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TheMoneyIllusion » Contrarian views
1. The FT reports that we are edging ever closer to WWIII: European intelligence agencies have warned their governments that Russia is plotting violent acts of sabotage across the continent as it commits to a course of permanent conflict with the west. Russia has already begun to more actively prepare covert bombings, arson attacks and damage to infrastructure on European soil,
TheMoneyIllusion » The once and future king
So let me get this straight. The President of the United States encouraged the Chinese to build concentration camps in Xinjiang. The Chinese built concentration camps in Xinjiang. In response, we complain about human rights violations and launch a cold war that could easily turn into a hot war. Increasingly, I feel that America is just a giant lunatic asylum.
TheMoneyIllusion » Nationalism rots your brain
I don't think people realize how profoundly nationalism distorts their view of the world. Consider a recent comment in response to my complaint about people's obsession with the Gaza War: I suggest you ask a Palestinian for their views. Maybe he was joking, as from a certain perspective this is an amusing response to my earlier post. But I
TheMoneyIllusion » Immigration, wages, and the Phillips Curve
As you may know, the actual Phillips Curve is about the relationship between unemployment and wage inflation. That's the relationship A.W. Phillips actually identified, and it's still the correct version. Price inflation doesn't correlate well with unemployment. Painful disinflation is and always has been about getting wage inflation down.Forget payroll employment, the big news in today's job
TheMoneyIllusion » Odds and ends
1. Commenter Floccina directed me to a video showing Matt Yglesias's ideal city. 2. A back issue of Harpers had an article discussing the possibility of legalizing drugs. This comment caught my eye: At the time, I was writing a book about the politics of drug prohibition. I started to ask [former Nixon aide] Ehrlichman a series of earnest, wonky
TheMoneyIllusion » The question is the problem
You: What do you think of the Gaza situation?Me: That's the problem.You: What do you mean? I asked for your view on the situation.Me: My view is that the question you asked is the problem. The problem is that we are asking questions about Gaza. If we were not asking those questions, there would be no problem.You: Please explain. Me:
TheMoneyIllusion » More articles
1. Tyler linked to an interesting article on Portugal. This caught my eye: Then, in 2023, the Immigration Control Agency was dissolved, ostensibly in response to an extremely uncharacteristic display of violence where, in March 2020, two officers beat a Ukrainian man to death in the airport of Lisbon. No protests followed the unjust death of this man on Portuguese
TheMoneyIllusion » Seven! (Trump is on a roll)
In a recent post, I listed 6 ways that Trump intends to reduce inflation: Trump has a 6-part plan to bring down inflation: 1. Favors NIMBY policies to prevent housing construction in the suburbs. 2. Expel all the illegal workers that pick our food and provide other key services. 3. Put heavy tariffs on imported food and other goods. 4. Have Medicare do less negotiation of drug prices. 5. Run
TheMoneyIllusion » Is African politics inferior to American politics?
The Financial Times has a story that points to some disturbing features of South African politics: It is the kind of fervent devotion that has driven a wave of support for the former president [Jacob Zuma] ahead of a critical general election on May 29. Yet as recently as January, the 82-year-old African National Congress veteran appeared to have been cast
TheMoneyIllusion » The hawkish case
The future course of the economy always involves a bit of guesswork. But it seems to me that the following two claims are pretty likely to be true:1. Over the past three years, monetary policy has been far too expansionary.2. It is likely that monetary policy is still a bit too expansionary, although I have less confidence
TheMoneyIllusion » Leftists for Trump
How are leftists working to re-elect Trump? There are almost too many ways to count: 1. Trump was reeling after his candidates did horrible in the 2022 midterms, and people like Ron DeSantis were soaring in the polls. Then leftists saved him by making him seem like a victim, and he began rising in the polls. Even
TheMoneyIllusion » Time to add the epicycles!
During the golden age of macroeconomics (roughly 1984-2007), many economists understood that interest rates were not monetary policy. After 2008, economists have been drifting back to old-school Keynesianism, with its emphasis on fiscal policy and interest rates.For the umpteenth time, it makes no sense to talk about interest rates causing changes in other macro variables. To do so
TheMoneyIllusion » Is inflation re-accelerating?
I don't know. But the possibility is greater than I would have wished to see.Inflation data is often noisy and unreliable, for a wide variety of reasons. Wage inflation is the most meaningful for monetary policy. Among all of the various price indices, the service sector inflation ex-housing and energy is probably the most closely tied to
TheMoneyIllusion » Ranting and berating at the National Review
Here's Jim Geraghty of the National Review: We’ve reached the point where Biden administration officials, Democrats, and pro-Biden columnists are tearing their hair out, furious that the electorate perceives the economy as being subpar. But if you look in the right places, the economic frustration makes perfect sense — and those right places include grocery prices since before the pandemic, the
TheMoneyIllusion » There’s no such thing as public opinion; example #2178
Each day I get more and more depressed about the intellectual climate in America (and the rest of the world.) How often do you see people quote polls suggesting that the public believes the economy is doing poorly, as if these polls actually meant something?Matt Yglesias directed me to this Chris Rugaber tweet: Most people (as individuals) are doing fine. Most
TheMoneyIllusion » Comments, observations, snide remarks
1. Be careful what you wish for (from Matt Yglesias's Substack): While several states have banned abortion, a bunch of other states have made it easier to get medication abortions and otherwise reduced restrictions with the result that there were actually more abortions in 2023 than in previous years. And abortion rights is getting more popular. A new Fox poll showed
TheMoneyIllusion » The Fed is clumsy
The Fed should not be targeting interest rates. But if it insists on doing so, then the most efficient regime would adjust the fed funds rate target by basis points (i.e., 0.01%), not quarter point increments. In addition, the rate should be adjusted daily based on the median vote of the FOMC. It should move around like
TheMoneyIllusion » Price indices: constant utility or constant quantity?
Josh Hendrickson argues that an ideal price index should include asset prices. I am not going to address that issue, as I'm not sure what an ideal price index is. But it's a good post---worth reading if you are interested in price indices. Instead, I'd like to focus on a less controversial claim in the Hendrickson post: From that description,
TheMoneyIllusion » Treasure for pleasure
[Readers trying to avoid sugar for health reasons may want to skip this post.] My basement recently flooded, and I was forced to knock out some drywall to prevent mold. At one point, I discovered a secret compartment that was completely walled in. It contained several boxes. Here I should digress and mention that I've always been fascinated
TheMoneyIllusion » Wage inflation in Japan
There is evidence that nominal wages in Japan are finally starting to rise: Toyota Motor Corp. met its labor union’s demands for increases in salary and bonuses in full for the fourth straight year, in another sign that a sustainable wage-price cycle may be taking hold in Japan’s economy as the central bank considers the timing of a long-awaited interest rate hike. The yen
TheMoneyIllusion » Random observations
1. This confused me: Renewed efforts by Congress to force TikTok to sell or face a ban in the US have the backing of the White House, even as President Joe Biden’s reelection campaign has started to use the platform to reach younger voters. I'm confused. If using Tiktok endangers national security, then why is Biden using TikTok? I get
TheMoneyIllusion » It’s all demand side
Here's The Economist: The economists who had warned that excessive stimulus and overheating demand, rather than production snarls, would make inflation a more serious problem seemed prescient. In the shorthand of the day, it looked as if “Team Persistent” had defeated “Team Transitory”. Fast-forward to the present, and something strange has happened. The Fed, along with most other major central banks, has
TheMoneyIllusion » Loud, salty, and stupid (give em what they want)
Yesterday, I saw Dune 2 in a huge theater (with only one other patron.) Before the feature presentation, I was subjected to 35 minutes of torture. First a series of ads, then one preview after another full of loud explosions and ridiculous CGI monsters. (Remakes of Planet of the Apes, King Kong and Mad Max, among other
TheMoneyIllusion » I am the captain now
The day after the 2020 election, I suggested that the results were bad news, as now we'd have 12 years of Trump instead of 8 years of Trump. I immediately realized that the closeness of the race meant that Trump would be back---more fascist than ever and seeking revenge against those who oppose him. Flash forward to 2024,
TheMoneyIllusion » About that 2017 Tesla bubble
There are times when the claims of bubble proponents becomes so far-fetched that you wonder if it's all just a spoof. Bloomberg provides a recent example: Nvidia Corp.’s rise is captivating the stock market and driving the S&P 500 Index to new highs. But it also raises cautionary reminders of another investor darling that soared on dreams of a technological transformation, only
TheMoneyIllusion » The wonderful (horrible) economy (economic policy)
This made me laugh out loud: Biden can't catch a break. For the past year, Dems have been scheming to run against Trump, arguably the weakest candidate in US history. Now they are finally getting their wish, and Biden's going to lose. (They don't read my blog.) Here are some truths about the current US economy: 1. It's in
TheMoneyIllusion » The Lucas critique cuts both ways
I'm occasionaly asked how NGDP level targeting would have performed in a specific historical case, such as 1981 or 2023. The usual worry is that when NGDP is well above trend, a policy of level targeting might require a highly contractionary monetary policy, triggering a recession.Here it's worth recalling the Lucas critique (from Wikipedia): The Lucas critique argues that it
TheMoneyIllusion » Recent articles/tweets
1. I agree with 95% of the views in this Zvi Mowshowitz post, but not this one: Andrew Biggs makes the case for eliminating the tax preference for retirement accounts. This mostly benefits the rich, does not obviously increase net savings values, causes lots of hoops to be jumped through, and we can use the money to shore up social security