During the past week, roughly 1470 Americans died of Covid. The overwhelming majority were not fully vaccinated. And now this:

The nation’s top infectious disease expert expressed horror on Sunday over attendees of a conservative political conference loudly applauding the inability of the federal government to hit its vaccine goals.

With new variants of COVID-19 now surging in areas with low vaccination rates and right-wing media promoting vaccine hesitancy to its viewers, the Conservative Political Action Conference in Texas invited noted “Covid Contrarian” Alex Berenson to fearmonger about the safe and effective coronavirus vaccines.

Speaking on the CPAC stage on Saturday, Berenson—who The Atlantic once labeled the “Pandemic’s Wrongest Man”— prompted cheers from the crowd when he boasted that “the government was hoping that they could sort of sucker 90 percent of the population into getting vaccinated, and it isn’t happening.”

Dear God! And people ask me why I’m not a conservative.

And this:

Carlson, the highest-rated Fox News host, with an average of 2.9 million viewers, said the Biden plan was an attempt to “force people to take medicine they don’t want or need.” He called the initiative “the greatest scandal in my lifetime, by far.”

Carlson’s guest on that episode, veteran Fox News political analyst Brit Hume, pushed back slightly, saying, “What they’re trying to do is make it as easy as possible for people to get the vaccine and, for people who are hesitant, to perhaps encourage them that they have nothing to fear.” Hume was quick to add that “vaccines do have side effects” and said those who are hesitant “should be respected.”

By far the greatest scandal? Far worse than Benghazi?

Brit Hume always seemed like a decent man to me. He’s 78 years old. So sad to see him end his career associated with people like Tucker Carlson and Laura Ingraham. And in which circle would Dante have placed Rupert Murdoch? He’s 90 years old, super rich, and vaccinated—does he still value money that much?

Was I naive during the 1990s, or is the world actually becoming an increasingly evil place?

Why not both!

Here’s the FT:

A steady decline in yields since the start of the second quarter accelerated sharply this month, which market participants attributed to a liquidation of short positions by hedge funds and other momentum-orientated traders whose bets had turned against them. . . .

“The market was banking on a dovish contingency at the Fed,” Tipp said, who would allow the economy to run hot, pushing up inflation and reducing the value of long-dated bonds. That narrative stalled last month, he said, when Fed officials opened the door to raising rates in 2023, earlier than previously expected.

Mark Lindbloom, who manages the Western Asset core plus bond fund echoed that view. “We do not believe the Fed today, or in the future will sacrifice its credibility” from taming inflation in the 1980s, he said.

It seems like some bond traders had assumed that AIT was being used by the Fed as an excuse to engage in a more dovish monetary policy. Then, some recent statements by Fed officials convinced the market that the Fed is serious about keeping inflation close to 2% on average. Inflation expectations fell and this dragged down long-term bond yields.

In my view, there are still two unexplained mysteries:

1. While there are cases where a contractionary policy announcement immediately reduces bond yields, in other cases the effect seems to be delayed. Why is that?

2. What explains the long run downward trend in real interest rates? It’s clearly not (easy) central bank policy, as we’ve seen that tighter money actually reduces interest rates. So what is it?

Given point #2, the Fed needs to fix its monetary policy. While the adoption of AIT is a step in the right direction, a further step is needed. I see two primary options. First, raise the inflation target to 3%. Realistically, that’s not going to happen. Second, acquire a more powerful tool kit (a subject on which I’ve written extensively). Given the gridlock in DC, that probably won’t happen either, even though each party would probably support the idea at a time when they were in power. A couple years ago, I suggested that the Fed was missing a golden opportunity to ask for more powerful tools when Trump was in power. Now it’s too late.

It’s fashionable in certain circles to suggest that both the Dems and the GOP have been taken over by the loonies. While there are plenty of crazy Trumpistas in the GOP and loony woke people in the Democratic party, I don’t buy into the “pox on both your houses” view of the situation. Put simply, the loony Trumpistas have totally taken over the GOP, whereas the Dems are not yet a personality cult, nor are they controlled by woke leftists.

The recent NYC mayoral primary offers a striking example. The primary was won by Eric Adams, who is tough on crime, favors charter schools, wants to keep standardized tests for elite high schools, is pro congestion pricing and is a pro-development YIMBY. I’m sure he also supports lots of bad policies, but how much better can one realistically expect from a Democrat in that liberal city? The “defund the police” mob does not yet control the Dems.

A reasonable Republican supporter might respond that at the local level there are plenty of Republicans who are not wild-eyed Trumpistas, and who have even better policy views than Adams. I agree. But that’s not what distinguishes the two parties today.

The real issue is that Republican politicians who stand up for democracy and the rule of law fear for their lives and the lives of their families. Democratic politicians that oppose Biden do not fear for their lives. It’s that simple.

The Economist is a centrist magazine that is published in the UK, and they often have a much clearer view of what’s going on here than do Americans who can’t see the forest for the trees:

Bill Gates, a member of the Maricopa County Board of Supervisors (and one of the “enemies of the people” blasted outside the Coliseum), is a lonely example [BTW, not the Microsoft Gates]. A longtime Republican of the Ronald Reagan and Jack Kemp mould, Mr Gates has received death threats for defending the legitimacy of the election. “If this is a new normal, our democracy is definitely in peril. Because you can’t do this and have a healthy, functioning democracy,” he says.

His other Republican credentials—cutting taxes and even supporting tighter voting laws—have ceased to matter. “There may be electoral consequences to me down the road. I’m not currently worried. This is too important…9/11 was a threat to our safety. This is the biggest threat to our democracy,” he adds. “We were the party of the rule of law.” Mr Gates argues that the party has lost its Burkean roots in favour of feverish populism. Thought of as a careful and pragmatic politician before, with some aspirations for statewide office, Mr Gates’s stance may have sunk his chances.

In his retirement, he had dreamed of going to the former Soviet republics to serve as an election observer in fledgling democracies. With some emotion in his voice, he reflects, “I never imagined that it would be here. I would do it here in Maricopa County…that’s what’s just stunning.” Looking around he repeats, almost to himself: “I don’t need to go to Belarus. I got it right here.”

When I began saying that America was becoming a banana republic, commenters said I was being hysterical. OK, now we have Republicans in the Reagan/Kemp mold saying exactly the same thing. Still think I’m being hysterical?

Here’s GOP Congressman Peter Meijer from Michigan (or should I say soon to be former GOP congressman?), in a Reason magazine interview:

And then one of the saddest things is I had colleagues who, when it came time to recognize reality and vote to certify Arizona and Pennsylvania in the Electoral College, they knew in their heart of hearts that they should’ve voted to certify, but some had legitimate concerns about the safety of their families. They felt that that vote would put their families in danger.

Really? You heard that?

Yeah.

Wow. That’s pretty striking.

That’s pretty much the textbook definition of a banana republic.

I know what you are going to say; just another delusional Republican that is overreacting to recent events. But here’s what I don’t get. When these “hysterical” Republican get interviewed they seem like normal human beings. When the “steal the election” Trumpistas get interviewed they come across as escaped mental patients that are off their meds. What should we infer from that pattern?

Most comparisons of the two parties miss the point. Each party is right on some issues and wrong on others. The key difference is that one party is a personality cult that is trying to subvert democracy, and the other is not. In 2021, that’s all that really matters.

PS. Don’t you hate it when left wing newspapers mention Hitler and Trump in the same article? Here’s The Guardian:

On a visit to Europe to mark the 100th anniversary of the end of the first world war, Donald Trump insisted to his then chief of staff, John Kelly: “Well, Hitler did a lot of good things.”

The remark from the former US president on the 2018 trip, which reportedly “stunned” Kelly, a retired US Marine Corps general, is reported in a new book by Michael Bender of the Wall Street Journal.

Imagine a Hitler that didn’t launch WWII or the Holocaust. That’s sort of how I have always viewed Trump, and I suspect that’s how he views himself. A “doing good things” Hitler that likes to troll.

I frequently criticize the ECB’s weird inflation target. To their credit, ECB policymakers have finally seen the light:

After years of failing to lift inflation up to its objective, the ECB has ditched its target of “close to, but below, 2 per cent”, which policymakers concluded was too opaque and implied a cap on price growth.

The central bank said its new target of 2 per cent was symmetric, “meaning negative and positive deviations of inflation from the target are equally undesirable”. The new target is a medium-term objective with flexibility to fluctuate in either direction in the short term.

This will provide more clarity and transparency to ECB policymaking.

Throughout history, central bank policymakers have often debated two issues at the same time: What rate of inflation is the appropriate goal and what is the best way to achieve that goal? This caused policymakers to split up into “hawks” and “doves”, which added uncertainty about the future course of monetary policy. If all policymakers can agree to the same goal, then the only differences are technical, not ideological. Markets would face less uncertainty.

I’m not so naive to think the ECB has entirely moved past hawks and doves, but this is a step in the right direction. The next step should be some sort of level targeting (or AIT), which would further move the bank away from the hawk/dove split and toward a more enlightened approach to monetary policy.

Which arrow is “close, but just below the bullseye”? The Italians would say the top arrow whereas the Germans would say the bottom arrow.

Both groups can agree that this is a bullseye:

David Beckworth has an excellent podcast with Jason Furman. I don’t entirely agree with Furman’s views on macro policy—he’s more of a fan of fiscal policy than I am—but I was greatly impressed by the way he thinks about problems, particularly the way he handles data.

Furman consistently emphasized the need to be intellectually consistent, to avoid letting our policy views bias the way we interpret data. For instance, you often hear people say things like “Yes, the unemployment rate is low, but the employment/population rate is still depressed from a decade ago.” Furman points out that this argument cuts both ways:

I’m a little old-fashioned. I think the unemployment rate is the single best measure that we have for that because the number of people who want jobs at a point in time seems to vary a lot for all sorts of structural reasons. In 1983, you could have argued… or in 1982, that the economy wasn’t in recession because the employment rate or the prime age employment rate was higher than where it was a decade before, that would have been crazy. We had a 10% unemployment rate, but because of demographic changes, the employment rate was higher, not lower. So I think you want to take whatever your preferred variable is and look at what it was in 1999. Look at what it was in 1982, and ask, would it have worked in those circumstances too.

Those who read my comment section know that when commenters propose this or that metric, I often point to an earlier period of history when their preferred metric would have delivered what they would have regarded as unwelcome policy implications.

Here’s another example from Furman:

If inflation expectations go up to three at the end of this year, are you going to change your views about monetary policy or are you not? I think you probably won’t. So maybe rather than pointing to a data point that won’t change, that might change, make the real argument, which is, inflation expectations are too low. I’d like to see them rise to three or something like that. And so I think we’ve seen that over and over again. So I do predict that there’s a decent chance the breakevens are going to go up, and if they do, people are going to find all sorts of creative technical reasons as to why they’re high, rather than saying, “Actually, this said it was telling us something back in June. So now I have to continue to admit it’s telling us something.”

In other words, if you prefer a dovish policy even were inflation expectations to reach 3% in 2022, then don’t say we need easy money because the bond market shows inflation expectations at 2%. Instead just say that you’d welcome above 2% inflation. That way you have justification for your strongly held preference for dovishness even if things don’t turn out the way you expected. (This advice doesn’t impact me as I’m not a hawk or dove; I’m a stable money guy.)

In terms of current events, Furman favors a somewhat higher inflation target, which makes him a bit of a dove. If I read the interview correctly, he worries that people are making the argument for dovishness based on predictions that current inflation is almost entirely “transitory”, and that if some if it turns out not to be transitory then the credibility of doves will suffer.

My own view is that the most likely outcome is that current inflation is transitory, but there’s somewhat more tail risk of too high inflation than too low inflation during 2022-23. I believe Furman has a similar view.