Remarkably bad manufacturing-conditions survey from New York; Mohamed El-Erian thinks we are a mile away from where we actually are; Patrick Wyman on great historical human cruelty; British...
CPI inflation is dominated by shelter inflation, which is measured as rental inflation, that's dominated by owners equivalent rent, which is driven by the rental market of single family houses. There's a shortage of single family houses, so rent increases are high, as opposed to the much larger apartment rental market, where there is rising new construction supply.
So the headline CPI, which gets much more attention than core PCE, is increasingly dominated by the risible assumption that homeowners with fixed rate mortgages are leasing their houses back to themselves at a rental price which is based on a very small share of the total shelter market. I fear we will impute and assume ourselves into a recession.
Yep. Also, public accommodations discrimination is usually very easy to prove in court. After all, a business cannot discriminate in a public accommodation unless it does something overt: like posting a "whites only" sign or refusing to take peoples' money for no apparent reason. Employment discrimination is very difficult to prove--almost impossible at the hiring level, and not very easy for firing. This is true even for class-action suits, since a defendant can find plenty of confounders.
Goldman Sachs: "When rates ultimately do settle, we expect central banks to leave policy rates above their current estimates of long-run sustainable levels."
Blanchard: "Why I worry about inflation, interest rates, and unemployment | PIIE" It is interesting that he is explicit in identifying his analogous period. Good for him for that. And he is explicit about the common feature, the negative real rate of the policy instrument. So, what went wrong?
I’d hypothesize that in ‘74-75 the economy was indeed experiencing generalized excess demand spread more or less evenly across sectors and with inflation expectations being validated. In ’21-’23, excess demand was disparate, greater in sectors affected by COVID (supply chain) shocks with expectations spectacularly NOT being validated.
Now that does not answer the question why monetary tightening worked in the later case and not in the former, except that disparate excess demands in ’21-‘22 were further from equilibrium and so were in the process of dissipating as real resources shifted; i.e., some of the observed inflation was “temporary” and policy (eventually, just in time?) ensured that the “temporary” inflation WAS temporary. [I'll take Shiner "The pandemic inflation episode is still unwinding | Brookings" as support for disparate excess demands as "the difference."]
Someone with modeling skills should try their hand at a non-one-good, one-input model with disparate vs uniform excess demand to examine this. Would examination of differences in variations of inflation among sectors between the two periods be evidence?
CPI inflation is dominated by shelter inflation, which is measured as rental inflation, that's dominated by owners equivalent rent, which is driven by the rental market of single family houses. There's a shortage of single family houses, so rent increases are high, as opposed to the much larger apartment rental market, where there is rising new construction supply.
So the headline CPI, which gets much more attention than core PCE, is increasingly dominated by the risible assumption that homeowners with fixed rate mortgages are leasing their houses back to themselves at a rental price which is based on a very small share of the total shelter market. I fear we will impute and assume ourselves into a recession.
TIPS ought to be defined for PCE, not the CPI. "The food is no good and the portions (number of TIPS tenors) are too small" :)
Logan [Can Discrimination Thrive in a Free Market?] answers DeLong's perpetual question, "Why can't we have a better press corps?" :)
The Civil Rights Act public accommodations solved the coordination problem of business that did not want to discriminate.
Yep. Also, public accommodations discrimination is usually very easy to prove in court. After all, a business cannot discriminate in a public accommodation unless it does something overt: like posting a "whites only" sign or refusing to take peoples' money for no apparent reason. Employment discrimination is very difficult to prove--almost impossible at the hiring level, and not very easy for firing. This is true even for class-action suits, since a defendant can find plenty of confounders.
Goldman Sachs: "When rates ultimately do settle, we expect central banks to leave policy rates above their current estimates of long-run sustainable levels."
GS-thinks that r* has increased?
Blanchard: "Why I worry about inflation, interest rates, and unemployment | PIIE" It is interesting that he is explicit in identifying his analogous period. Good for him for that. And he is explicit about the common feature, the negative real rate of the policy instrument. So, what went wrong?
I’d hypothesize that in ‘74-75 the economy was indeed experiencing generalized excess demand spread more or less evenly across sectors and with inflation expectations being validated. In ’21-’23, excess demand was disparate, greater in sectors affected by COVID (supply chain) shocks with expectations spectacularly NOT being validated.
Now that does not answer the question why monetary tightening worked in the later case and not in the former, except that disparate excess demands in ’21-‘22 were further from equilibrium and so were in the process of dissipating as real resources shifted; i.e., some of the observed inflation was “temporary” and policy (eventually, just in time?) ensured that the “temporary” inflation WAS temporary. [I'll take Shiner "The pandemic inflation episode is still unwinding | Brookings" as support for disparate excess demands as "the difference."]
Someone with modeling skills should try their hand at a non-one-good, one-input model with disparate vs uniform excess demand to examine this. Would examination of differences in variations of inflation among sectors between the two periods be evidence?
Any more extended thoughts on the New York manufacting report? (as an upstate NY resident, some parochial interest here).