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it means the long wage-currency dealio of the non us manufacturing powers (prc, japan, germany), is over, because they're all three getting hit in the nuts instead
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Nov 1, 2023 21:11
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hypnophant posted:still think we'll get another hike in december unless there's a strong movement in PCE between now and then. The last three months have been stuck at 3.4 and FOMC won't be happy sitting there forever Fedwatch has 20% hike in Dec, 26% by Jan. I'm with you though, I feel like the chance is significantly higher. We seem a bit stuck here. But I'm not feeling strongly enough to do much about it. Probably will keep nibbling on fixed income, because if we aren't at the top we are very likely close to it.
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Nov 1, 2023 21:20
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i'm not sure i follow. the dollar is still well stronger than the baseline over the last 20 years, in part due to fed coming down harder than other central banks (especially boj, though their circumstances are unique), so theoretically us exports are less competitive. chips act and ira definitely seem to be contributing to strong non-inflationary growth in us (at least for now), and china is in the midst of it's slow and opaque real estate crisis, and i guess germany is having secular supply shocks due to reliance on russian energy, but i'm not sure what the currency dealio is edit: Baddog posted:Fedwatch has 20% hike in Dec, 26% by Jan. now that the immediate concern of almost double-digit inflation is over, the majority of the fed might be remembering all those policy papers they wrote in the mid and late 2010's about flexible rate targets, and weighing benefits of full employment versus hitting 2% as soon as possible. that was the line through covid until "transitory" proved not to be quite so transitory. the last 18 months has probably taken some of the shine off this line of thought, but it's hard completely reversing course policy you've been working to implement for the last decade GhostofJohnMuir fucked around with this message at 21:31 on Nov 1, 2023 |
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Nov 1, 2023 21:23
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the dollar being made freakishly expensive and the others being made cheap, and importantly wages being suppressed for manufacturing competitiveness
bob dobbs is dead fucked around with this message at 21:27 on Nov 1, 2023 |
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Nov 1, 2023 21:24
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bob dobbs is dead posted:the dollar being made freakishly expensive and the others being made cheap, and importantly wages being suppressed for manufacturing competitiveness what's the deal with germany? did their exports suddenly become uncompetitive, or was that vaunted trade surplus covering up so much rot? I haven't seen much analysis
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Nov 1, 2023 21:33
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the wage suppression has stopped working and energy is expensive. mass wage suppression requires lots of cheap labor to compete with and the chinese supply has basically been exhausted and the indian and nigerian supplies are not yet ready and perhaps will never be
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Nov 1, 2023 21:39
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hypnophant posted:please clarify because I must have misread this, which is good because it sounds like an absolutely insane statement to make I'm not sure what you want me to show. You said it was key, I didn't say otherwise. I said you're overly focused on just FFR, that doesn't mean it isn't "key". I'm saying your story is shifting because you were initially you were talking about "tightening" and "loosening", and because we've been "tightening" for a year the Q3 2023 GDP was extraordinary as an outlier since 2008. When I asked you to explain why 2008 was the cutoff, you switched to absolute "tight" and "loose" and used that, and total asset purchase, to justify the cutoff of 2008. hypnophant posted:You also have an incomplete understanding of "tight" and "loose" policy. While it's true that the FFR was trending down for most of the 80s and is therefore "loosening", it is still "tight" monetary policy because it is restrictive, above the "neutral" rate of interest which does not cause the economy to grow faster or slower than the natural growth of potential output. Read more at my earlier link to the Taylor Rule wiki page. The neutral rate of interest is not measured but must be basically guessed at, usually years after the fact. There is no agreed upon econometric model for it so I won't give a link. In any event the entire period of Paul Volcker's chairmanship, and the beginning of Greenspan's, (ie, 1979 to the mid-90s) is regarded as tight monetary policy, thereafter achieving at most a neutral stance until around 2000. We had undeniably loose monetary policy from 2009 to 2022, after which the Fed began tightening very rapidly in response to the increase in inflation. You state here that what determines "tight" or "loose" is whether we are above or below some natural rate that is determined later by an unagreed upon method. You define here that 1979 to mid-90s was tight, and 2009-2022 was loose, therefore we can only look back to 2008 as things have been different. In the same post you then say hypnophant posted:Here's a graph which I think illustrates the concepts well: Which is "prior to 2020" not since "2008" which does not support your claim that we should only look back to 2008 to determine whether Q3 2023 was unusual. Thank you for being a good sport in the discussion.
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Nov 1, 2023 21:50
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GhostofJohnMuir posted:chips act and ira definitely seem to be contributing to strong non-inflationary growth in us Chips act funds haven't been distributed yet, as near as I can tell. There certainly have been a lot of projects that have been announced. But, there is competition for limited funds so I assume at least some of those announcements will lead to nothing if they dont get the funds they want.
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Nov 1, 2023 21:56
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drk posted:Chips act funds haven't been distributed yet, as near as I can tell. There certainly have been a lot of projects that have been announced. But, there is competition for limited funds so I assume at least some of those announcements will lead to nothing if they dont get the funds they want. maybe, but the US has always been a large player in fabs and chips provides a pretty strong signal even apart from the funds disbursed so there's reason to be optimistic
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Nov 1, 2023 22:18
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every other putative world power has serious industrial policy. america basically took a break for a half century and now is kramering back into it
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Nov 1, 2023 22:28
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My guess is they won't hike in december, quoting the fact that rates have been below X since N, where X is 4.0, 4.5 or 5.0 depending on N which is what the November CPI data releases as two days earlier At what point does raising rates virtually guarantee wage inflation? Seems like wages are roughly keeping up with inflation right now, which is another reason to hold and not hike, IMO https://www.bankrate.com/banking/federal-reserve/wage-to-inflation-index/ quote:Wages are finally rising faster than inflation. Will Americans ever feel like it? 
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Nov 2, 2023 05:02
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I'm not being snarky, but why would raising rates guarantee wage inflation? Or do you just mean in comparison with goods and service cost?
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Nov 2, 2023 14:33
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https://budgetmodel.wharton.upenn.e...iscal%20policy.quote:We estimate that the U.S. debt held by the public cannot exceed about 200 percent of GDP even under today’s generally favorable market conditions. Larger ratios in countries like Japan, for example, are not relevant for the United States, because Japan has a much larger household saving rate, which more-than absorbs the larger government debt. Does it make me a "debt hawk" if I am worried that the united states is at increasingly high risk of one day defaulting?
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Nov 6, 2023 16:38
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hobbez posted:https://budgetmodel.wharton.upenn.e...iscal%20policy. There's no reason for default when the government can print the same money that its debt is denominated in. The bigger risk is uncontrolled inflation.
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Nov 6, 2023 17:19
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Lockback posted:I'm not being snarky, but why would raising rates guarantee wage inflation? Or do you just mean in comparison with goods and service cost? I think this was flawed thinking, but on further reflection, shelter is near the top of Maslow's pyramid of needs, so I think people will continue to job hop to make rent. Ease of job hopping seems to be a factor in wage inflation
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Nov 6, 2023 17:25
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drk posted:There's no reason for default when the government can print the same money that its debt is denominated in. Well, yeah, money printing is a bad solution to a bad problem. Inflating the money supply is not a solution
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Nov 6, 2023 17:36
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hobbez posted:https://budgetmodel.wharton.upenn.e...iscal%20policy. I think it's legitimate to have that worry. However, I think studies like this are nearly useless when they start out with presumptions like this one: quote:Larger ratios in countries like Japan, for example, are not relevant for the United States, because Japan has a much larger household saving rate, which more-than absorbs the larger government debt. When appetite for its debt is falling, the government must offer higher yields to attract buyers. The US public's appetite for that debt - and, we can extrapolate, for savings in general - is likely to rise if the yields of treasuries rise well above inflation. Increasing savings is deflationary activity. Consumers choose to save rather than buy when the returns become more and more lucrative, and that cut in purchasing pushes downward on the economy, reducing inflation. At the same time, as drk posted, the government can pay off that borrowed debt with printed money, an inflationary activity. So the ability of the government to service very large amounts of debt via inflation is countered by the attractiveness of high interest rates prompting savings rather than spending by the public. Of course, paying increasingly higher yields above inflation means ballooning the cost of the national debt, so I think these forces are not always (maybe not ever) in perfect balance, but I think they can ebb and flow. Moreover, a deflationary economy implies job losses, with less money Americans spend their savings, so it may be that this factor doesn't scale perfectly or you need to do a more complicated multifactor analysis. Regardless, the handwave of "americans don't save as much" as if that's a permanent feature of the landscape makes me think that this is a paper written by people who started with a conclusion they wanted - "we need to cut spending" - and then argued away factors that run counter to their thesis. I do think we will raise taxes and lower spending sooner or later, though, because I expect both politicians and the public to be increasingly alarmed by the size of the national debt compared to GDP. Leperflesh fucked around with this message at 18:02 on Nov 6, 2023 |
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Nov 6, 2023 18:00
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drk posted:There's no reason for default when the government can print the same money that its debt is denominated in. The conservative “theory” is always that this will lead to a rampant inflationary cycle but it’s always a projection years away. Strangely the obvious corollaries, cut military spending, raise marginal income tax rates on the wealthy, the best sources of expense reduction and revenue generation with least marginal impact on the overall economy, never follows. It’s somehow always cut the safety net, and bullshit about a Laffer curve (never empirically demonstrated). The same garbage got touted 10 or so years ago about debt:GDP ratios by country and growth, and it turned out the “economists” were using excel and couldn’t even do that right.
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Nov 6, 2023 18:25
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hobbez posted:Well, yeah, money printing is a bad solution to a bad problem. https://en.wikipedia.org/wiki/Seigniorage#Seigniorage_as_a_tax Why not? Inflating your way out of debt is a viable solution for currency sovereigns who don’t trade much, like the us. It doesn’t solve the fiscal deficit of course, but that could easily (not politically easy) be addressed by raising the tax take to the oecd average Leperflesh posted:Regardless, the handwave of "americans don't save as much" as if that's a permanent feature of the landscape makes me think that this is a paper written by people who started with a conclusion they wanted - "we need to cut spending" - and then argued away factors that run counter to their thesis. seconded hypnophant fucked around with this message at 18:34 on Nov 6, 2023 |
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Nov 6, 2023 18:32
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20 years ago the financial/macro problem was the tech bubble proving to not be dependable and unemployment would be rampant in 2023. 20 years before that it was the threat of Japan taking over the US economy. Things that look like threats in 20 years are usually not the things that are actually threats. All that said: Leperflesh posted:
Is probably true but that's less of a crisis and more of a shift over time.
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Nov 6, 2023 19:13
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Leperflesh posted:I do think we will raise taxes and lower spending sooner or later, though, because I expect both politicians and the public to be increasingly alarmed by the size of the national debt compared to GDP. Right, so, you agree. My concern is we won't. I don't feel reassured by the leadership in Washington. Cut's to spending or tax increases anywhere are both political 3rd rails. When your career exists in 2-4 year election cycles, there's no incentive. The model referenced in that article isn't well described at all. I can't/won't make an argument for or against it. There's plenty of other evidence the debt is getting out of hand. By 2050, servicing debt interest will be the single largest government expenditure. At some point, this is simply unsustainable. Hypnophant posted:https://en.wikipedia.org/wiki/Seigniorage#Seigniorage_as_a_tax Totally debasing the currency in the process? No rational actor would ever want to do business in dollars again. Who would take a loan denominated in dollars when subject to such heinous interest rate risk? Anyone holding dollars would have their lunch eaten. Not to mention, anyone seeing it coming would abandon their dollars immediately. "Hyperinflation" is a gold bug boogieman, but, if you want hyperinflation, this is how you would get it started! pseudanonymous posted:The conservative “theory” is always that this will lead to a rampant inflationary cycle but it’s always a projection years away. Strangely the obvious corollaries, cut military spending, raise marginal income tax rates on the wealthy, the best sources of expense reduction and revenue generation with least marginal impact on the overall economy, never follows. You're talking about politics. It's not really a counter argument at all. From a liberal or leftist perspective, a reason that this issue is so concerning is that the United States is bankrupting itself whilst already having such drastic deficiencies in it's social services. Lockback posted:20 years ago the financial/macro problem was the tech bubble proving to not be dependable and unemployment would be rampant in 2023. Maybe so, but I feel that this issue has a higher degree of certainty of becoming problematic then the ones you cited. Calculating interest on a growing deficit is arithmetic. You just do the math and you see where it leads. It's not that nothing can happen that would disrupt this process, but we also have to make decisions on the best available evidence. Overall I don't really buy that just because the problem is "far away" makes it any less of a problem. It's like people that references the ozone layer in reference to solving climate change. Just because that problem got solved doesn't mean this one will too. hobbez fucked around with this message at 05:25 on Nov 7, 2023 |
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Nov 7, 2023 05:16
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Wework files for bankruptcy, to the complete surprise of nobody https://www.bloomberg.com/news/articles/2023-11-07/wework-goes-bankrupt-capping-co-working-company-s-downfall quote:WeWork Goes Bankrupt, Signs Pact With Creditors to Cut Debt
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Nov 7, 2023 06:34
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hobbez posted:Right, so, you agree. My concern is we won't. I don't feel reassured by the leadership in Washington. Cut's to spending or tax increases anywhere are both political 3rd rails. When your career exists in 2-4 year election cycles, there's no incentive. I don't think I agree, at least not to the specific points made by that article. I don't think you nor I have any idea what the leadership in Washington will be like in even ten years, much less 20. And I've seen quite a few "political third rails" get decidedly touched over the years, too. I remember times when gay marriage, health care reform, immigration, and abortion were all universally understood as third-rail items that politicians simply couldn't touch and survive, and then at some point... they weren't. I do agree that "at some point" servicing debt becomes unsustainable, but I also do not believe that we will just merrily fly past that point while doing nothing whatsoever. Politicians tend to eventually, belatedly come around to doing the necessary thing, half-assedly and belatedly, but also some of the actors involved aren't politicians - the Fed is influenced by politics but has some degree of independence and is not really answerable to the voters, for example. Basically I think the size of the deficit and by extension the national debt is mostly not America's most pressing and immediate problem, and if or when that changes, we'll have a big messy debate about it and then some kind of not great compromise will get reached and we'll slide along maybe worse off than we are now but probably not actually default on the debt or go into like, Greek debt crisis level austerity and perma-recession.
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Nov 7, 2023 07:54
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There's also powerful external factors. World leaders don't actually want the US to fall into a debt spiral.
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Nov 7, 2023 14:15
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hobbez posted:Totally debasing the currency in the process? No rational actor would ever want to do business in dollars again. Who would take a loan denominated in dollars when subject to such heinous interest rate risk? Anyone holding dollars would have their lunch eaten. Not to mention, anyone seeing it coming would abandon their dollars immediately. "Hyperinflation" is a gold bug boogieman, but, if you want hyperinflation, this is how you would get it started! There’s an ocean between 2% annual inflation and 50% monthly hyperinflation. Plenty of functioning states run 10% or 20% annual inflation and nothing collapses; sure, the dollar would probably lose its status as the global reserve, but if the government is committed to closing the fiscal deficit, through seigniorage or other means, de-dollarization can rapidly become someone else’s problem. Also it’s mostly the wealthy who hold dollars, by definition, and there’s not nearly enough liquidity in the entire ROW for the US capitalist class to get its money out of dollars. You are the one jumping at boogiemen here. You asked whether posting that article made you a deficit hawk; the answer is very much yes, it’s coming from a fundamentally conservative viewpoint, promoting regressive ideas about fiscal policy. The idea that we need to slash services now in order to head off a potential problem in 25 years is brokebrained.
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Nov 7, 2023 16:56
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i remember a decade ago when austerity hawks were pushing 90% debt to gdp as the tipping point when servicing a nation's debt would wipe out a national economy. european leaders took it seriously and for the last 15 year the eu has trailed the us in growth. turned out there were errors in their spreadsheet, so their already nebulous number that contributed to unemployment and economic anxiety of millions was just plain wrong. now this wharton paper is floating 200% as the tipping point. this particular section is suspect to me quote:Some of the increase in debt is well understood and driven by policy changes, including in response to 2007 – 2010 Great Recession, the Tax Cuts and Jobs Act of 2017, and more recent Covid-19 stimulus. Some of the projected debt increase was due to underestimates in entitlement program spending arising from faster-than-expected growth in the population of retirees and their Social Security and Medicare benefits. A decomposition of the exact causes goes beyond this brief. What Figure 1 clearly documents, however, is the secular rise in the debt-GDP ratio relative to past projections rather than an up-and-down relationship consistent with counter-cyclical policy. so looking at projections made over a 16-year period, which as noted included the worst economic crisis in a century and the worst pandemic in a century, there is no detailed analysis of what is actually driving an increase in debt to gdp ratios and the assumption is made that it is a secular trend. this is not exactly compelling when the human costs to trying to cut our way out of debt is so high
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Nov 7, 2023 19:33
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Here's an article which is relevant to any discussion of future budget deficit projections. TLDR: medicare costs diverged from projections around 2010, going from the projected exponential growth path to being basically flat. This resulted in a savings of trillions of dollars, far larger than any proposed deficit reduction program. No specific action was taken to reduce medicare costs and the CBO can't fully explain the discrepancy. Spending per beneficiary slowed significantly across federal programs.
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Nov 7, 2023 21:26
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if they can get a glp1 agonist that costs like $50 a month you can kiss the whole budget deficit goodbye
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Nov 7, 2023 21:56
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If anyone wants to watch a thorough debunking of the whole austerity myth this is a really good watch https://www.youtube.com/watch?v=JQuHSQXxsjM
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Nov 7, 2023 21:58
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bob dobbs is dead posted:if they can get a glp1 agonist that costs like $50 a month you can kiss the whole budget deficit goodbye I mean we could probably have that now if not for patents.
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Nov 7, 2023 22:05
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I still think about the day in my capstone Econ class where someone asked the professor (an amazing 40 year Fed vet who was only teaching as something to do in retirement) at what point will people stop lending the US money. Mainly in the sense of T Bills, but in general. He just shrugged and said he calculated it would be 15 years ago so probably never.
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Nov 7, 2023 23:37
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GhostofJohnMuir posted:the Tax Cuts and Jobs Act of 2017, and Man I was really looking forward to TCJA2017 expiring and saving loads of money on mortgage interest deduction I think with inflation etc they're pretty much gonna have to let that provision expire. Median house price is $431k. There will be blood in the streets if they don't reinstate the $1mm cap at the end of 2025
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Nov 8, 2023 08:38
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hypnophant posted:Here's an article which is relevant to any discussion of future budget deficit projections. TLDR: medicare costs diverged from projections around 2010, going from the projected exponential growth path to being basically flat. This resulted in a savings of trillions of dollars, far larger than any proposed deficit reduction program. Hmm. quote:The Patient Protection and Affordable Care Act was signed into law on March 23, 2010. The ACA was amended by the Health Care and Education Reconciliation Act on March 30, 2010. Wonder if that had anything to do with it. E. Having skimmed the CBO report, not a lot. It looks like the biggest factors are drug patents expiring and doing a lot better at managing high blood pressure and heart disease which reduces hospitalizations. Leperflesh fucked around with this message at 09:19 on Nov 9, 2023 |
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Nov 9, 2023 09:09
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I do like the idea of attributing all of it to the ACA, in a kind of reverse Laffer curve argument where you increase spending to decrease spending. But turns out, the real world is more complicated than that
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Nov 9, 2023 16:41
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hypnophant posted:Global Economics Thread: turns out, the real world is more complicated
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Nov 9, 2023 17:13
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hypnophant posted:I do like the idea of attributing all of it to the ACA, in a kind of reverse Laffer curve argument where you increase spending to decrease spending. But turns out, the real world is more complicated than that It’s really not read the Koch brothers own research on having Medicare for all.
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Nov 9, 2023 17:37
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hypnophant posted:I do like the idea of attributing all of it to the ACA, in a kind of reverse Laffer curve argument where you increase spending to decrease spending. But turns out, the real world is more complicated than that One of the main arguments for the ACA was that increased spending on preventative care decreases spending on emergency rooms and the like. It's closer to arguments in favor of infrastructure investment than it is to the Laffer curve. Spend a little now to avoid spending a lot later is a pretty common financial proposition. I'm not sure if managing high blood pressure and heart disease better was actually a result of the ACA but it was intended to be.
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Nov 9, 2023 18:04
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pseudanonymous posted:It’s really not read the Koch brothers own research on having Medicare for all. link Leviathan Song posted:One of the main arguments for the ACA was that increased spending on preventative care decreases spending on emergency rooms and the like. It's closer to arguments in favor of infrastructure investment than it is to the Laffer curve. Spend a little now to avoid spending a lot later is a pretty common financial proposition. hey i'm in favor of it, i just think it's hard to prove
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Nov 9, 2023 18:52
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hypnophant posted:link https://letmegooglethat.com/?q=koch+brothers+research+shows+medicare+for+all+savings
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Nov 9, 2023 18:57
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IIRC the discrepancy in Medicare spending vs projection was nearly entirely due to CBO overestimation from the 2003 Medicare Modernization Act, specifically the cost of Part D coverage. Compared to that the ACA barely touched Medicare, most of the provisions didn't go into effect until 2014, and the impact of preventive care probably wouldn't hit until years later. E.g. cbo.gov/publication/45552 cbo.gov/publication/58997 They only attribute 7% of discrepancy to legislative changes. Largest component is Part D, suspected to be because of a major shift to generics esquilax fucked around with this message at 19:28 on Nov 9, 2023 |
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Nov 9, 2023 19:13
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