Macro Musings

I have to feel relatively awake and able to concentrate, but when those conditions are fulfilled I like nothing better than to listen to an episode of Macro Musings with David Beckworth. He’s on the fairly obscure podcast app that I use, so yours will almost certainly work too.

I listened to two episodes yesterday:

• Megan Greene and Eric Lonergan on Dual Interest Rates and the Prospects of Average Inflation Targeting and
• Thorvald Grung Moe on the Life of Marriner Eccles and His Lasting Macroeconomic Legacy.

Both are excellent. The first explains how expanding the ECB TLTO facility could solve the issues of the zero lower bound and give monetary policy. It has an excellent discussion of how even eminent central bankers have a hazy idea of where to draw a line between monetary and fiscal policy. In my view, the major central banks have carried out policies with massive distributional consequences and are, as such up to their necks in fiscal policy. If a progressive income tax is a fiscal policy, then QE — which arguably has precisely the opposite distributional effect — must also be.

The second is a fascinating insight into a man who, without any academic training, came up with an intuitive understanding of macroeconomics that foreshadowed the work of Keynes and Minsky and, without even a degree (as far as I can tell) ended up not only becoming the chairman of the Fed but actually redesigned the Fed into the institution we know today. Minsky is sometimes mocked as an economist famous for having just one idea and promoting it endlessly (the “Minsky moment”). It’s clear that he had some much more wide ranging ideas about how to stabilize an economy. I did read a long book by him once, but it was rather dense and I can understand why the general public prefers boiled down versions of his ideas.

Markets Open

The mad tweeting from Trump seems to be having less impact on the market. From what I can tell, he decided to backpedal on saying that he’d block stimulus spending until after the election. Currently (9:30 BST), most markets looking fairly rangebound, even bitcoin!

Chart for the day

For a president who promised to make US exports great again, he has conspicuously failed. Recessions usually hit domestic spending, which suppresses imports. This one seems very different, with GDP taking a dive but consumers spending much less on (domestically produced) services and more on imports. I’m surprised that Biden doesn’t make more of this (in the 2008 crises the trade deficit shrank dramatically) but I guess that any mention of economics loses more votes than it gains, because it makes the candidate seem remote and out of touch with ordinary voters.

Long ideas

I am a great fan of Kuppy‘s. A lot of his ideas crash and burn, but Dillards might be an exception. It’s a department store stock. As he sort of says, why not just buy Macy’s or JC Penney? Well, you have to read the argument. It’s basically that $DDS is going to experience a short squeeze. I feel the market is in a precarious place go long something as unpromising as a retailer, but maybe a small exposure could be justified. Neither I nor Kuppy can advise you on anything, especially trading stocks.