The Fed goes where other CBs fear to tread

I stole the title of this post from Robin Wigglesworth’s “The Fed’s Vietnam moment” published today. He, in turn stole it from Alan Ruskin of Deutsche Bank (with acknowledgment). It argues that the Fed may be getting in too deep and that, like Kennedy deciding to go into Vietnam, it’s a lot easier for governments and quasi-governmental institutions to start a policy than to finish it.

The Twittersphere, at least the tiny corner of it that I visit, has been saying more or less the same thing for months, or even years (Northman Trader, Jesse Columbo, Ben Hunt, 7x2fB, QTR, Peter Schiff — uncountable commentors). Up to now, they’ve been considered rather fringe commentators, but if we do see a spike in inflation, they’ll be seen as visionary. The Credit Bubble Bulletin is a good source of current news from a Fed-sceptic point of view. Another good source is Wolf Richter, e.g. Nothing’s Fixed: What’s Behind the Corporate Debt Bailout published 6th May 2020.

It’s impossible for one person to get a perspective on what the general population think, on average, about a new policy. My guess is that it’s generally seen at the moment as being the right thing.

Modelling Covid-19 and the Climate

I have some background in mathematically modelling, and I am much more sceptical of its general usefulness than the average person. I think that some of the Covid-19 modelling has low predictive value, because the input parameters are so difficult to get right. I often think about this in the context of economic modelling, but this blog post draws a comparison with climate modelling. All these things (infectious diseases, climate and the economy) are very complex systems. Modelling how they evolve is intrinsically difficult, especially when humans are part of the system which is being modelled.

A random national stereotype image, for your delectation:

(I think that, as a Welshman, I’m allowed to post this. I found it on the web, on some blog which didn’t indicate any copyright so I assume it’s safely public domain.)

Late news

I have always been baffled about why anyone should use the PEG ratio. Seems like I am not alone.