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TheMoneyIllusion » A long strange trip
For readers who don't already know this, my new blog is over at Substack:scottsumner.substack.comThis will be my final Money Illusion post. The blog began on February 2, 2009. But the events that led to the blog took place in late 2008. Indeed my life can be divided into two segments, before and after September 16, 2008. It was that specific
TheMoneyIllusion » Are we moving toward fiscal dominance?
A recent Bloomberg article suggested that we may be moving toward a regime characterized by fiscal dominance, at least part of the time: In their paper, three economists from New York University, Stanford and London Business School argue that the US is moving from a regime of “monetary dominance” to one of “fiscal dominance.” In the former, the Fed controls inflation
TheMoneyIllusion » Yglesias on political sorting
There has recently been a lot of discussion about how all of the conspiracy nuts are moving over to the GOP, whereas not so long ago they were at least as common among Democrats. Matt Yglesias has a very good post that points out how this is a problem for both sides.The TLDR is that Republicans increasing suffer from
TheMoneyIllusion » Jeffrey Ding on China
I've been amazed by the response to Russia's invasion of Ukraine. The most militarily expansionist leader since Hitler and Stalin starts a war that threatens to spiral out of control. He leads a country with enough weapons to destroy most of the US population. He threatens to use nuclear weapons (and is scolded by China for doing
TheMoneyIllusion » An American economic miracle?
Matt Yglesias directed me to this tweet: If you looked at certain polls, you'd think the economy was doing poorly. On the other hand, if you looked at state economic performance polls, or polls asking about an individual's personal financial situation, then things look far better. But one thing is clear---the US is outperforming the economies of other developed countries by
TheMoneyIllusion » Fifty to one on job growth?
Brad DeLong directed me to a tweet that contained this intriguing graph: If you polled 51 million Americans and found that 50 million supported X, whereas 1 million opposed X, that would be a highly significant survey. So what should we make of the fact that over the past 35 years, Democratic presidents have
TheMoneyIllusion » Hanania on the GOP
Here's Richard Hanania: We can already see Republican candidates and institutions shifting over to Gribble messaging. The Heritage Foundation, once believed to represent elite conservative thought, goes to Twitter and implies that the Secret Service tried to assassinate Trump. JD Vance has praised Alex Jones as a truth teller. Meanwhile, Ted Cruz and Vivek Ramaswamy went around earlier this year predicting
TheMoneyIllusion » The final nail for fiscal dominance?
One of my biggest frustrations over the past 15 years has been the economics profession's drift away from certain well established propositions, such as the fact that the Fed controls the price level. But there are signs of light. David Beckworth has a twitter thread discussing how inflation has recently fallen sharply despite absurdly large budget deficits as
TheMoneyIllusion » Bayesian analysis
The FT has a good article that might be seen as being tangentially related to my earlier post on lab leak vs. zoonosis: If a screenwriter were to come up with a storyline in which a tech tycoon drowns when his luxury yacht is hit by a freak storm just two days after his co-defendant in a multibillion dollar fraud trial
TheMoneyIllusion » A chat with ChatTMI
As I wrap up this blog, it's worth asking ChatTMI about my central claim---that the Fed caused the 2008 recession with a tight money policy. First I asked it to summarize my view, and then critique it. Me: Why does Scott Sumner believe the Fed caused the 2008 recession? The response: Scott Sumner, an economist known for his work on monetary
TheMoneyIllusion » Robert Kennedy Jr. goes to the highest bidder
Here's Reason magazine: Still, Kennedy's endorsement of the Republican candidate wasn't inevitable. Just last week, Kennedy was reportedly angling for a position in the Harris administration in return for an endorsement. A few months before that, Kennedy was (somewhat half-heartedly) seeking the Libertarian Party's nomination for president. At his Phoenix rally today, Kennedy said he had several meetings with Trump, in which the former president committed to
TheMoneyIllusion » A final few links
1. Ross Douthat has a good piece in the NYT, pointing to the scandal of Joe Biden continuing to serve as president despite his physical and mental decline. But this specific sentence had me scratching my head: And since things keep happening in the world — for instance, this week, the nation that we’ve been arming for a defensive war decided
TheMoneyIllusion » The art of saying nothing
Who was the coolest actor in the history of cinema? I'd vote for Alain Delon. And I suspect that many of the runners up got their style by copying Delon. (Compare Tony Leung and Delon.) If you are not familiar with Delon, check out his work in Jean-Pierre Melville's noirs, especially The Samurai. Also films
TheMoneyIllusion » Conspiracy theories aren’t about conspiracies
The OC register has an article discussing the views of an English professor on conspiracy theories: Cal State Fullerton professor Elise Wang is one of 28 scholars across the country selected for the 2024 Andrew Carnegie Fellows Program, one of the nation’s most prestigious grants for social science and humanities researchers examining pressing societal issues.So, what can someone studying Chaucer tell
TheMoneyIllusion » Three Bayesian estimates
I'm on record suggesting that Covid probably entered the human population from an animal market in Wuhan. I've given 10-1 odds in favor of that hypothesis. Two other researchers looked at essentially the same data as I did, and reached radically different conclusions. In a presentation at the Hoover Institute, Andrew Levin presented a paper entitled: A Bayesian Assessment of
TheMoneyIllusion » How many $s to tell the truth?
We all hold back on some unpleasant truths, at least now and then. That's partly due to fear of angering co-workers, friends or family. We wish to be polite. But if I were rich enough, then I'd be able to say whatever I wish. I would have no fear of losing my job in response to
TheMoneyIllusion » Bananaland
Every since the late 2010s, the US fiscal situation has become unsustainable. Unless dramatic changes are made, we are eventually headed toward a major problem (sharp tax increases, high inflation, or default.) Now it seems as though dramatic changes are going to be made---albeit in the wrong direction. Here's Bloomberg: The back-and-forth over taxes has escalated in recent
TheMoneyIllusion » More links
1. For years, I've been complaining about the US bullying of smaller nations. This tweet thread by Jeff Stein documents the fact that US bullying has increased dramatically over the past decade. 2. By some measures, Texas is far and away the most environmentally conscious state. Another link suggests that Texas produces more electricity from renewable energy than New
TheMoneyIllusion » Claudia Sahm on the risk of recession
A few days ago Claudia Sahm wrote a Bloomberg column entitled: My Recession Rule Was Meant to Be Broken Even before I read the article, I suspected that I would sympathize with her argument, which proved to be the case: The US is not in a recession, despite the indicator bearing my name saying that it is. The Sahm rule, which was triggered with
TheMoneyIllusion » China, China, China
1. Here's what happens when the West turns away from globalization: While the United States has free-trade agreements with 11 Latin American countries, it shows no appetite for more. Uruguay’s centre-right government is negotiating an accord with China after its requests for one with the United States were rebuffed. France and others are blocking the ratification of a trade pact between
TheMoneyIllusion » What should the Fed do?
What should the Fed do?NGDP level targetingBut what should the Fed do right now?NGDP level targeting OK, but they won't. So what should the Fed do to interest rates right now? Set the target rate consistent with 4% NGDP growth But what is the target rate consistent with 4% NGDP growth? How should I know? They are the geniuses that think interest
TheMoneyIllusion » The Second Sex
I don't follow Democratic politics closely, but those who do suggest that Michigan Governor Gretchen Whitmer would have been a strong possibility to be the nominee if there were an open primary. She's a popular governor in a part of the country that will determine the election.[Conditional forecast: If Harris wins Wisconsin, Michigan and Pennsylvania, she wins the
TheMoneyIllusion » Second derivative blues
Payroll employment rises by 114,000 and unemployment is only 4.3%. Wages are up 3.6% over the past 12 months. Those are really good numbers!Unfortunately, it's often the second derivative that tells the real story. There are strong signs that the economy is slowing rapidly. That doesn't necessarily mean there'll be a recession, but I'd say there's
TheMoneyIllusion » Provoked by a provocative piece
It seems to me that the term 'provoked' has a sort of negative connotation. Don't poke the bear, you'll only provoke him. On the other hand, 'provocative' can have a positive connotation. He expressed some provocative ideas, meaning interesting ideas. But doesn't provocative mean things that provoke? Tyler Cowen has a new piece in Bloomberg entitled: Trump Likes
TheMoneyIllusion » Never reason from a quantity
I see lots of commenters making an EC101 error. They notice that Canadians are much more likely to live in high rises, and assume that this reflects a difference in preferences. It's certainly possible that preferences differ in one country from another, but to demonstrate that to be true you'd first have to consider supply factors. Canada
TheMoneyIllusion » The odd distribution of high rise construction
This tweet caught my eye: The tweet included this graph (click link for closer view): In the unlikely event that my math is accurate, I counted 624 high-rises under construction in Canada and 796 in America. But the US has more than 8 times the population of Canada. In addition, we are more densely populated, even if you throw out
TheMoneyIllusion » Creep
Matt Yglesias directed me to this audio: Obsession with George Soros? Check Obsession with black women getting abortions? Check Unease with women being free to travel to other states? Check All in 48 seconds, three seconds longer than the shower scene in Psycho. Yes, you could probably find just as many offensive statements in this blog. But guess what---I don't plan to
TheMoneyIllusion » Not impressed
Tyler Cowen linked to an interesting set of tweets: Neither observation impresses me. The fast growth over the past 51 months comes from a rebound from Covid (plus strong immigration.) The expansion after March 2009 was way too slow, featuring very high unemployment for a number of years. I am impressed by the low unemployment rates since March 2022, and
TheMoneyIllusion » Children are the future
Back in 2010, I predicted that India would have the world's largest economy (in PPP terms) within 100 years. A few months later, I moved up the predicted date to 2081. Based on this graph, I'd now say some time in the 2060s: Today, India and China both have a bit over 1.4 billion people. But look at the
TheMoneyIllusion » Facing or creating?
During the 2010s, Jim Bullard was probably my favorite Federal Reserve bank president. David Beckworth has an interview with Bullard, in which he makes a number of insightful observations. As usual, I'll focus on an area where I seem to spot a difference of opinion: Bullard: So, the mentality at the time [2020] was, still, that this shock was going
TheMoneyIllusion » Random links
[I've received complaints that I don't do enough posts on monetary policy. I have a long one over at Econlog with zero comments, while my moronic Trump posts get dozens of comments.] 1. Here's Janan Ganesh: Because, in Britain, someone who is nationalist in general will be anti-EU in particular, the Anglo-American intelligentsia tends to assume the same of Europeans. In
TheMoneyIllusion » Now do you see the problem?
I'm certainly no Nostradamus, having incorrectly forecast both the 2016 and 2020 elections. But it seems to me that I have made a number of more general claims that are looking increasingly plausible:1. I've consistently said that Biden is a senile old guy, not fit to be president. (I've said the same about Trump, but that's neither
TheMoneyIllusion » Trump’s worst decision
Trump has done so many awful things that it's hard to single out any one example. But for my money, picking Vance as his VP is his single worst decision. Vance is my least favorite US senator. Picking Vance confirms what I already suspected. The traditional Republican Party is dead---it's officially the party of nationalism from