Archive for August 2016


Are Saudis more productive than Germans?

I’m sure this post is wrong, but I’d be interested in finding out the precise way that it’s wrong.

I was recently looking at an international ranking of GDP/person in PPP terms, and noticed something strange.  The per capita GDP for Saudi Arabia ($53,624) is higher than for Germany ($46,893).

I know what you are thinking: Oil, lots of oil.  But is that the explanation?

The GDP for Saudi Arabia was $1,683 billion in 2015.  As far as I can tell the Saudis produced about 10.25 million barrels of oil a day last year, or a total of roughly 3.75 billion barrels.  Oil seemed to average about $50/barrel last year, for a total of about $187.5 billion in oil output.  That means the non-oil sector of the Saudi economy produced about $1,495.5 worth of output.  If we divide that number by the Saudi population (about 31.3 million in 2015) we get $47,780/person in output, even excluding the entire output of their oil industry.  That’s more than Germany! These are all IMF figures, but the World Bank isn’t much different.

What did I miss?

1.  I subtracted nominal oil output from total PPP GDP.  That might seem like comparing apples and oranges, But oil is internationally traded, and I used international oil prices.  So the oil sector needs no PPP adjustment.

2.  Lots of Saudi output is produced by foreigners.  Yes, but the 31.3m population figure includes foreigners.

3.  Saudi non-oil output is only possible because the oil wealth finances it.  So does that mean that if we give Bangladesh foreign aid equal to 12.5% of their GDP, they would be able to boost per capita output to German levels?  I don’t think so.

4.  The IMF’s PPP estimates are way, way off.  But the other sources reports similar or even higher levels of Saudi GDP (PPP).

I vote for #4.  But it still seems odd that multiple sources would produce similar numbers that are all wildly incorrect.  If so, why?  The IMF and the World Bank employ highly skilled economists.  Wouldn’t that be a major scandal?

Or are Saudis actually more productive than Germans?  If so, isn’t that a huge story?

Is China focused on NGDP?

This morning I noticed a discussion of NGDP growth in China, which has recently picked up slightly:

Screen Shot 2016-08-25 at 12.36.30 PM

The commentator at suggested that the acceleration in NGDP growth may help to explain why the PBoC has not done any monetary easing in recent months.

Many observers are skeptical about China’s RGDP numbers. It does seem plausible that the RGDP numbers are smoothed, and thus that NGDP more accurately reflects cyclical movements in the Chinese economy.

Question for my British readers:  How is Brexit impacting the UK economy so far? This will be a test of “uncertainty” theories of the business cycle—the claim that recessions can be caused by an increase in uncertainty, which hampers investment. Brexit was the mother of all uncertainty shocks. I’m agnostic on those theories, but on balance I think they are modestly overstated. Over at Econlog, I predicted a 0.5% rise in the UK unemployment rate as a result of Brexit. This BBC article suggests the immediate impact has been fairly mild—so far.  (Very little post-Brexit data is available.)



Here’s Jim Geraghty:

Meet Donald Trump’s new immigration stance, which is to . . . praise how tough President Obama has been on deportations. Huh? What?

“We’re going to obey the existing laws. Now, the existing laws are very strong. The existing laws, the first thing we’re gonna do, if and when I win, is we’re gonna get rid of all of the bad ones. We’ve got gang members, we have killers, we have a lot of bad people that have to get out of this country,” he said on Fox News. “As far as everybody else, we’re going to go through the process. What people don’t know is that Obama got tremendous numbers of people out of the country, Bush the same thing. Lots of people were brought out of the country with the existing laws. Well, I’m gonna do the same thing.”

[Host Bill] O’Reilly then mentioned detention centers, prompting Trump to quickly shoot down the idea of keeping undocumented immigrants in detention centers.

“You don’t have to put them in a detention center,” Trump said.

“I never even heard the term. I’m not gonna put them in a detention center,” he added. “We want to do it in a very humane manner.”

Great news, immigration hawks! Trump will emulate those tough policies of . . . Obama and Bush! Aren’t you thrilled? Haven’t you passionately campaigned for the status quo all these years?

Still on “vacation”, so let’s just have a poll.  What’s funnier:

1.  The fact that Trump has never heard of immigration detention centers.

2.  The fact that he doesn’t know that Obama puts illegals into detention centers.

3.  The fact that Trump has decided to run to the left of Obama on immigration.

4.  The fact that Trumpistas believed that Trump was sincere on immigration.

P.S.  If you see Harding on the street, steer clear.  His head might explode.

Where is the “honest dialogue”?

Here is Ben Bernanke in 1999, talking about the situation in Japan:

With respect to the issue of inflation targets and BOJ credibility, I do not see how credibility can be harmed by straightforward and honest dialogue of policymakers with the public.  In stating an inflation target of, say, 3-4%, the BOJ would be giving the public information about its objectives, and hence the direction in which it will attempt to move the economy. (And, as I will argue, the Bank does have tools to move the economy.)” (1999)

One of the things that I find most infuriating about the current policy environment is the lack of an “honest dialogue” about the choices faced by monetary policymakers.

Go back to the 1990s and early 2000s and look at the discussion about inflation targeting, involving elite economists like Ben Bernanke. One common theme was that the inflation target should not be too high, but definitely needed to be high enough to keep economies out of the zero rate trap. As far as I know, there was widespread agreement on this point.

Now that we’ve discovered that a 2% inflation target does not keep us above the zero rate bound, especially in recessions, I’d expect exactly the sort of honest dialogue that Ben Bernanke suggested back in 1999. Instead, we have a profoundly dishonest dialogue, dodging the real questions:

1. When do you recall Bernanke, Yellen or any other central banker, telling government leaders that we faced a choice between a massive central bank balance sheet, and a higher inflation target? Or a choice between negative IOR and a higher inflation target?

2. Back in 2009-11, do you recall a Fed official telling Congress that the Fed was holding back on monetary stimulus, out of fear they might be embarrassed at some time in the future by large capital losses, even though those losses would net to zero for a consolidated Federal government balance sheet perspective, and even though the reluctance to pursue monetary stimulus further would result in a great deal of unnecessary unemployment? I don’t.  I recall vague discussion of “costs and risks” associated with QE, but nothing that would give Congressmen any idea of the actual choices we faced.

3.  How often did Fed officials tell Congress that we faced a choice between moving to a higher inflation target, and relying more heavily on fiscal stimulus?  I don’t recall any such discussion.

There’s a price to pay for dodging these important questions.  We are sleepwalking into a world where the central bank will ask for assistance from fiscal policymakers, and they won’t provide it, or at best they’ll provide too little to make a difference.

PS.  Just to be clear, I am not advocating a higher inflation target, because we have better options.  The problem is that we are also not going to adopt those better options, and instead will end up with something far worse.

PPS.  I’m not alone; Paul Krugman was equally frustrated back in 2010.

PPPS.  Speaking of honesty, I just finished volume 5 of “My Struggle”.  As I’ve gotten older, I have fewer and fewer experiences of the sort of “aesthetic bliss” that was common when I was younger, especially in arts like music, painting and film.  And now at age 60 I’ve stumbled upon my all time favorite novel.  (The entire set, not just volume 5)  I am profoundly grateful to Karl Ove Knausgaard.  (BTW, my dad’s name was Karl, and his mom spoke Norwegian.)

And how come reporters keep asking him about the title?  How could it be titled anything else?

PPPPS.  I won’t post much over the new few weeks, due to summer vacation.  I will have a few posts at Econlog, which have already been written.


“I’m not a politician”

Some professions look really easy, even to outsiders.  Others look really hard.  In fact, most are difficult for outsiders.  Consider the following imaginary remarks:

1.  It’s not my fault the patient died; I’m not a brain surgeon.

2.  It’s not my fault that my client got the electric chair; I’m not an attorney.

3.  It’s not my fault that I missed the game winning shot; I’m not a basketball player.

My response would be, “If you are not a brain surgeon, then don’t do brain surgery”.  Ditto for attorneys and NBA basketball players.  And if you aren’t a skilled politician, then don’t do politics.  And for God’s sake, don’t get your apprenticeship by running for President.

Some people will argue that Eisenhower was not a politician.  Nonsense.  He had not been elected to public office, but he had extensive political experience at the very highest levels of government.  Trump has none, and it shows.

Trump is already making excuses, in case he loses.  He says it won’t be his fault, as he’s not a politician.

There’s a reason that we usually nominate politicians to be presidential candidates, it’s tough when your very first job is in a field that you know nothing about, even more so when it is the most difficult job in the world.

Here’s the WaPo:

It is peculiar in the extreme  — unprecedented, according to the former agent — for a candidate for president to prompt concern about inciting violence against his opponent. Even if not intentional, Trump is so cavalier and/or inarticulate as to invite sincere concern about his words’ effect on his loyalists. But then, in his word salad of half-sentences and disconnected thoughts, it is often hard to figure out what in the world he is trying to say. (On the difference between coal from the United States and China, he announced, “We have a very, very small planet compared to the universe, right? And that stuff is going up and they’re not cleaning it.” What?!?)

What we do know is that Trump has repeatedly egged on his crowds and boasted that he would have hit this or that protester in the face. His henchman Roger Stone warned of “days of rage” at the convention if the nomination didn’t go to Trump. This is the language of thugs and fascistic pretenders who seek to discredit and undermine democracy itself.

Hillary Clinton was certainly entitled to rub it in. At an event on Wednesday, she told the crowd in Iowa, “Words matter, my friends, and if you are running to be president or if you are president of the United States, words can have tremendous consequences.” She continued, “Yesterday, we witnessed the latest in a long line of casual comments from Donald Trump that crossed the line. His casual cruelty to a Gold Star family, his casual suggestion that more countries should have nuclear weapons, and now his casual inciting of violence.” She concluded, “Every single one of these incidents shows us that Donald Trump simply does not have the temperament to be president and commander in chief of the United States.” Can anyone really take issue with that?

Well, we passed “unfit for office” months ago, but Republicans might want to consider whether Trump’s Second Amendment threat is the last, best chance to dump him. Neither House Speaker Paul Ryan (R-Wis.) nor Senate Majority Leader Mitch McConnell (R-Ky.) responded to a request for comment. They might consider coming out en masse against Trump. At a time when many ordinary Republicans are decamping from Trump’s camp, GOP “leaders” seem paralyzed by indecision. They risk a real calamity (political and, God forbid, otherwise) if they remain silent. But mostly they look lost, irresponsible and blinded by partisanship.

What’s surprising about Trump is not that he has a flaw, other candidates were known for garbled sentences.  (Although I consider that to be kind of inexcusable in a Presidential candidate.  After all, talking is one of the President’s most important responsibilities.)  What surprises me about Trump is that he’s so bad at so many of the skills needed to be a politician, like not giving the Secret Service the impression that you are trying to encourage others to assassinate your rival:

Trump insults nearly every subset of Americans. He lacks rudimentary knowledge of our government and critical policies. But are Republicans really going to persist in running a candidate for president whose campaign the Secret Service had to speak to multiple times concerning language that can be taken as a call for violence? CNN reported:

A US Secret Service official confirms to CNN that the USSS has spoken to the Trump campaign regarding his Second Amendment comments. “There has been more than one conversation” on the topic, the official told CNN. The campaign told USSS Donald Trump did not intend to incite violence.

I guess the Secret Service is also “unhinged and deranged”.

Now I see that Trump is starting to drag down GOP Senate candidates, even as he grows ever more apathetic about his own race for President.  Won’t it be nice when Hillary has a majority Democratic Senate to rubber stamp her appointments?

PS.  How many times have you heard the following:

I’m not an economist, but it seems like . . .

I always brace myself for what’s coming next.

PPS.  Why does Trump have to step in it every single day?  Here’s the latest from Jim Geraghty.

PPPS.  And here Trump provides additional details on how he plans to pay off the entire national debt in 8 years.