Archive for May 2021


The imperial post-presidency?

After the Teapot Dome scandal, a law was passed giving Congress the right to order the Treasury department to turn over someone’s tax return. The purpose of the law was to allow Congress to investigate cases of corruption.

The law worked fine until Trump became president. For instance, in 1974 the Treasury department turned over a copy of Richard Nixon’s tax return as a part of the Watergate investigation. Unfortunately, the Trump administration refused to comply with the law, one of about 1000 reasons why Trump deserved to be impeached.

Now we have a new administration. Furthermore, Trump is now just a private citizen, so phony claims of “executive privilege” are completely moot. So there should be no problem, right? Unfortunately, Janet Yellen has continued Mnuchin’s unlawful policy of withholding the Trump tax returns.

If I were the House leadership, I’d tell Biden that there will be no infrastructure bill until he turns over Trump’s tax returns. Voters sent Biden to Washington to clean up the corruption, not to continue Trump’s blatant disregard for the law.

Saving, investment, and secular stagnation

Tyler Cowen asks a few questions regarding the relationship between saving and secular stagnation:

I have never understood how savings is supposed to remain above investment for extended periods of time. . . .

If the demand to investment is so low, why don’t the prices of investment goods fall, thereby increasing the marginal return to new investment?  (I do get why the zero lower bound may limit the ability of interest rates to fall).  That would then equilibrate planned savings and planned investment once again and eliminate the savings overhang.  Of course price stickiness may prevent this from happening in the short run, but secular stagnation is a longer run theory.

Tyler’s right that secular stagnation is a long run problem. It’s just a fancy term for a low trend rate of growth in RGDP. Real problems are not caused by nominal conditions; they reflect real factors, such as slow population growth and slow productivity growth.

The zero lower bound on interest rates can create problems for nominal growth (i.e. monetary policy), but only if the Fed allows it to do so. If Fed policy is inept, then when interest rates fall to zero it is more likely that there will be a negative nominal shock. This nominal shock can cause real output to fall in the short run, a recession. But this does not cause secular stagnation. Wages and prices adjust in the long run.

To summarize:

1. Secular stagnation is a long run problem, and hence is not caused by monetary policy, saving/investment imbalances, or the zero bound problem. But secular stagnation can make a zero bound situation more likely, if the central bank is inept.

2. Business cycles are mostly caused by nominal shocks (with the exception of Covid-19, which is a real shock). Some nominal shocks are caused by ordinary Fed policy mistakes when interest rates are positive (as in 2008), and some nominal shocks are caused by the Fed being unable to handle the zero lower bound in an intelligent fashion (a failure to do level targeting, target the forecast, and adopt a “whatever it takes” approach to asset purchases), as in 2009.

Talk of saving/investment imbalances is not useful; it’s an extremely convoluted and misleading way of thinking about monetary policy failures. So just talk about monetary policy failures!

BTW, the zero bound problem does not prevent saving from equalling investment, rather if handled improperly by the central bank it may cause S=I equilibrium to occur at a lower than desired level of nominal spending. I seem to recall Nick Rowe saying the actual problem is not excess saving, it’s excess hoarding of money.

The new cold war with China

Having lived through the Gulf of Tonkin incident, the ridiculous hysteria over Japan during the 1980s, and the post 9/11 hysteria over Iraq, I am dismayed by the bipartisan attempt to gin up a cold war with China. Especially given that Russia is a far greater threat. It has far more nukes, and it seized the Crimea from Ukraine.

Thus it’s nice to see a few thoughtful observors pushing back on the cold war narrative. Peter Beinart has a WaPo piece entitled “Biden’s Taiwan Policy Is Truly, Deeply Reckless“:

By keeping U.S. relations with Taiwan unofficial, the “one China” fiction helped Beijing imagine that peaceful reunification remained possible. Which gave it an excuse not to invade.

Like the Trump administration before it, the Biden team is now progressively chipping away at this bargain. Last summer, Democrats removed the phrase “one China” from their platform. . . .

What’s crucial is that the Taiwanese people preserve their individual freedom and the planet does not endure a third world war. The best way for the United States to pursue those goals is by maintaining America’s military support for Taiwan while also maintaining the “one China” framework that for more than four decades has helped keep the peace in one of the most dangerous places on earth.

Hawks will call this appeasement. So be it. Ask them how many American lives they’re willing to risk so the United States can have official diplomatic relations with Taiwan.

The FT warns that the US military industrial establishment is playing a dangerous game:

Chinese military aircraft are flying into Taiwan’s air defence identification zone on an almost daily basis now, and those flights are increasing in both frequency and range.

But rather than a step towards war, these moves are more likely to be part of a campaign to intimidate Taiwan with so-called grey-zone tactics. Constant fear-mongering over the risk of a Taiwan war only plays into the hands of such a Chinese strategy.

Some security experts see the US Indo-Pacific Command’s warnings of a heightened war risk as an attempt to secure budget funds for propping up the US military presence in the region, as well as to influence the Biden administration’s China policy review.

“This is a defence-driven assessment in the US,” rather than a systemic analysis of Chinese interests in the region, said Bonnie Glaser, a veteran China expert at the German Marshall Fund of the US.* “They have really done a disservice to American national interests.”

The Economist warns of a groupthink on the issue:

“It doesn’t take any bravery to be a China hawk today. It takes bravery to not be one,” says a former official who advised several presidents on China. He and many others see a desire for a new cold war in Washington. . . .

Expertise about China is not necessary. Within government, analysts who once focused on war zones have pivoted to China. Those who preach moderation towards the Chinese government risk being tarred by the most strident hawks as apologists, their motives called into question. Esteemed China specialists who were previously called on by the White House for advice have fallen out of favour.

Commenters on this blog also question my motives.

In Australia, it’s even worse:

The government of Scott Morrison, prime minister since 2018, relishes calling China out. By now, though, the rhetorical flourishes are starting to sound as though it were girding for war. Mr Morrison says Australia must speak with “one voice” on foreign policy, as if scrappy debate was uncalled for, or even unpatriotic. . . .

One veteran Canberra hand describes a dangerous “ideological intolerance” in which moderate voices are drowned out and the debate about China is reduced to emotion. Another senator, Eric Abetz, last year even called on Chinese-Australians appearing before his committee to denounce the Communist Party. That points to a further risk, says Greg Barns, a lawyer: pinko paranoia plays to a xenophobic, racist undercurrent that has long run through Australian life.

Such an undercurrent risks resurfacing if Chinese-Australians face questions or abuse about their loyalty. If the hawks’ tactics end up making Australia seem a less civil, tolerant or welcoming place, then the country will be the poorer for it.

Is China trying to take over the world? You be the judge:

China has blamed the abrupt US withdrawal of forces from Afghanistan for a surge in attacks, after multiple explosions at a girls’ school in Kabul on Saturday killed more than 60 people, most of them female students.

Foreign ministry spokeswoman Hua Chunying said China was “shocked” by the attacks and “deeply saddened” by the death toll. She also called on Washington to pull out troops “in a responsible manner”.

Here’s a question for those of you who think China’s just like the old Soviet Union. Would the Russians have complained about the US withdrawing troops from a country right on the Soviet Union’s southern border?

PS. Speaking of China, the new census showed a huge imbalance in population growth, with some provinces losing population and others growing rapidly. I notice that most of China’s population growth occurred in 4 provinces (Guangdong, Zhejiang, Jiangsu and Fujian.) Those also happen to be China’s most market-oriented economies. It seems like the Chinese people are moving toward capitalism. Perhaps they don’t agree with Western pundits who attribute China’s success to statist economic policies. In contrast, China’s most statist provinces (in the northeast) all lost population–even the one on the coast.

PPS. Sometime this year, Guangdong province will surpass Japan in population.

Recent articles

1. Our tort system is a huge part of our broader regulatory system. Thus while repealing Section 230 (which shields tech companies from liability for material on their platforms) might be seen as “deregulation”, it would actually represent a huge increase in the government’s role in our economy.

Both Dems and Republicans want to get rid of 230, but for opposite reasons:

While the Constitution’s First Amendment protects the speech of these private companies, Republican lawmakers blame Section 230 for allowing Big Tech companies to moderate content too aggressively — and Democratic lawmakers say it promotes the companies not being aggressive enough.

What could go wrong?

2. A very interesting study by Pramod Kumar Sur and Masaru Sasaki showed that the Chinese famine of 1959-61 had severe long term effects on those born during this period, even for the very highest income groups in society:

We provide strong evidence suggesting that exposure to famine has a large negative effect on the wealth of individuals born during this period. Additionally, we show that the effect is present after more than half a century, and it is even persistent among the wealthiest cohort of individuals in China today.

As with any study that relies on natural experiments, our results can be considered local to our context. However, we believe this context is of particular interest as we examine the economic consequences of a famine of which millions of survivors are still living today. In particular, investigating the historical persistence of famine among ‘literally billionaires’ who belong to the strongest and wealthiest cohort of individuals in present-day China, and showing that decades of rapid economic development may not mitigate the adverse impact merits important implications for understanding how profound is the impact of famine in China.


3. Previously, I’ve discussed polls showing increasing support for international trade. Some commenters suggested that might just be an artifact of Trump being president. A new poll suggests that there is indeed a Trump effect, but just for Republicans. The increase in Dem support for trade seems more durable:

4. Matt Yglesias has a great post on one specific form of wokism that has gone off the rails:

Strange ideas about nonwhite people

At this point, I think it’s worth pointing out that Tema Okun is white.

She doesn’t put forward any evidence or arguments in favor of her claims (and indeed, “objectivity” is seen as a manifestation of white supremacy culture), but this is also not a lived experience argument. Instead she credits the second-hand wisdom of the late Kenneth Jones who was her co-author on the original version of the workbook that featured the list. And the reason it feels like an op to destroy progressive politics is that she’s pretty clearly not talking about race or racism at all. This whole document instead comes from a place of extreme characterological aversion to hierarchy and structure.

I don’t know if Trump is using his billions of dollars to fund the woke movement, but if not he should be. It’s the best way to advance his white nationalist agenda.

5. Unfortunately, both the left and the right tend to ignore the war on drug using Americans:

With so many states choosing to legalize marijuana, it’s easy to forget how draconian the penalties for possession can still be. Case in point: The Mississippi Court of Appeals just upheld a life sentence for 38-year-old Allen Russell for being in possession of about one and a half ounces of the drug.

Remember, Russell did absolutely nothing wrong in possessing marijuana, which is legal in 17 states. The legislators who passed these laws are the evil ones. Keep these cases in mind when you think about human rights in other countries.

6. I don’t read much sci-fi, and thus hadn’t even heard of Gene Wolfe until a few years ago. Now he’s one of my favorite writers, in any genre. Oddly, he’s not fully accepted by either the sci-fi community or the highbrow literary world. This article is a good introduction:

Gene is hailed as one of the greatest science fiction writers of all time, perhaps the greatest. He’s hailed as a great American writer, full stop. It’s because of New Sun that Ursula K. Le Guin later calls him science fiction’s Herman Melville. It’s because of New Sun that Neil Gaiman says he’s “possibly the finest living American writer.”

Yet the books don’t sell in large numbers, possibly because many people can’t make sense of them. He doesn’t inspire a wave of copycat writers, like William Gibson does around this time. He doesn’t conquer the bestseller lists like other creators of large-scale fantasy series. He doesn’t become a convention superstar like George R.R. Martin or a cultural icon like Le Guin. He’s written a work that proves (if you needed proof) that SF can be high art, yet not many people even within SF read it. He’s written one of the all-time masterworks of science fiction, and it’s hard to say whether he influences the genre at all.

Sci-fi requires two distinct talents. It’s rare to find someone that is really good at both.

Trump’s kind of Republican

What sort of Republican does Trump support for positions of leadership? Based on who Trump endorsed in the recent race for GOP conference chair, we can conclude that Trump likes:

  1. People who voted against the Trump tax cuts.
  2. People who vote against funding the border wall.
  3. People who favor the Paris Climate Accord.
  4. People who favor overturning the results of the 2020 presidential election, and putting Trump back in office.

Especially #4. In other words, in the modern GOP there is only one issue that matters—are you willing to kiss Trump’s ring? The Republican Party has now become nothing more that a Latin American style personality cult. When I warned of Trump’s authoritarian tendencies back in 2016, I was viewed as being “hysterical”. What do you guys think now? How many of you predicted that in 2021, Liz Cheney would be fired and replaced by Elise Stefanick? (And watch the comment section, I almost guarantee that some moron will think it appropriate to discuss the relative merits of Stefanik and Cheney, as if that has any bearing on this post. Some people can’t see the truth if you put it right in front of their faces.)

Make no mistake, Trump’s efforts would have caused a second civil war if he succeeded in overturning the election. Democrats would not have taken that lying down, there would have been a large and violent response. I would have actively supported the “terrorists”. Thank God Trump did not succeed.

In today’s GOP, it’s impossible to have a position of authority if you loudly proclaim that elections should determine who becomes president. It’s now an anti-democratic authoritarian party, which is what I warned against in 2016.

I told you so.

PS. Here’s another way of seeing the picture:

Trump = Darkside

Modern GOP = Colonial Pipeline

Eh, what could go wrong?

PPS. This caught my eye: