbs new entrants to the workforce and keeps the unemployment rate constant.2

July marked the first time that the three-month average unemployment rate has increased by at least a half of a percentage point above its 12-month low, which was 3.6 percent in July 2023. This breached a threshold established by the Sahm rule, which observes that when this has occurred in the past, it has been a reliable indicator of the economy entering a recession.

While this is a correlation that certainly bears attention, I want to make a few cautionary points about relying on such rules in deciding that a recession has begun. As we have seen in the recent past with other supposedly reliable recession rules, such as an inverted yield curve, there is more to forecasting economic outcomes than the relationships between a couple of variables.

First, these rules are nothing more than a mechanical, statistical description of past economic outcomes—they do not seek to explain what economic forces drive the relationship between the data, nor are they based on the totality of economic data. All recessions rules do is pick up a correlation between movements in economic data and the dates of recessions or other outcomes. A second point is that, setting aside the unusual circumstances of the 1981–82 recession, recessions occur when a major shock hits the economy.3 In the absence of a big negative shock, an inversion of the yield curve or a triggering of the Sahm rule doesn’t necessarily mean we are entering a recession.

Third, recession rules typically pick up demand-driven recessions. But this is not why unemployment is rising now. GDP forecasts for the current quarter all show solid growth, labor market data show lay off rates are stable, and consumer spending is growing at a healthy rate. These data suggest demand is fairly strong. Instead, most of the increase in the unemployment rate is from workers entering the labor force and not finding jobs right away. So, the recent rise in the unemployment rate appears to be more of a supply-side-driven phenomenon, not demand driven.

And lastly, it should be clear to everyone that many pre-pandemic economic relationships have not proven to be good policy guides post-pandemic. Reliance on old lessons from inverted yield curves to predict a recession, a Phillips curve to predict inflation, or a flat Beveridge curve to predict the movement in the unemployment rate have all led to mistaken economic forecasts.

While I don’t see the recent data pointing to a recession, I do see some downside risk to employment that I will be watching closely. But at this point, I believe there is substantial evidence that the economy retains the strength and momentum to keep growing, supported by an appropriate loosening of monetary policy.

Let me now turn to the outlook for inflation. With the labor market cooling, it doesn’t surprise me that wage growth has slowed to a pace consistent with the FOMC’s price-stability goal, and this is supporting ongoing progress toward that objective. The employment cost index grew at an annualized rate of 3.5 percent from March to June, and the 12-month change was 3.9 percent for private sector workers, the lowest since late 2021.4 Average hourly earnings, reported in today’s jobs report, rose at a three-month annualized pace of 3.8 percent in August, the same as the 12-month change.

Inflation in July continued to show progress toward the FOMC’s goal. The price index for personal consumption expenditures (PCE), the Committee’s preferred inflation measure, increased at a monthly pace of 0.2 percent in July for both total and core PCE inflation. Core PCE inflation, which excludes volatile food and energy prices, is a good guide to underlying inflation, and it increased 2.7 percent over the past 12 months. Given the downward trajectory of monthly readings, I also look at the 6- and 3-month annualized rate. These stand at 2.6 percent and 1.7 percent, respectively. These numbers are good news and suggest that our restrictive policy stance has put us on the right path to attain our 2 percent inflation target.

Looking across the components of inflation, one can see the breadth of the disinflation. Over 50 percent of categories in the total and core market baskets had annualized monthly inflation less than 2.5 percent in August. In fact, the index of core goods prices has reverted to its historical pattern of slight deflation, reflecting normalized supply after the disruptions of the pandemic as well as ongoing technological and productivity advances. Meanwhile, services price inflation has slowed as wage growth has slowed, since labor is a large input for much of the service sector. Overall, I see significant and ongoing progress toward the FOMC’s inflation goal that I expect will continue over the remainder of this year.

Now let me discuss the implications of this outlook for monetary policy. As I said at the outset, considering the achieved and continuing progress on inflation and moderation in the labor market, I believe the time has come to lower the target range for the federal funds rate at our upcoming meeting. Reducing the policy rate now is consistent with many versions of the Taylor rule, which suggest reducing the policy rate is appropriate given the data in hand.

Furthermore, I do not expect this first cut to be the last. With inflation and employment near our longer-run goals and the labor market moderating, it is likely that a series of reductions will be appropriate. I believe there is sufficient room to cut the policy rate and still remain somewhat restrictive to ensure inflation continues on the path to our 2 percent target.

Determining the appropriate pace at which to reduce policy restrictiveness will be challenging. Choosing a slower pace of rate cuts gives time to gradually assess whether the neutral rate has in fact risen, but at the risk of moving too slowly and putting the labor market at risk. Cutting the policy rate at a faster pace means a greater likelihood of achieving a soft landing but at the risk of overshooting on rate cuts if the neutral rate has in fact risen above its pre-pandemic level. This would cause an undesired loosening of monetary policy.

Determining the pace of rate cuts and ultimately the total reduction in the policy rate are decisions that lie in the future. As of today, I believe it is important to start the rate cutting process at our next meeting. If subsequent data show a significant deterioration in the labor market, the FOMC can act quickly and forcefully to adjust monetary policy. I am open-minded about the size and pace of cuts, which will be based on what the data tell us about the evolution of the economy, and not on any pre-conceived notion of how and when the Committee should act. If the data supports cuts at consecutive meetings, then I believe it will be appropriate to cut at consecutive meetings. If the data suggests the need for larger cuts, then I will support that as well. I was a big advocate of front-loading rate hikes when inflation accelerated in 2022, and I will be an advocate of front-loading rate cuts if that is appropriate. Those decisions will be determined by new data and how it adds to the totality of the data and shapes my understanding of economic conditions. While I expect that these cuts will be done carefully as the economy and employment continue to grow, in the context of stable inflation, I stand ready to act promptly to support the economy as needed.


1. The views expressed here are my own and are not necessarily those of my colleagues on the Federal Reserve Board or the Federal Open Market Committee. Return to text

2. The preliminary estimate of the annual benchmark revision to the establishment survey data, which was announced on August 21, suggests that payroll growth between April 2023 and March 2024 will likely be revised down early next year by about 68,000 per month on average. The implications for payroll growth beyond March are less clear. Return to text

3. The 1981–82 recession was triggered by tight monetary policy in an effort to fight mounting inflation. For more information about this recession, see Federal Reserve History. Return to text

4. The employment cost index is a valuable measure of compensation growth because it covers non-wage benefits and accounts for shifts in the shares of workers in different occupations and industries. Return to text

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WEEKLY BRIEFLY NOTED: FOR 2024-09-13 Fr

My weekly read-around: Xi Jinping trying to keep growing Chinese capitalism inside the “bird cage”; Montana’s Beartooth range; “Rings of Power” elvenizes the orcs—to the dismay of trolls, & not in-universe ones; SubStack NOTES; very briefly noted; the Jacksonian thread of American nationalism; Daniel Webster bemused by the inauguration of Andrew Jackson; & weekly briefly noted for 2024-09-06 Fr…

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ONE AUDIO: The Best Recent Thing I Have Hears on China:

& on just what Xi Jinping thinks he is doing:

China’s Bird-Cage Economy: ‘In this episode of Pekingology, Freeman Chair in China Studies Jude Blanchette is joined by David Hoffman, Senior Advisor with the China Center for Economics & Business at The Conference Board The Conference Board, and non-resident Senior Associate with the Freeman Chair in China Studies at CSIS. They discuss China’s economy, political economy, and evolving business environment…

<https://overcast.fm/+AAf_JQRxLoI>

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ONE IMAGE: The Beartooth Range of Montana:

Hazy because of Idaho wildfires, but impressive nonetheless.

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ONE VIDEO: Humanizing (Elvenizing?) the Orcs:

From Amazon’s Lord of the Rings: The Rings of Power. Apparently the trolls—not the in-universe trolls you understand, but the right-wing internet shitposters—are unhappy with the idea that orc mothers and fathers love their children.

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SubStack NOTES:

https://www.threads.net/@kjhealy/post/C_xtSdcRosV","body_json":{"type":"doc","attrs":{"schemaVersion":"v1"},"content":[{"type":"paragraph","content":[{"type":"text","marks":[{"type":"bold"},{"type":"italic"}],"text":"Journamalism"},{"type":"text","text":": "},{"type":"text","marks":[{"type":"italic"}],"text":"Does anybody want to argue that Jeremy W. Peters, Jack Healy and Campbell Robertson should not immediately leave the journalism profession, this hour?"}]},{"type":"blockquote","content":[{"type":"paragraph","content":[{"type":"text","marks":[{"type":"bold"}],"text":"Jeremy W. Peters, Jack Healy & Campbell Robertson"},{"type":"text","text":": Pundits Said Harris Won the Debate. Undecided Voters Weren’t So Sure: ‘Voters said the vice president talked about a sweeping vision to fix the country’s most stubborn problems. But they wanted the fine print… <"},{"type":"text","marks":[{"type":"link","attrs":{"href":"www.nytimes.com/2024/09/1…","target":"_blank","rel":"nofollow ugc noopener","class":"note-link"}}],"text":"www.nytimes.com/2024/09/1…"},{"type":"text","text":">"}]}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"As Kieran Healy says:"}]},{"type":"blockquote","content":[{"type":"paragraph","content":[{"type":"text","marks":[{"type":"bold"}],"text":"Kieran Healy"},{"type":"text","text":":"},{"type":"text","marks":[{"type":"italic"}],"text":" ‘"},{"type":"text","text":"The image of a substantial contingent of “undecided” voters watching the debate, listening to Trump go on about cat-eating immigrants, thoughtfully stroking their chins, and remarking to their spouse that they should like to hear more “fine print” from Harris on policy is quite delightful, really… <"},{"type":"text","marks":[{"type":"link","attrs":{"href":"https://www.threads.net/@kjhealy/post/C_xtSdcRosV","target":"_blank","rel":"nofollow ugc noopener","class":"note-link"}}],"text":"https://www.threads.net/@kjhealy/post/C_xtSdcRosV"},{"type":"text","text":">"}]}]}]},"restacks":1,"reaction_count":13,"attachments":[{"id":"4bd5f6aa-1515-4bc9-aa46-8d4a6988e164","type":"link","linkMetadata":{"url":"https://www.threads.net/@kjhealy/post/C_xtSdcRosV","host":"threads.net","title":"Kieran Healy (@kjhealy) on Threads","description":"The image of a substantial contingent of “undecided” voters watching the debate, listening to Trump go on about cat-eating immigrants, thoughtfully stroking their chins, and remarking to their spouse that they should like to hear more “fine print” from Harris on policy is quite delightful, really.","image":"https://substack-post-media.s3.amazonaws.com/public/images/a421a8cc-1919-4ec5-8c9c-10cca9831498_877x1370.jpeg","original_image":"https://scontent-iad3-2.cdninstagram.com/v/t51.29350-15/458590989_498400069488039_5571407781515193200_n.jpg?stp=dst-jpg_e35&efg=eyJ2ZW5jb2RlX3RhZyI6ImltYWdlX3VybGdlbi44Nzd4MTM3MC5zZHIuZjI5MzUwLmRlZmF1bHRfaW1hZ2UifQ&_nc_ht=scontent-iad3-2.cdninstagram.com&_nc_cat=103&_nc_ohc=2adFbmfSCIIQ7kNvgFukU9O&_nc_gid=8d0576ebfc704f6780928de676db3b97&edm=APs17CUBAAAA&ccb=7-5&ig_cache_key=MzQ1NDc0MTU2OTgyNjM2MDA4NQ%3D%3D.3-ccb7-5&oh=00_AYBc2tiJLCgnzl1seuOdtdtEEVWbCyX-qPtrHcI34KgWNw&oe=66E7BC27&_nc_sid=10d13b"},"explicit":false}],"name":"Brad DeLong","user_id":16879,"photo_url":"https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea5ae644-9822-4ca5-ac6b-e18c017d8fbc_1189x1208.png","user_bestseller_tier":1000}}" data-component-name=“CommentPlaceholder”>
www.bls.gov/news.rele…","target":"_blank","rel":"nofollow ugc noopener","class":"note-link"}}],"text":"www.bls.gov/news.rele…"},{"type":"text","text":">"}]}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"So why—with the labor market weakening, and thus further downward pressures on the inflation rate gathering—is policy not in neutral? Yes, Chris Waller says that now is not a time for patience but for action in reducing interest rates. But surely the action needed is a monetary policy that is neutral, or even a little bit stimulative, rather than to take steps over the next year to shift from a substantially restrictive monetary policy to a moderately restrictive one. Isn’t it?"}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"And, of course, things are complicated by the Federal Reserve’s failure to provide meaningful forward guidance. To what level—were inflationary and deflationary shocks to balance each other over the next five years—does the Federal Reserve believe it should guide interest rates in the future, and how long does it think it ought to take to get there? “We are going to ease for a while, until we decide it is time to stop” is not, I think, the kind of “data dependence” that makes anybody happy."}]}]},"restacks":1,"reaction_count":5,"attachments":[],"name":"Brad DeLong","user_id":16879,"photo_url":"https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea5ae644-9822-4ca5-ac6b-e18c017d8fbc_1189x1208.png","user_bestseller_tier":1000}}" data-component-name=“CommentPlaceholder”>
https://www.bloomberg.com/news/newsletters/2024-09-06/us-august-jobs-numbers-set-up-big-fed-decision-on-interest-rates?srnd=phx-businessweek","target":"_blank","rel":"nofollow ugc noopener","class":"note-link"}}],"text":"https://www.bloomberg.com/news/newsletters/2024-09-06/us-august-jobs-numbers-set-up-big-fed-decision-on-interest-rates?srnd=phx-businessweek"},{"type":"text","text":">"}]}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"It seems to me that if the economy is in “equipoise”—and in fact touched down on its soft-landing fifteen months ago—then policy should be (and should have been for more than a year not) at neutral. Do you believe policy should be. now at neutral? Is policy now at neutral? If not, why is it not now at neutral? And how quickly do you anticipate moving to neutral? And what do you think neutral is?"}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"As you repeatedly say, questions about r* are implicitly at the heart of every monetary policy decision, and cannot be evaded by pretending they do not exist."}]}]},"restacks":0,"reaction_count":6,"attachments":[{"id":"ad48cd64-3ea7-41bb-af7c-d853e15037e7","type":"link","linkMetadata":{"url":"https://www.bloomberg.com/news/newsletters/2024-09-06/us-august-jobs-numbers-set-up-big-fed-decision-on-interest-rates?srnd=phx-businessweek","host":"bloomberg.com","title":"Fed&#8217;s Word of the Day for the Economy: Equipoise","description":"What the jobs numbers mean for rate cuts. Plus: The surging demand for cheese.","image":"https://substack-post-media.s3.amazonaws.com/public/images/196fc562-aa39-4cd4-94ea-67852388384a_1200x799.jpeg","original_image":"https://assets.bwbx.io/images/users/iqjWHBFdfxIU/it5lNouNaUl4/v1/1200x799.jpg"},"explicit":false}],"name":"Brad DeLong","user_id":16879,"photo_url":"https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea5ae644-9822-4ca5-ac6b-e18c017d8fbc_1189x1208.png","user_bestseller_tier":1000}}" data-component-name=“CommentPlaceholder”>
https://www.youtube.com/watch?v=rdKVA2IHXtY","target":"_blank","rel":"nofollow ugc noopener","class":"note-link"}}],"text":"https://www.youtube.com/watch?v=rdKVA2IHXtY"},{"type":"text","text":">"}]}]}]},"restacks":0,"reaction_count":0,"attachments":[{"id":"fc957e6f-91b1-41cf-9d00-cf20d934b2e4","type":"link","linkMetadata":{"url":"https://www.youtube.com/watch?v=rdKVA2IHXtY","host":"youtube.com","title":"- YouTube","description":"Enjoy the videos and music you love, upload original content, and share it all with friends, family, and the world on YouTube."},"explicit":false}],"name":"Brad DeLong","user_id":16879,"photo_url":"https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea5ae644-9822-4ca5-ac6b-e18c017d8fbc_1189x1208.png","user_bestseller_tier":1000}}" data-component-name=“CommentPlaceholder”>
https://www.federalreserve.gov/newsevents/speech/waller20240906a.htm","target":"_blank","rel":"noopener noreferrer nofollow","class":"note-link"}}],"text":"https://www.federalreserve.gov/newsevents/speech/waller20240906a.htm"},{"type":"text","text":"> "}]}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"I read this as stating as clearly as the FOMC ever does that its consensus is to wait until the September 11 release of the CPI before it decides whether to cut interest rates by 0.25%-points or by 0.50%-points at its September meeting."}]}]},"restacks":0,"reaction_count":2,"attachments":[{"id":"7d7a9554-b1da-4fba-95dd-c8be817c0dcd","type":"link","linkMetadata":{"url":"https://www.federalreserve.gov/newsevents/speech/waller20240906a.htm","host":"federalreserve.gov","title":"Speech by Governor Waller on the economic outlook","description":"Thank you, Eric, and thank you for the opportunity to speak to you today. 1 My topic is the outlook for the U.S. economy and the implications for monetary","image":"https://substack-post-media.s3.amazonaws.com/public/images/b407ca5a-59a3-43ee-bc08-c67307c923b8_1200x630.jpeg","original_image":"https://www.federalreserve.gov/images/social-media/social-default-image-opengraph.jpg"},"explicit":false}],"name":"Brad DeLong","user_id":16879,"photo_url":"https://bucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com/public/images/ea5ae644-9822-4ca5-ac6b-e18c017d8fbc_1189x1208.png","user_bestseller_tier":1000}}" data-component-name=“CommentPlaceholder”>
x.com/NateSilve…>. I find myself mostly but not completely agreeing with Grimmer. He is correct to point out that the number of election observations is just too small to properly assess the accuracy of the various forecasting models. Furthermore, Grimmer’s implicit point—that many of these models cause their audience to treat genuine uncertainty as quantifiable risk—is well taken. So as a cautionary warning, Grimmer’s essay resonates… <danieldrezner.substack.com/p/gone-co…> \n\nAs I see it, it makes sense to shift from “risk” to “uncertainty” when your counterparty is not Nature but rather some other mind with interests that are not aligned with yours, and further that the spread of the actual ϕ around the ϕ that you think it is is large enough that that other-mind counterparty you are betting against has invested in acquiring information and knows more about what the true value of ϕ is right now than you do. Then you simply should not bet: any odds they would offer would be a bad deal for you to accept. That much, also, is clear. But when your counterparty is Nature herself, does it make any sense to sharply distinguish between risk and uncertainty? Isn’t the claim that there is likely to lead you astray, perhaps very badly, as simply throwing up your hands and saying “it is uncertain” keeps you from using the information about the distribution of ϕ that you do have (and you always have some) to calculate odds and then act on them?","body_json":{"type":"doc","attrs":{"schemaVersion":"v1"},"content":[{"type":"paragraph","content":[{"type":"text","marks":[{"type":"bold"},{"type":"italic"}],"text":"Cognition"},{"type":"text","text":": "},{"type":"text","marks":[{"type":"italic"}],"text":"Suppose that there is a parameter ϕ that is the share of white balls in an urn containing mixed white and black balls. You know that this ϕ has a value ϕ. If offered odds ѱ by someone wanting to bet on whether the next ball drawn will be white or black, if the size of the stakes are such that you want to bet, and if you want to win money on average, you will bet that the ball will be white if ϕ > ѱ and bet that the ball will be black if ϕ* < ѱ. That much, at least, is clear. Now suppose that you do not know what ϕ is—suppose it is itself a random variable. If the variable has a distribution very tightly clustered around value ϕ, that makes no difference: you will still, if there is someone wanting to bet on whether the next ball drawn will be white or black, if the size of the stakes are such that you want to bet, and if you want to win money on average, you will bet that the ball will be white if ϕ > ѱ and bet that the ball will be black if ϕ* < ѱ. Now let the spread of the distribution grow, giving you less and less confidence that the actual value of ϕ you are confronting is close to ϕ. Does it make any sense to say that there is a line you cross as the spread grows at which it makes sense to say something like:"}]},{"type":"blockquote","content":[{"type":"paragraph","content":[{"type":"text","marks":[{"type":"bold"}],"text":"Dan Drezner"},{"type":"text","text":": Gone Conferencing: ‘It would be safe to say that Nate Silver disagrees with Grimmer’s take <"},{"type":"text","marks":[{"type":"link","attrs":{"href":"x.com/NateSilve…","target":"_blank","rel":"","class":"note-link"}}],"text":"x.com/NateSilve…"},{"type":"text","text":". I find myself mostly but not completely agreeing with Grimmer. He is correct to point out that the number of election observations is just too small to properly assess the accuracy of the various forecasting models. Furthermore, Grimmer’s implicit point—that many of these models cause their audience to treat genuine uncertainty as quantifiable risk—is well taken. So as a cautionary warning, Grimmer’s essay resonates… <"},{"type":"text","marks":[{"type":"link","attrs":{"href":"danieldrezner.substack.com/p/gone-co…?publication_id=1010841&post_id=148559427&isFreemail=false&r=d0v&triedRedirect=true","target":"_blank","rel":"noopener noreferrer nofollow","class":"note-link"}}],"text":"danieldrezner.substack.com/p/gone-co…?publication_id=1010841&post_id=148559427&isFreemail=false&r=d0v&triedRedirect=true"},{"type":"text","text":"> "}]}]},{"type":"paragraph","content":[{"type":"text","marks":[{"type":"italic"}],"text":"As I see it, it makes sense to shift from “risk” to “uncertainty” when your counterparty is not Nature but rather some other mind with interests that are not aligned with yours, and further that the spread of the actual ϕ around the ϕ that you think it is is large enough that that other-mind counterparty you are betting against has invested in acquiring information "},{"type":"text","marks":[{"type":"bold"},{"type":"italic"}],"text":"and knows more about what the true value of ϕ is right now than you do"},{"type":"text","marks":[{"type":"italic"}],"text":". Then you simply should not bet: any odds they would offer would be a bad deal for you to accept. That much, also, is clear. But when your counterparty is Nature herself, does it make any sense to sharply distinguish between "},{"type":"text","marks":[{"type":"bold"},{"type":"italic"}],"text":"risk"},{"type":"text","marks":[{"type":"italic"}],"text":" and "},{"type":"text","marks":[{"type":"bold"},{"type":"italic"}],"text":"uncertainty"},{"type":"text","marks":[{"type":"italic"}],"text":"? Isn’t the claim that there is likely to lead you astray, perhaps very badly, as simply throwing up your hands and saying “it is uncertain” keeps you from using the information about the distribution of ϕ that you do have (and you always have some) to calculate odds and then act on them?"}]}]},"restacks":1,"reaction_count":5,"attachments":[{"id":"9969a5d3-e36b-4337-a53a-94507f1ac765","type":"post","publication":{"apple_pay_disabled":false,"apex_domain":null,"author_id":46261221,"byline_images_enabled":true,"bylines_enabled":true,"chartable_token":null,"community_enabled":true,"copyright":"Daniel W. 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Very Briefly Noted:

  1. Economics: The Ten-Year TIPS real interest rate is 1.7%/year right now and the nominal Ten-Year 3.7%/year—that is materially lower than the Fed’s 2.5%/year CPI inflation target. Why is this the case? Does the Fed think that the bond market has overshot it on expectations once again, or is there some reason the Fed wants an economy at sub-full employment. Powell said that he does not want to see any further labor market deterioration. But is there a theory of what is going on in the economy that does not make that deterioration very likely, given today’s policies?
    Justin Wolfers: ‘I think this is a really smart point. Real rates are far too high right now (a point I’ve constantly warned about as inflation has declined). We’ve gotta get to “normal,” and we can’t take too long to get there: Greg Ip: “Jobs report wasn’t definitive on Fed cutting 25 or 50. But another factor argues for 50. Mkt inflation expectations falling, only partly due to lower oil prices. Thus, real funds rate risen to a very high 3.2-3.6%, vs neutral at 0.8%. (Source:ICE) Fed needs to normalize… <https://www.threads.net/@justinwolfers/post/C_l2CfmSe7j>

  2. The answer, I think, is that the bond market’s expectations give recession—and thus a rapid return to the zero lower bound on interest rates—a significantly higher probability of coming to pass than the stock market’s expectations. And it is hard for even someone very clever to figure out how to make money at scale from this divergence, and hence push expectations in the two markets into harmony:
    John Authers: Today’s Points: ‘With August inflation data in the books, don’t expect the fed funds rate to fall more than 25 basis points next week. But—if markets have this right—you should still expect 250 basis points of cuts by the end of 2025. That implies deep problems for the economy—but corporate profits look fine. No wonder people bought stocks…. The problem is that services inflation remains uncomfortably high…. Going further into the future, confidence in a drastic and sustained easing campaign looks unshakeable… <https://public.hey.com/p/QtnQV4NrVjWWqkZoahnKDXE8>

  3. Somebody should run a big conference on this new trilemma, and run it soon:

    Dani Rodrik: A New Trilemma Haunts the World Economy: ‘It may be impossible simultaneously to combat climate change, boost the middle class in advanced economies, and reduce global poverty…. Climate change is an existential threat. A large and stable middle class is the foundation of liberal democracies. And reducing global poverty is a moral imperative. It would be alarming if we had to abandon any of these three goals. Yet our current policy framework imposes, implicitly but forcefully, a trilemma that appears difficult to overcome. A successful post-neoliberal transition requires us to formulate new policies that put these trade-offs behind us…. Labor-absorbing sectors such as care, retail, education, and other personal services are non-traded for the most part. Promoting them does not create trade tensions in the same way as in manufacturing industries. This means that the conflict between the middle-class imperative in rich economies and poor countries’ growth imperative is less severe than meets the eye… <https://www.project-syndicate.org/commentary/new-trilemma-of-climate-change-global-poverty-rich-countries-middle-classes-by-dani-rodrik-2024-09>

  4. The Labour government is voluntarily making itself a hostage to a major productivity rebound more-or-less immediately. This is a risky thing to do. But do they have a real choice?
    Dan Davies: the mean reversion imps: ‘The British economy is, as can be confirmed by reading journalism on the subject, basically a realm of fantasy…. The “magic money tree”… hidden in Threadneedle Street.  The Reform Fairy determines long term public spending growth, while the Confidence Fairy sets the level of long term interest rates and the exchange rate. However, possibly hidden away in the Celtic Fringes, I think there’s another kind of mythical wee beastie which is about to become important…. This [2%/year] productivity [growth] trend used to be a very well-established empirical fact, but then it ceased to be so…. The expectation of the consensus of mainstream economic thought, as summarised by the Office of Budget Responsibility, that the mean reversion imps would come along to do their stuff…. [People] are anticipating that the mean reversion pixies are still out there, just waiting for Liz Truss and Kwasi Kwarteng to stop scaring them away. It’s not in any way a ridiculous thing to believe and it might not even be wrong. It just worries me that it’s so damned congenial for an optimist… <https://backofmind.substack.com/p/the-mean-reversion-imps>

  5. This is all OK as long as not too many of the losers are not too highly leveraged with the debtholders themselves also being too highly leveraged:

    William Cohan: Creative destruction rips through US commercial property: ‘Sector shakeout is leading to pain for both equity and debtholders…. The county of Los Angeles recently agreed to buy Gas Company Tower… for $215mn, well down on its appraised value of $632mn in 2020…. In San Francisco, talks are reported to be under way over a $26mn offer for… historic 400 Montgomery Street… down two-thirds from… $77mn five years ago…. In Oregon’s Portland… Montgomery Park, the state’s most prominent office building, just sold for $33mn, down 87 per cent from… $255mn… in 2019. And in Manhattan… 135 West 50th Street… sold in an online auction for $8.5mn, a small fraction of the $332mn it sold for 18 years earlier…. Schumpeter’s logic is likely to prove true. Flexner said many of these buildings would be razed, taken down to the raw land, at great cost, and then would rise again as residential properties or new commercial properties designed to meet the demands of the evolving office culture. Until then, the bloodbath will continue and the pain will be considerable for both equity and debtholders…<https://www.ft.com/content/531f2cda-f378-441c-8158-207a1305d7de>

  6. Economic Development: But if not land reform as kick-off, what was? I still think land reform was a key in eliminating the possibility of the creation of a Latin American-style alliance between landlords and bureaucrats, but…:
    Oliver Kim & Jen-Kuan Wang: Land Reform in Taiwan, 1950-1961: Effects on Agriculture and Structural Change: ‘Taiwan’s landmark 1950s land reform… Phase II… redistributed formerly Japanese public lands… [and]reduced tenancy, boosted rice yields, and increased the share of labor in agriculture. By contrast, phase III—which reduced tenancy by breaking up larger estate—did not increase agricultural productivity and pushed labor (in particular, female labor) out of agriculture into manufacturing…. Phase II can still explain at most one-sixth of observed 1950s rice yield growth. These results challenge the longstanding view that land reform was a major factor behind Taiwan’s economic takeoff… <https://oliverwkim.com/papers/KimWang_Taiwan.pdf>

  7. Clever and honest governments in middle-income countries can do industrial policy based on factor accumulation. But what is needed is technology transfer, for factor accumulation has profound limits:
    Martin Wolf: Overcoming the ‘middle income’ trap: ‘The principal failure of these countries lies not in accumulating too little capital, but in using it poorly…. The focus must shift from investment… to infusion of new ideas available abroad… development of a more sophisticated economy. That depends on the acquisition and development of knowhow… skilled workers (engineers, scientists, managers) and openness to ideas… direct investment and trade…. For innovation, exchanges of human capital are particularly important, including via education and work abroad. The resulting diasporas are a huge potential asset. Innovation also depends on access to global markets…. In developing countries… the rise of protectionism and consequent fragmentation of the world economy are likely to make their prospects worse… <https://www.ft.com/content/5c486ddb-61f2-4280-a61b-5e14107fb024>

  8. Neofascism: Does Dick Cheney even matter?. Do any of them even matter? I am reminded of a passage from one of Robert Harris’s “Rome” novels, Dictator: “I cannot remember exactly what [Cicero] said. All the usual words were there—liberty, ancestors, hearths and altars, laws and temples—but for once I listened without hearing. I was looking at the faces of the legionaries. They were sunburnt, lean, impassive. Some were chewing mastic. I saw the scene through their eyes. They had been recruited by Caesar to fight against King Juba and the army of Cato. They had slaughtered thousands and had been stuck in Africa ever since. They had travelled hundreds of miles crammed together in boats. They had been force-marched for a day. Now they were lined up in the heat in Rome and an old man was talking at them about liberty, ancestors, hearths and altars—and it meant nothing. Cicero finished speaking. There was silence. Cornutus ordered them to give three cheers. The silence continued. Cicero stepped off the platform and got back into his litter and we returned down the hill, past the saucer-eyed starving children…”:

    Charlie Sykes: How Dick Cheney Could Matter: ‘The former VP opens the door…. “In our nation’s 248-year history, there has never been an individual who is a greater threat to our republic than Donald Trump. He tried to steal the last election using lies and violence to keep himself in power after the voters had rejected him. He can never be trusted with power again. As citizens, we each have a duty to put country above partisanship to defend our Constitution. That is why I will be casting my vote for Vice President Kamala Harris…” Former Vice President Dick Cheney, September 6, 2024…. Trump himself dismissed Cheney as “an irrelevant RINO.” A RINO is, of course, a Republican In Name Only, and Trump’s use of the term to describe the former two-term GOP VP reminds us for the gazillionth time that irony is well and truly dead. But is Cheney really “irrelevant”?… Can the Cheneys make a difference?… And what might that look like?… A bipartisan group of patriots who would join Cheney in warning voters against restoring Trump to power…. Trump’s former Chief of Staff (John Kelly); former secretaries of defense (Mark Esper, James Mattis); and former national security advisor (H.R. McMaster) that Trump poses a real and present danger to the nation?

    What if all of the living secretaries of defense — from both parties — joined them? Would that make a difference? Honestly, I don’t know. But I’d like to find out… <https://charliesykes.substack.com/p/how-dick-cheney-could-matter>

  9. Over and over again in history, plutocrats have been overeager to believe that charismatic kleptocrats and ideologues are their friends. They are not. Charismatic kleptocrats and ideologues wind up, sooner or later and it is almost always sooner, regarding plutocrats as their lawful prey…
    Steven Greenhouse: Billionaires are endorsing Trump—but is that a bad bargain for them?: ‘Experts are issuing stern warnings about business support for Trump—it could backfire badly and endanger democracy…. From Wall Street to Silicon Valley… Stephen Schwarzman… Steve Wynn… Bill Ackman…Marc Andreessen…. Witold Henisz…. “The best info they have is what happened in the last Trump administration,” Henisz said. “They got tax breaks, and nothing really terrible happened. The world didn’t end…. That’s a mispricing of the tail risks…. The ultimate tail risk is change in political institutions that makes the US more authoritarian and less democratic, with restraints on media freedom and the political use of tax authorities and the judicial system” against people and corporations Trump dislikes… <https://www.theguardian.com/us-news/article/2024/sep/06/trump-billionaires-2024-campaign>

  10. Public Reason: Is “liberalism” simply too big and too self-contradictory to be in any sense a thing?:

    Amicus: Liberalism Is a Plural Noun: ‘Consider rights…. For Bentham, these are legal constructs with a practical aim…. For Thomas Paine, rights were written into the laws of nature…. For William Lloyd Garrison… rights… [were] a higher law, written in the hearts of men. These are not the same concept. They bear a loose family resemblance—but no more so to one another than to the right of labor to all that it creates, or the right of the politai of Athens to speak and be heard…. Are these thinkers part of a single liberal tradition, while Athens remains pre- and the utopian socialists non-? Continuity can disqualify Pericles, but not Proudhon; an austere individualism can bar them both, but catches Hobbes and Tocqueville too. Hobbes… we can do without…. Perhaps we can even dispense with Tocqueville. But if Paine and Bentham are not both liberals, then of what use is the word?… There is a common thread that… you can call… “liberalism”… but… it’s just modernity. Marx belongs to it as much as Mill; it claims Proudhon, and Owen too. The inheritance of Rousseau and Montesquieu is the common heritage of all mankind, and its proper heirs are all those who would defend Man qua Man against all the creatures of the past. There is no such thing as liberalism: only liberalisms, or else the Enlightenment, of which the Left is the best and truest heir. But that story, too, will have to wait… <https://homosum.substack.com/p/liberalism-is-a-plural-noun>

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"The Hunters of Kentucky": The Jacksonian Thread of American Nationalism

What I see as the third of the major strains of American national identity—behind Massachusetts-Puritan and Virginia-Cavalier: Kentucky-Frontier. No, Andrew Jackson’s victory at the Battle of New Orleans wasn’t due to a band of mythical sharpshooters—the “Hunters of Kentucky”—but within a decade, that legend became an inseparable part of Jackson’s image. & it became unwise to dispute it in an American bar. & so by 1829 for Jacksonians Jackson’s inauguration was the moment when America was rescued from both external and internal enemies, & it was only by trusting & following his policy twists-&-turns & taking his shifting set of enemies as their own that they could be & remain truly free. This was & is the Kentucky-Frontier strain of American nationalism, and it is powerful & mythical to this day, & its mythical nature does not reduce its power…

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The battle of New Orleans—the closing episode of the war of 1812—was not won for General Andrew Jackson by The Hunters of Kentucky.

The Hunters of Kentucky were not people born on a mountain top, accustomed to drop squirrels with their rifles at 200 yards, able to then cook them up into a tasty stew.

The Hunters of Kentucky were not people who, because frontier bounty and frontier hardships had made them what they were, could, without military discipline and training, easily wipe the floor with the scarlet-red ordered ranks of the British divisions with which the Duke of Wellington had beaten Napoleon’s best generals in Spain.

But within less than a decade after the war, it became a very important part of the identity of those Americans who counted—who spoke loudly in the public square, who influenced the votes of others, and who voted—that it had been so.

Thus Andrew Jackson of Tennessee became a symbol. And then by the alchemy of human psychology he became the embodied exemplar. The exemplar of what? The examplar of a man who could be trusted to preserve America from enemies foreign. Who were these enemies? In Jackson’s case, it was overwhelmingly the British Empire. The British Empire was strong enough, and had it conquered New Orleans at the end of the War of 1812 might have found it easy enough, to turn America back into an effective colony:

  • It would seize Americas goods, at will.

  • It would impress American soldiers on the seas into its navy, at will.

  • It would use the great water highways of the Mississippi and the Great Lakes to arm Amerindians to burn out settlers and thus keep America penned in the east, well away from the Mississippi Valley proper.

  • It would use its industrial power to take control of the commanding heights of the American economy via offering élites special good deals on imports.

  • It would use its financial power to take control of the American government by bribery.

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This, those people who saw themselves as “the hunters of Kentucky” or who wanted to identify in some way with “the hunters of Kentucky”, had been stopped by the hunters of Kentucky when Andrew Jackson had called and mobilized them to come down the Mississippi to New Orleans.

The ideas behind Jackson-the-symbol were, as summarized by J. William Ward:

The victory at New Orleans was a victory of the American farmer… ‘fresh from his plough’… [for his] normal life vis-à-vis nature… overcome[s] the conquerors of the conquerors of Europe….

[The] spontaneous… strength of the American farmer… allows him to forego the regimen… [of] European troops….

God is on our side; not only the God of Battles but God and Nature… by [virtue of] the bountiful means placed at America’s disposal….

We are favored by God… with one stipulation—we must prove ourselves worthy… by… [grasping] the opportunity he so bountifully provides….

[So also] will, the process of self-determination, brought victory to our side….

National pride… resting upon three main concepts… ‘Nature’, ‘Providence’, and ‘Will’… the structural underpinnings of the ideology… for which Andrew Jackson is one symbol…

In brief, Nature has made Americans into the free self-reliant “hunters of Kentucky”, whom God has chosen for His special blessing if we show the Will. But I would go further than J. William Ward here: I see an essential part of “Jacksonism” as Will consisting not only of the “hunters of Kentucky” taking action to float down the Mississippi to New Orleans on the flatboats, but also of Andrew Jackson’s calling them to help him in his mission to protect America. The free people need a leader to coördinate and direct them as to how to take action to achieve and maintain their freedom.

Jackson then parlayed his image as exemplar into the image of a person who also could also be trusted to preserve America from enemies domestic. Who were these enemies domestic? in this case, they were an iron triangle of:

  • corrupt Philadelphia financiers, especially those who controlled the Second Bank of the United States.

  • the land speculators the financiers financed.

  • the politicians who gave the speculators unfair heads-ups as to future land sales.

  • and who also themselves took tax money earmarked for internal improvements and national defense and diverted it into their own pockets.

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And it worked. When Jackson was inaugurated President of the United States on March 4, 1829, Massachusetts Senator Daniel Webster was more than bemused at the extraordinary number of “persons have come five hundred miles to see General Jackson, and they really seem to think that the country is rescued from some dreadful danger.”

Jackson’s statue stands to this day in the center of Lafayette Square, just across Pennsylvania Avenue from America’s White House.

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The Hunters of Kentucky.

Ye gentlemen and ladies fair, who grace this famous city,
Just listen, if you’ve time to spare, while I rehearse a ditty;
And for the opportunity conceive yourselves quite lucky,
For ‘tis not often that you see a hunter from Kentucky.

Oh, Kentucky! the hunters of Kentucky.
Oh, Kentucky! the hunters of Kentucky.

We are a hardy free-born race, each man to fear a stranger,
Whate’er the game we join in chase, despising toil and danger;
And if a daring foe annoys, whate’er his strength and forces,
We’ll show him that Kentucky boys are alligator horses.

Oh, Kentucky, &c.

I s’pose you’ve read it in the prints, how Packenham attempted
To make old Hickory Jackson wince, but soon his schemes repented;
For we with rifles ready cocked, thought such occasion lucky,
And soon around the general flocked the hunters of Kentucky.

Oh, Kentucky, &c.

You’ve heard, I s’pose, how New Orleans is famed for wealth and beauty
There’s girls of every hue, it seems, from snowy white to sooty.
So Packenham he made his brags, if he in fight was lucky,
He’d have their girls and cotton bags in spite of old Kentucky.

Oh, Kentucky, &c.

But Jackson he was wide awake, and wasn’t scared at trifles,
For well he knew what aim we take with our Kentucky rifles;
So he led us down to Cyprus swamp, the ground was low and mucky,
There stood John Bull in martial pomp, and here was old Kentucky.

Oh, Kentucky, &c.

A bank was raised to hide our breast, not that we thought of dying,
But then we always like to rest unless the game is flying;
Behind it stood our little force, none wished it to be greater,
For every man was half a horse and half an alligator.

Oh, Kentucky, &c.

They did not let our patience tire, before they showed their faces;
We did not choose to waist our fire, So snugly kept our places;
But when so near to see them wink, we thought it time to stop ‘em,
And ‘twould have done you good I think to see Kentuckians drop ’em.

Oh, Kentucky, &c.

They found at last ‘twas vain to fight, where lead was all their booty,
And so they wisely took to flight, and left us all our beauty,
And now if danger e’er annoys, remember what our trade is,
Just send for us Kentucky boys, and we’ll protect your ladies.

Oh, Kentucky, &c.

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READING: Daniel Webster in 1829: "Persons... Really Seem to Think that the Country Is Rescued from Some Dreadful Danger..."

A sense of some bewilderment at Andrew Jackson & the Jacksonian movement in an Inauguration-Day letter from Daniel Webster to his sister-in-law. Washington had been from Virginia. Jefferson from Virginia had been Washington’s Secretary of State, and became president. Ditto for Madison. & for Monroe. William H. Crawford was from Georgia & had been Monroe’s Secretary of the Treasury, but that was close enough—especially since Monroe’s Secretary of State was the crypto-Federalist John Quincy Adams, & the “Era of Good Feelings” could only go so far. But then Crawford had a serious stroke, & Pandæmonium came to American politics. Neither the Virginia Dynasty nor its standard Loyal Oppositions in New England and the Midwest had any idea what was about to hit them…

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The addressee of this letter is Daniel Webster’s sister-in-law Harriet Eliza Paige Webster, the wife of Ezekiel Webster, Daniel Webster’s older brother.

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Washington, March 4, 1829.

MY DEAR SISTER,—I thank you for yours, received to-day, and thank you both for the letter itself and for your pardon which it contains, and of which I stood in so much need.

Your benignity is memorable and praiseworthy.

To be serious, however, my dear sister, let me say once for all, that I have a very affectionate regard for you; that I am very glad you are my sister, and the wife of the best of all brothers; and that if, like him, I am not the most punctual of all correspondents, I am like him in sincerity and constancy of esteem. If you find in your connection with my own little broken circle but one half as much pleasure as you bestow, you will have no reason to regret it. Your presence with my children, through the winter, has relieved me from a pressing weight of anxiety.

To-day [March 4, 1829] we have had the inauguration [of Andrew Jackson as President]. A monstrous crowd of people is in the city. I never saw any thing like it before. Persons have come five hundred miles to see General Jackson, and they really seem to think that the country is rescued from some dreadful danger.

The inauguration speech you will see. I cannot make much of it, except that it is anti-tariff, at least in some degree. What it says about reform in office may be either a prelude to a general change in office, or a mere sop to soothe the hunger, without satisfying it, of the thousand expectants for office who throng the city, and clamor all over the country. I expect some changes, but not a great many at present.

The show lasted only half an hour. The Senate assembled at eleven, the judges and foreign ministers came in, the President-elect was introduced, and all seated by half-past eleven. The Senate was full of ladies; a pause ensued till twelve.

Then the President, followed by the Senate, &c., went through the great rotunda, on to the portico, over the eastern front door; and those went with him who could, but the crowd broke in as we were passing the rotunda, and all became confusion.

On the portico, in the open air, the day very warm and pleasant, he read his inaugural, and took the oath. A great shout followed from the multitude, and in fifteen minutes, “silence settled, deep and still”. Every body was dispersed.

As I walked home, I called in at a bookstore, and saw a volume which I now send you; it may serve to regulate matters of etiquette at Boscawen.

I hope to write Edward to-night. If not, I shall not fail to do so to-morrow.

Yours very sincerely and truly,

Daniel Webster

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