BRIEFLY NOTED: For 2024-04-15 Mo
What do we think of the Federal Reserve’s doing a 25-bp policy-rate reduction in June?; Nilay Patel turns SEO into an art form; the distribution of world manufacturing; BREXIT effects on UK video; very briefly noted; & Are Editors Useful? Noah Smith Says: NO!!; READING: Patricia Crone on the Agrarian Landlord-Dominated Gunpowder-Empire as the Normal Climax Societal Order of the East African Plains Ape…; HOISTED: On Ryan Avent’s Meditations on Trumpism; Scratchpad: No, for the Federal Reserve to Cut Interest Rates by 25 Basis Points in June Would Not Be a Mistake…; Trying to Puzzle Through the Current Macro Situation; & BRIEFLY NOTED: For 2024-04-09 Tu…
SubStack NOTES:
Economics: I agree that a 25 basis-point Federal Reserve rate cut in June would as a mistake be one “comparable to… [those] the Federal Reserve was making in the summer of 2021…”, but that is because I believe that there was no mistake then—that the Federal Reserve was playing it completely right in the summer of 2021.
That is because of the asymmetry in the loss function. You cannot effectively stimulate the economy if you land at the zero interest-rate lower bound. By contrast, you can always effectively restrict the economy by raising interest rates wherever you are.
Thus waiting to raise rates until you were almost sure that you would not soon be back at the zero lower bound, and then moving fast and far, was in fact optimal monetary policy in the summer of 2021. And that is what the Fed did.
There was no error.
There would be no error in cutting by 25 basis points in June.
But even if it would be an error to cut by 25 basis-points in June, that would be a small beer policy move compared to Fed forbearance in the early Biden years. Monetary conditions as indexed by the Treasury Ten-Year TIPS were kept very loose by the Fed until the start of 2022. Between then and August it tightened by 350 basis points: lowering the real value of the future ten years out by about 35%. That is a huge shift in the intertemporal price system.
A 25 basis-point cut in June with an 0.4 gearing to the Treasury Ten-Year TIPS would raise the real value of the future ten years out by about 1%.
How can these possibly be seen as moves comparable in magnitude?
Lawrence Summers: ‘On current facts, a rate cut in June would be a dangerous and egregious error comparable to the errors the Federal Reserve was making in the summer of 2021. We do not need rate cuts right now… <bloomberg.com/news/articles/2024-04-10/…>
Spam-Spam-Spam-Spam-Spam: This is the best article I have seen in at least a year about the advertising-attention-ecosystem-driven en*ification of the world wide web, making it a hive of scum and villainy rather than a useful information utility. Nilay Patel is a genius, and the genius of this article is that it makes its point and also makes an example of its point by also partaking of the quintessence of SEO-spam, and thus is both en*ified and not en****ified in a positive Schrödinger’s Cat superposition of the Last Days of the Useful Web:
Nilay Patel: Best printer 2024, best printer for home use, office use, printing labels, printer for school, homework printer you are a printer we are all printers/After a full year of not thinking about printers, the best printer is still whatever random Brother laser printer that’s on sale: ‘Tech/Artificial Intelligence…. It’s been over a year since I last told you to just buy a Brother laser printer, and that article has fallen down the list of Google search results because I haven’t spent my time loading it up with fake updates every so often to gain the attention of the Google search robot. It’s weird because the correct answer to the query “what is the best printer” has not changed, but an entire ecosystem of content farms seems motivated to constantly update articles about printers in response to the incentive structure created by that robot’s obvious preferences. Pointing out that incentive structure and the culture that’s developed around it seems to make a lot of people mad, which is also interesting!… My only ask is that you make this article go viral by sharing it in faux-outrage that the EIC of The Verge has published an article partially generated by AI, because after the buttons I am going to include a bunch of AI-generated copy from Google’s Gemini in order to pad this thing out…<theverge.com/2024/4/2/24117976/best-pri…>
ONE IMAGE: World Manufacturing:
ONE VIDEO: Financial Times: The BREXIT Effect:
Very Briefly Noted:
Global Warming: Lawrence Summers & N.K. Singh: The World Is Still on Fire—PROJECT SYNDICATE: World leaders have made big promises and laid out bold plans to mitigate the climate crisis and help the neediest countries adapt…. They must demonstrate that they can fulfill these promises, rather than simply touting new ones…. Setting aside… climate change for a moment, world leaders haven’t even been able to tackle the simplest, most straightforward challenges…. Chad, Haiti, Sudan, and Gaza… [are on] the brink of famine, yet the international response has been slow and muted. This is both a humanitarian disaster in its own right and a symbol of our broader inability to act in the face of a crisis. If the world can’t even get food to starving children, how can it come together to defeat climate change and reorient the global economy?…. Reverse the capital flows, so that the lowest-income countries are receiving more support than they are paying out…. Transform MDBs into big, risk-taking, climate-focused institutions…. Fully fund the International Development Association…. Tackle food security. Last year, the United Nations was able to raise from international donors only about one-third of what it sought for humanitarian relief, and it had to slash its goals for 2024… <https://www.project-syndicate.org/commentary/imf-world-bank-spring-meetings-need-to-get-four-things-right-by-lawrence-h-summers-and-n-k-singh-2024-04>
Economics: Oliver Kim: The Real Development was the Friends We Made Along the Way: ‘Hirschman… [in] his 1958 classic, The Strategy of Economic Development. In it, Hirschman set out to slay the dragon of… [Rosenstein-Rodan’s] Big Push, and replace it with a theory more grounded in reality…. Strategy… [has a] strange central argument—that the scarce resource constraining development is not natural resources or capital or schooling or technology or any other tangible factor, but the ability to make development decisions…. Hirschman proposes… unbalanced growth. Instead of trying to solve all problems all at once, policy-makers should push forward in a limited number of sectors, and use the reactions and disequilibria created by those interventions to inform their next move…. Hirschman formalizes… insight with his famous notion of backward and forward linkages…. Instead of a Big Push… Hirschman calls for the Targeted Strike–choose the sectors with the most potential to create demand for other inputs, and support those. Ahead of his time for economics, Hirschman also argues that the “nonmarket” responses induced by a policy change may be just as important as market ones…. The Credibility Revolution has yielded, perhaps for the first time, robust evidence for individual program effects. The time is ripe, not to copy Hirschman’s ideas wholesale, but to borrow his clear-eyed approach and think carefully about how projects can be brought together, pressure point by pressure point, into programs for sustained development… <https://www.global-developments.org/p/the-real-development-was-the-friends>
Chris Anstey: US Goes From Gloom to Bloom in Six Months: ‘The latest Bloomberg monthly survey of economists shows US growth is projected at 2.2% this year — more than twice as fast as anticipated in September. The odds of a recession in the next 12 months dropped to 35%, the lowest since July 2022 and down from 55% in September. Perhaps even more striking, payroll gains are now seen averaging 150,000 a month this year. That’s more than quadruple the average estimate six months ago. Economists also anticipate a 2.4% increase for private investment this year, up from the 1% growth seen in September. Despite those revamped forecasts, and surprisingly strong inflation data from January and February, economists stuck to their outlook for tamer price rises… <https://www.bloomberg.com/news/newsletters/2024-03-26/world-economy-latest-gloom-to-boom>
Tim Duy: Fed Watch: ‘Last week’s inflation data created a string of three reports that combined to throw cold water on the “bumpy landing” story and put the “hard last mile” story back in play. Market participants quickly pushed out rate cuts again, and we expect Fed speakers will reinforce that move this week. The debate is now one or two rate cuts this year, but we can see it quickly moving to none or one on the back of another month of elevated inflation…. The Fed needs the April, May, and June inflation prints to all fall into line to set up July rate cut…
Economic History: Alan Taylor (2014): The Argentina Paradox: Microexplanations & Macropuzzles: ‘Argentina’s policy decisions were… not that unusual… [in], the shift towards impost substitution industrialization…. However, while Argentina’s stance was not that peculiar by the standard of developing countries, where inward looking development strategies were the norm, it was unusual by the standard of the rich countries, the club to which ostensibly Argentina wished to belong, or rather remain…. Argentina’s structural shift was… rapidly accelerated by an autarkic economic environment… in the 1920s and 1930s… [and] reinforced by autarkic domestic policies… in the 1940s and 1950s, and persisted over time to the present…. Argentina had more to lose…. For other countries with smaller trade shares and smaller financial inflows, the end of the first age of globalization entailed a fairly bothersome adjustment; for Argentina it entailed a radical and painful reorientation…. It has been argued that the “shock” of Atlantic trade expansion empowered mercantile/capitalist interests in the Anglo-Saxon Northwest corner of Europe, allowing this region to embrace economic and political reforms that enhanced openness and competition…. In Argentina, we may have seen something of the same path dependence driven by trade shocks, only in reverse: the shock of global trade contraction discrediting and weakening the old outward-looking order, and allowing new interests to arise with more autarkic goals…. Argentina’s extreme comparative advantage would also play into this dynamic… [as] the redistributive effects of autarky would be great…. These observations fit with a broader theme in economic history which argues that economic and political competition are key complements via the forces unleashed in “open access” orders…. Globalization and democracy go hand in hand, and, with empirical tests based on plausible instruments, this proposition holds up reasonably well… <https://www.nber.org/system/files/working_papers/w19924/w19924.pdf>
Yaw: What was Pre-Industrial Japan like?: ‘From the mid-1400s to the mid-1800s, Japan transformed from pandemonium to isolation to a semi-vassal of the West. Instead of becoming a colony, Japan, just like Ethiopia, decided to be imperialist to avoid colonialism. However, Ethiopia remained a feudalistic monarchy that mainly sold coffee until it had a communist revolution (Similar to Russia but 50 years behind), while Japan reformed feudalism and kickstarted its industrialization process. In the future, we’ll discuss the actual industrialization phase of Japan during the Meiji era. Among the non-European countries that avoided colonialism were Nepal, Afghanistan, Ethiopia, China, Iran, Bhutan, Japan, and Thailand. Out of all of these countries, Japan industrialized first… <https://yawboadu.substack.com/p/how-did-japan-become-the-first-non>
Central Country: Sofia Horta e Costa: A negative China outlook:’
Fitch Ratings revised its outlook on China’s debt to negative from stable, matching a similar action by Moody’s Investors Service in December. The thinking is that the government will pile on debt in order to pull the economy out of a real estate-driven slowdown, Fitch said in its report. China’s government rapidly pushed back against the outlook cut, saying the rating company’s methods fail to reflect the role of fiscal policy in stabilizing growth. Officials in Beijing have become more sensitive about negative commentary on the economy as they seek to bolster confidence and stem capital outflows… <https://www.bloomberg.com/news/newsletters/2024-04-10/stock-markets-today-cpi-inflation-oil-gold-s-p-500-fed-rate-cuts?cmpid=BBD041024_MKT>
Nationalism: Samuel Clowes Huneke: Reading Imagined Communities Amid a Resurgence of Nationalism: ‘What Benedict Anderson’s classic account of nationalism’s origins misses about today’s world…. Gutenberg…. By 1500, some 20 million books had been printed. A century later, that figure was 200 million. These texts spread and standardized vernacular languages and challenged the sacred centrality of Latin…. They also made intellectual communion possible between people who had never met and would never meet. In the profits of print-capitalism lay appleaathe seeds of the imagined community…. What… [Anderson] cannot explain, and… remains seemingly mystified by, is “the attachment that people feel for the inventions of their imaginations.” Why, that is, “people are ready to die for these inventions.” No matter how many fine poems of the love of the fatherland or motherland (or whatever) he cites, Anderson’s Marxist framework cannot explain the devotion that nations have and continue to inspire…. <https://newrepublic.com/article/179786/reading-imagined-communities-amid-resurgence-nationalism>
Tech! Tech! Tech!: Tim Burke: The Mythical People-Life: ‘Most of us have had those moments where everything did seem faster, better, cleaner because of a new device or tool. And because we are doing many things in objectively better ways…. But even those things which are better don’t remain that way…. We had… an era where if you had a modicum of skill with inputting keywords, you could get much better results, much more quickly, than painstakingly leafing through the card catalog. Then it all enshittified… as the related subject links for an article that is about an incredibly specific subject… [became] a few words… that belong, and the rest are laughably useless…. So now I’m back to teaching about research as an arcane and unintuitive process, or more often, I’m just doing the first steps for the students so they can get going on the work that is a productive learning process for them… <https://timothyburke.substack.com/p/the-mythical-people-life>
Public Reason: Om Malik: Why I redesigned my home page: ‘When working for the magazines, I learned to think of what I wrote in terms of where it would sit in the publication: the front of the book, the feature well, and the back of the book…. Writing the front of the book pieces took longer because of the limitation of space and perceived topicality…. And then there was the “back of the book” where you wrote about things that were marginally tangential to the magazine’s core focus…. So I have rearranged my internet homestead into… blog posts… feature well (essays, long analysis & interviews), and… back of the book (my podcast, obsessions, travels, recommendations & photography)… <https://om.co/2024/03/16/why-i-redesigned-my-home-page/>