Archive for November 2021


Is everything now political?

I used to hate it when people would say “everything’s political”. Partly this was because in that case saying “X is political” would be saying precisely nothing distinctive about X. And also because not everything is political. Or at least, in the past not everything was political. But now? It seems like everything’s political:

Uptake of the Covid-19 vaccine has, unfortunately, become partisan like so much else in our society. Almost every Democratic adult (90% to 95%) has gotten a shot, while a little less than two-thirds of Republican adults have. . . .

According to the Ipsos data, 68% of Democrats said they have gotten a flu shot or are very likely to get one. Just 44% of Republicans said the same. This 24-point gap is very similar to the 30-point gap for Covid-19 vaccines. . . .

An AP-NORC poll in February 2020 asked adults whether they had received a flu shot in the last 12 months. In this poll, 58% of Democrats said they had compared to 54% of Republicans. This 4-point gap is well within any margin of error.

A Princeton Survey Research Associates International from the second half of 2016 queried adults about whether they had gotten a flu shot in the past year. This poll looked nearly identical to the 2020 poll with 55% of Democrats and 53% of Republicans saying they had gotten a flu shot in the last 12 months.

In other words, there was no partisan gap.

I can’t even blame this one on TDS, as Trump is not an anti-vaxxer.

I seem to be one of the few exceptions. I don’t let politics have any influence on what I buy, what athlete I root for, what music I listen to, what movie I see, or even what pillow I buy. When thinking about the most important things in my life, politics doesn’t even make the top 20. I was far more interested in the Bucks winning the NBA title this year than in who takes Congress in 2022 or the presidency in 2024.

PS. I wonder what will happen when the amazing new Pfizer drug for Covid comes on the market. Will there also be a partisan gap in its use?

PPS. Shorter version of this post: Get a life.

Who wants a recession in 2024? (part 2)

This past July, I did a post arguing that Donald Trump would be the primary beneficiary if there were an overly expansionary monetary policy. At the time, the internet was full of pundits denying that too much stimulus was even possible. After all, employment was down by over 5 million from pre-Covid levels. Here’s what I said:

I don’t expect a recession to occur in the next few years, but recessions are almost impossible to predict. It’s more interesting to think about the sort of policy mistakes (were they to occur) that might lead to a recession within a few years.

One mistake would be an excessively tight money policy, which could trigger a recession in 2022 or 2023. That’s possible, but seems quite unlikely at the moment.

A slightly more likely scenario would involve excessively expansionary monetary policy, which drove wage growth to levels inconsistent with 2% inflation over the long run. To get the inflation rate back on target the Fed would then need a tight money policy, which might trigger a recession.

Correct me if I’m wrong, but opinion seems to be shifting in my direction. In a political sense, the biggest threat to the Dems is now too much demand stimulus. Matt Yglesias recently linked to this Conor Sen tweet:

Since July, the evidence has gradually shifted in the direction of the Fed being a bit too expansionary. (Widening TIPS spreads, etc.) That’s not to say that the Fed’s overall policy under Covid has been bad—they succeeded in the very important goal of quickly getting the price level and NGDP back to the trend line. And much of the inflation is transitory. But now there is some risk of overshooting.

PS. I’m not claiming that I predicted any of this (I don’t predict, I infer market forecasts), rather that I warned that overstimulus was a potential concern for Dems.

Conservatives don’t favor small government

I sometimes get commenters telling me that Trump cannot be a far right politician because he favors big government. These people seem to forget that extreme rightists almost never favor small government.

There was a brief period where center-right parties did flirt with small government, but that period is certainly over:

The conservatives have undergone many transformations in their time: from the party of the landed squirearchy to that of the industrial bourgeoisie; from the post-war consensus to free-market radicalism. Now they are undergoing another. For 40 years, from the choice of Margaret Thatcher as its leader in 1975 to David Cameron stepping down as prime minister in 2016, Tories stood for small government. Today they are the party of big-government conservatism.

The budget provided a vivid illustration. By the mid-2020s public spending will be the highest, as a share of gdp, since the mid-1970s. By the same measure, taxation will be its highest since the early 1950s. But there is more to big-government conservatism than the size of the state. There is the philosophy of the state as well. And under Boris Johnson, the Conservatives have set themselves aims they think can be achieved only by big-state activism.

Remember when people said Brexit would free Britain from Europe, allowing it to become another Singapore?

The modern left has little to offer the working class, so their votes are shifting to the right in almost all developed countries:

The Conservative Party captured huge swathes of northern England in 2019, and is pouring resources into these new territories. It is increasingly the party of the working class and the elderly, so picking a fight with young and middle-aged trendies makes sense. 

So glad I live in America where none of this is occurring! Seriously, the Hispanic working class will be the next group to shift to the GOP. Meanwhile, upper middle class workers will continue shifting to the Dems.

Under a two party system where each party wins 1/2 of the presidential elections each century (in other words, in the USA) as one group shifts from one party to another, there must be a movement in the other direction of a roughly equal sized group.

PS. In a certain way I find all this to be kind of comical. Nativists like Steve Bannon became hysterical at the thought that lots of immigration from Latin America would change our politics. He was right, but not in the way he expected.

PPS. Biden is an old school Democrat, and doesn’t realize how his party is changing. I predict that Biden and Pelosi will cut my taxes, even though I’m pretty affluent. There won’t be any European style welfare state in America, not when the Dems need the votes of upper middle class professionals.

It’s no longer Biden’s party, which is both good and bad. It is increasingly Trump’s GOP, which is both bad and bad.

Trump Derangement Syndrome is very real

Anyone who doubts the existence of TDS needs to look at this recent poll:

A recent survey released by the Public Religion Research Institute (PRRI) found that only 29 percent of Republicans say that American culture and way of life have changed for the better since the 1950s.

The number is a leap down from 2020 when 46 percent of Republicans said American culture and way of life had changed for the better since the 1950s, but is only two points off from what Republicans said in 2016, before Donald Trump was elected President.

(It would be interesting to know how many black Republicans feel this way.)

You might argue that this is not surprising, that the same is true (in the opposite direction) of Democrats. But the poll results suggest otherwise:

Sixty three percent of Democrats who participated in the survey think American culture and way of life has changed for the better, which is about the same as it was in 2020.

The Trump cult is so obsessed with their leader that they literally believe that the entire nature of the United States of America changes on a dime the moment he enters office and then again the moment he leaves. When they think of America they don’t visualize a country, they visualize a man. It’s a personality cult.

So please, do not tell me that there is no such thing as Trump Derangement Syndrome.

The incredible shrinking yen

Over the past 28 years, the dollar/yen exchange rate has behaved very oddly. During this period, Japan’s CPI has risen by 4%. Not 4%/year, rather 4% in total. And even that merely reflects a set of sales tax increases. Meanwhile, the dollar has appreciated by about 6% against the yen (in nominal terms). If we combined those two facts, and apply the theory of purchasing power parity (PPP), then you might have expected the US price level to have fallen by about 2%. Instead, it rose by 90%.

This means that the US real exchange rate appreciated by roughly 92% against the yen. That’s a lot!

Each year, I expect PPP to finally kick in. But over the past 12 months, the US CPI rose by 6.2%, while the Japanese CPI fell slightly. So did the dollar depreciate? No, it’s up almost 8% against the yen, for a real appreciation of nearly 14%. (Japan is becoming a real travel bargain.)

So why don’t I give up on my belief in PPP? Why do I still believe that the optimal forecast of the real exchange rate for the dollar against the yen in the year 2049 (28 years from today) is roughly the same as the real exchange rate today? The answer is simple. The logic behind PPP is so powerful that almost any anomaly is easier to explain as being due to a one-time adjustment in Japan’s real exchange rate, rather than PPP being wrong. Ceteris paribus, I still expect US/Japan inflation differentials to show up in future movements in the nominal exchange rate.

Here’s another example. Over the past 28 years, the NASDAQ stock index has massively outperformed British and French stock indices. And yet, if asked to predict which index will do the best over the next 28 years, I’d predict they do about the same. And the reason is simple. The logic behind the Efficient Markets Hypothesis is incredibly powerful. Rather than reject the EMH, it’s easier to explain this huge NASDAQ outperformance as a one-time unanticipated adjustment in response to US tech firms doing better than they were expected to do back in 1993.

People often respond to these explanations with, “Oh come on, for 28 years?”

Apparently so.