Fairly Recently: Must- and Should-Reads, and Writings... (February 3, 2019)
Weekend Reading: Tren Griffin: A Dozen Things I’ve Learned from Charlie Munger about Capital Allocation: "There are two kinds of businesses: The first earns 12%, and you can take it out at the end of the year. The second earns 12%, but all the excess cash must be reinvested.... We hate that kind of business”...
Note to Self: A Comment on 'Development Engineering': The economy is a decentralized societal calculating machine... in which incentives are, and "doing well" achieved by, increasing resources that produce things for which rich people have a serious Jones...
Stephen Hackett: Twitter is Over: "Ashley Feinberg’s interview with Jack Dorsey.... As messy as the current version of Twitter is, the ideas bubbling to the top within the company all look pretty bad.... I think it’s clear the leadership at Twitter has no idea what they are doing, and I think the network’s time is ticking away faster than ever...
Ashley Feinberg: Jack Dorsey Has No Clue What He Wants: "A Q&A with Twitter’s CEO on right-wing extremism, Candace Owens, and what he’d do if the president called on his followers to murder journalists...
Marcy Wheeler: Lawfare's Theory of L'Affaire Russe Misses the Kompromat for the Pee Glee_: "Trump and the Russians were engaged in a call-and-response... that appears in the Papadopoulos plea and (as Lawfare notes) the GRU indictment.... At each stage... Russia got a Trump flunkie (first, Papadopoulos) or Trump himself to publicly engage in the call-and-response.... Putin obtained receipts at each stage of this romance of Trump’s willing engagement in a conspiracy with Russians for help getting elected. Putin knows what each of those receipts mean. Mueller has provided hints, most obviously in that GRU indictment, that he knows what some of them are.... Trump knows that if Mueller can present those receipts, he’s sunk, unless he so discredits the Mueller investigation before that time as to convince voters not to give Democrats a majority in Congress, and convince Congress not to oust him as the sell-out to the country those receipts show him to be. He also knows that, on the off-chance Mueller hasn’t figured this all out yet, Putin can at any time make those receipts plain.... Trump knows he’s screwed. He’s just not sure whether Putin or Mueller presents the bigger threat...
Would somebody please tell me what the Brexiters want? Do they want to stay in the customs union? Do they want a hard border in the Irish Sea? Do they want a hard border within Ireland? What is Theresa May asking for? What are the "alternative arrangements to prevent a hard border with Northern Ireland" and yet allow the collection of customs and the exclusion of commodities that do not meet European standards that they seek? 14 5 of British GDP is exported to the EU. 3.5% of EU GDP is exported to Britain. Demonstrating that being in the EU is a good deal relative to other options is an important value for the EU. Evans-Pritchard never says—nor does he comment that the German economists whom he praises also call for the UK government to abandon its "red lines". What is Theresa May willing to give up that the EU values in order to secure the removal of the Irish Backstop?: Ambrose Evans-Pritchard: German Anger Builds Over Dangerous Handling of Brexit by EU Ideologues: "A group of top German economists has told the EU to tear up the Irish backstop and ditch its ideological demands in Brexit talks, calling instead for a flexible Europe of concentric circles that preserves friendly ties with the UK.... The report implicitly rebuked the European Commission for mishandling its negotiations with Britain and for trying to use the legal advantage of the Article 50 process to dictate a harsh settlement, with little regard for long-term strategic and diplomatic interests...
The important takeaway from the February 1 BLS Employment Report is that goods-producing wage growth was remarkably low. No one data point should cause you to change your view radically. But it is yet another brick in the wall of evidence that the Federal Reserve has been massively underestimating how much slack there is in the U.S. economy by focusing on the unemployment rate. The current employment-to-population ratio is 60.7%. The prime-age rate tells us that we should probably adjust that upward by 2.1% to take account of population aging over the last two decades. That tells us that the labor market is still slack relative to its state in the late 1990s to the extent of a full percentage point or so. We should not expect to see higher inflation now—and the Fed should not have tied itself to the mast of using the unemployment rate as thecyclical variable over the past decade. Dan Alpert brings the main course. Karl Smith, Ryan Avent, Nick Bunker: Dan Alpert: Dan Alpert on Twitter: "Hourly and weekly wages for literally all categories of goods producing jobs took a huge tumble last month-down 13 cents/hr or 0.45% on average M/M. Its good :-( that there are so few of them or wages across the board would have plummeted! This is huge news!...
Sydnee Caldwell and Nikolaj Harmon: Outside Options, Bargaining, and Wages: Evidence from Coworker Networks: "We develop a strategy that isolates changes in a worker’s information about her outside options...
Barry Ritholtz: More Noise, Less Signal: "What would happen if you purposefully tried to assemble a “How-to” list to pursue the exact opposite goal—how to get more noise, and less signal? In other words, what are the exactly wrong things to do as an investor? I took last week’s list, and updated it to be the anti-list...
Barry Ritholtz (2016): The Counterfactual: "States, those so-called laboratories of democracy, have been engaging in a variety of different policy experiments.... Consider the following... "fourteen states begin the new year with higher minimum wages"... and, during the next few years, minimum wage increases are scheduled to take place in California, New York, Oregon and elsewhere. Regardless of your views... we will get a huge run of data in the coming years. Whatever your beliefs may be, you should pay attention to this data to learn if they are well-supported or not. We also see similar experiments taking place in tax policy.... During the past few years, we saw big tax cuts in Kansas, Louisiana and New Jersey, with big tax increases in others... #equitablegrowth #labormarket
This is hugely double-plus unhood. You would think Facebook would be more careful these days: Jeremy B. Merrill: Facebook Moves to Block Ad Transparency Tools—Including Ours: "Our tool had let the public see exactly how users were being targeted by advertisers. The social media giant urged us to shut it down... #behavioral #riseoftherobots #moralresponsibility
Dani Rodrik joins those who believe that Donald Trump and his administration have too little competence and too childish an understanding of the world to do substantial persistent damage to equitable growth. I would like to believe him, but I worry that Italy under Berlusconi may be a relevant case that is a counterexample. As I see it, Berlusconi's kleptocratic and chaos-monkey nature robbed Italy of a decade of economic growth. Trump can definitely do the same Dani Rodrik: Trump’s Trade Game: "Though Trump’s unilateralism and mercantilism are bad... one should not exaggerate.... If other countries do not overreact–and, so far, they have not–the consequences for world trade will remain manageable.... The shift in global demand from goods to (less tradable) services; the increased skill-intensity of manufacturing... automation... reshoring... China’s transition... to domestic-demand-led growth... are likely to have a larger impact on trade than Trump’s bluster ever could... #orangehairedbaboons
Josh Marshall: Why the Outlook for Digital Media Behemoths is Worse than You Think: "There are reasons to own a media company that posts consistent if modest profits.... even reasons to own media companies that lose predictable and relatively small amounts of money every year. The problem is that the people who currently own these companies aren’t in it for any of those reasons.... News organization don’t need to be wildly profitable. But the people who own most digital media today are owning for wild profitability or... the credible hope of future wild profitability... to sell the media companies for big returns. That’s a problem... #journamalism
Scott Lemiueux: Mitch McConnell: Free and Fair Elections Would Be Disastrous For the Republican Party... #moralresponsibility
Harry Brighouse: Navigating the Need for Rigor and Engagement: How to Make Fruitful Class Discussions Happen: "Derek Bok... a passage that, ultimately, transformed my teaching: 'Teaching by discussion can also seem forbidding because it makes instructors uncomfortably aware of their shortcomings. Lecturers can delude themselves that their courses are going well, but discussion leaders know when their teaching is failing to rouse the students’ interest by the indifferent quality of responses and the general torpor of the class. Trying to conduct a discussion with apathetic students is much like giving a bad dinner party'... #teachingeconomics #berkeley
But the demented yo-yo-ness of the stock market is important because it signals yo-yo-ness in investment spending three quarters down the road. "Deserve" has absolutely nothing to do with it. And Felix asks "how long is too long for real rates to be negative"? The answer is: as long as inflation is below its target—or below what the inflation target should be—it's not too long: Felix Salmon: The Case Against Raising Rates: "Brad is right that the stock market decline is new information, but it's new information that tells us more about stock-market volatility than it does about the health of the economy. The market does not deserve some kind of Fed-dispensed doggie treat just for bouncing around like a demented yo-yo...
Neil Steinberg: What's next? 'Hi, This Is A Scam! Grab Your Wallet So We Can Cheat You!': "'Social Security numbers do not get suspended', the Federal Trade Commission points out on its web page devoted to this scam. 'Ever'. Are there people who don’t know this? Apparently so. Which raises the question: Why base your scam on something a halfway savvy person knows to be false? For exactly that reason.... Fraud is... about identifying the most credulous, the choicest marks, and going after them. It’s a manpower issue.... Scams fall into two categories: fear and greed.... Fear and/or greed already in the victims-to-be make them party to their own defrauding, but inspires an unspoken complicity that blunts their ability to realize they’ve been had. The resilience of the cheated is plain if we look at... those who supported Donald Trump...
Paul Krugman: Attack of the Fanatical Centrists: "The most disruptive, dangerous extremists are on the right. But there’s another faction whose obsessions and refusal to face reality have also done a great deal of harm.... I’m talking about fanatical centrists... follow[ing] conventional centrist doctrine.... In general, centrists are furiously opposed to any proposal that would ease the lives of ordinary Americans. Universal health coverage, says Schultz, would be 'free health care for all, which the country cannot afford'.... Michael Bloomberg declared that extending Medicare to everyone, as Kamala Harris suggests, would 'bankrupt us for a very long time'. Now, single-payer health care (actually called Medicare!) hasn’t bankrupted Canada. In fact, every advanced country besides America has some form of universal health coverage, and manages to afford it...
Matthew Delmont: How Jackie Robinson Helped Defeat a Trump-Like Candidate: "At its core, Barry Goldwater’s campaign threatened blacks’ ability to fully engage in a two-party system: 'During my life, I have had a few nightmares which happened to me while I was wide awake,' Robinson wrote in 1967. 'One of them was the National Republican Convention in San Francisco, which produced the greatest disaster the Republican Party has ever known—Nominee Barry Goldwater.' Robinson, a loyal Republican who campaigned for Richard Nixon in 1960, was shocked and saddened by the racism and lack of civility he witnessed at the 1964 convention. As the historian Leah Wright Rigueur describes in The Loneliness of the Black Republican, black delegates were verbally assaulted and threatened with violence by Goldwater supporters. William Young, a Pennsylvania delegate, had his suit set on fire and was told to 'keep in your own place' by his assailant. 'They call you "nigger," push you and step on your feet,' New Jersey delegate George Fleming told the Associated Press. 'I had to leave to keep my self-respect'...
Adam Tooze, Brendan Greeley, and Mark Blyth: Davos, Econ 101 and the Unexpected Importance of China in the Global Economy | Financial Times: "hHow our politics got us to where we are today, why our ideas about how the economy works may not be fit for purpose, and the key role that China played during the Great Recession and continues to play today. They also discuss the central importance of global capital flows for understanding our world and why global liquidity may be much more fragile than we like to think...
Bruce Springsteen (1973): Live at Max's Kansas City
James Cameron: Aliens Script
Effects of Capital Inflows: The key question is: when capital flows in, does it just come by itself or does it bring an increased supply of risk-bearing capacity along with it?...: Olivier Blanchard, Jonathan D. Ostry, Atish R. Ghosh, and Marcos Chamon: Macro Effects of Capital Inflows: Capital Type Matters: "Some scholars view capital inflows as contractionary, but many policymakers view them as expansionary. Evidence supports the policymakers. This column introduces an analytic framework that knits together the two views. For a given policy rate, bond inflows lead to currency appreciation and are contractionary, while non-bond inflows lead to an appreciation but also to a decrease in the cost of borrowing, and thus may be expansionary...
Flexprice Model and IS Curve: Review and Problems: The GSI's have read me the riot act https://en.wikipedia.org/wiki/Riot_Act. We have gone too far too fast, and it is time to pause and do some examples...
Randy Shore: Bitcoin Dealer Seeks Credit Protection; Dead Owner Had Sole Access to 250 Million: "Gerald Cotten, 30, had died of complications due to Crohn’s disease.... The company’s cryptocurrency reserves are locked in so-called cold wallets—unhackable offline accounts—that cannot be accessed by anyone but Cotten.... 'The laptop computer from which Gerry carried out the company’s business is encrypted and I do not know the password or recovery key'...
Jordan Weissmann: "This post started off tongue in cheek, but I'm actually kind of serious. We need to hike the estate tax before a quarter of America's billionaires die in the next 10-12 years and leave their money to a generation of Wyatt Kochs...
#noted #weblogs
