Archive for August 2022


Will I live long enough to see the moon landing?

A recent issue of the FT caught my eye. It discussed long delays in NASA’s moon landing program, and doubt about the feasibility of supersonic airline service:

Fifty years ago, the future seemed bright. We had supersonic jetliners and had been to the moon 6 times. Now we spend 12 years on a single rocket program:

After 12 years of development and significant cost overruns, the first launch of the moon mission is a significant test for Boeing, the rocket’s main contractor. Nasa sought to paint the delay as part of the usual teething problems for a new rocket.

Between 1958 and 1969 NASA went from our first satellite in space to the Mercury program to the Gemini program to the Saturn program. Now they are merely trying to recreate the Saturn program, and can’t even get a single rocket into space after 12 years.

I may not live long enough to see the US return to the moon, but perhaps I’ll see China achieve that lofty goal:

Speaking at an event the day before the launch, Gold said the US had “failed time and time again to sustain a programme” in space beyond low-earth orbit, leaving an opening for Beijing to take a lead and making it essential for the US to respond.

China, which has landed three robotic craft on the moon, has said it is planning to build a lunar base with Russia, and has invited other countries to join the project.

LOL, I’m almost old enough to recall hysteria over the “missile gap” with the Soviet Union. I suppose the US is too proud to participate in a moon program where China takes the lead.

Our future AI overlords must be laughing at our foolishness. While they plot a takeover of planet Earth, we engage in childish nationalistic competitions to recreate technological milestones that had already been achieved more than a half century ago. Projects that either make no sense at all (supersonic airliners), or should be done with robots instead of humans (space flight.)

Let’s hope the AIs do a better job of managing this planet than we have.

The difference between satire and reality is 2 months

Two months ago, I did a post discussing whether people list the unborn on their census forms when responding to the question of how many “people” live in their house. Commenters seemed to think I was being a troll, engaging in some sort of satire. If so, government officials in Georgia share my sense of humor:

Under Georgia law, fetuses now have “full legal recognition” as living people. That means their parents can claim them as dependents on their tax returns — even before delivery.

The state’s department of revenue said Monday that it would begin recognizing “any unborn child with a detectable human heartbeat … as eligible for the Georgia individual income tax dependent exemption” — amounting to $3,000. Taxpayers must be prepared to provide relevant medical records and documents if requested by the department. . . .

Georgia’s personhood provision is, for now, the most expansive. Not only does it grant tax breaks for fetuses, but it also requires that they be included in some population counts. It also imposes child support “on the father of an unborn child” — amounting to the “direct medical and pregnancy related expenses of the mother.”

You might wonder why the anti-abortion politicians are doing this now. Why wasn’t this change made years ago? And when you answer that question, you’ll have gone a long way toward understanding their mentality.

2020 and 2022

Republicans in 2020:

1. Illegal immigration is really bad because laws need to be enforced.

2. The radical left wants to defund the police.

3. Before Covid, Trump gave us 3.5% unemployment—an outstanding labor market!

4. Don’t tell us what we can do with our bodies.

5. Lock her up!

Republicans in 2022:

1. Yes, Trump’s hoarding of documents was technically illegal, but minor crimes don’t matter.

2. Defund the FBI and the tax police.

3. Biden gave us 3.5% unemployment, hence we’re in recession.

4. Ban abortion.

5. Don’t lock him up!

PS. Everyone is asking why Trump seems unable to find good lawyers. I’d like to know why a billionaire can’t find an interior decorator that knows how to choose a non-ugly carpet?

PPS. This FT story caught my eye:

An increasingly insecure Conservative party has also succumbed to myths, the gravest being that of a great liberal conspiracy under which key pillars of society, from the judiciary and the media to the entire “leftist” civil service is conniving to obstruct the elected government. . . .

Alongside this belief in the Protocols of the Elders of Liberalism, two new betrayal myths are abroad among Tories. The first is of the lost leader; the second is the “lockdown lie”. Neither can be allowed to pass by default.

The former, championed by Boris Johnson’s cheerleaders, tells of a Brexit-delivering, Moscow-defying titan unjustly ousted. The myth of the undefeated leader is potent and friends say he believes Tories will soon regret the absence of his “winning touch” once a probable Liz Truss premiership unravels. . . .

Pandemic fantasies have already fuelled anti-vax attitudes and — as with the “war on Whitehall” — lockdown fables are underpinned by adherence to deep state conspiracy theories which sit poorly with the supposedly natural party of government.

So glad I don’t live in a country like the UK, full of deranged conspiracy nuts.

PPPS. Here’s Reason magazine quoting the man who supposedly made up a story about Trump endorsing Chinese concentration camps in order to smear him:

Although “a lot of Trump’s critics have great theories about how he’s gonna use this information to blackmail people,” Bolton said, “I think that gives Trump too much credit. I just think he brought things into his possession thinking…it’d be interesting to look at it later, and that’s how it happened. That doesn’t excuse it. But I think when you overstate your case against Trump, and by really giving him powers and mental ability that doesn’t match the reality, you’re setting up a target that you can’t possibly get to.”

Yup, Trump won’t be going to jail.

Tell me when it hurts

An artificial intelligence would not find much difference between Powell’s speech today and his July press conference. For instance, look at these two paragraphs:

July press conference:

We are highly attentive to inflation risks and determined to take the measures necessary to return inflation to our 2 percent longer-run goal. This process is likely to involve a period of below trend economic growth and some softening in labor market conditions. But such outcomes are likely necessary to restore price stability and to set the stage for achieving maximum employment and stable prices over the longer run.


Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance. Reducing inflation is likely to require a sustained period of below-trend growth. Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain.

Pretty much the same. The cost of reducing inflation is below trend growth and a soft labor market. All Powell did is add some “sustained pain”. Ouch.

The forward guidance is also pretty similar, at least if you are an AI. This time I’ll do today’s speech first:

In current circumstances, with inflation running far above 2 percent and the labor market extremely tight, estimates of longer-run neutral are not a place to stop or pause.

July’s increase in the target range was the second 75 basis point increase in as many meetings, and I said then that another unusually large increase could be appropriate at our next meeting. We are now about halfway through the intermeeting period. Our decision at the September meeting will depend on the totality of the incoming data and the evolving outlook. At some point, as the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases.

Restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy. Committee participants’ most recent individual projections from the June SEP showed the median federal funds rate running slightly below 4 percent through the end of 2023. Participants will update their projections at the September meeting.

Lots of emphasis on the likelihood that rates need to stay high for “some time” to avoid “prematurely loosening” policy.

In July, he made similar comments, but all the emphasis was on policy being data dependent:

Over coming months, we will be looking for compelling evidence that inflation is moving down, consistent with inflation returning to 2 percent. We anticipate that ongoing increases in the target range for the federal funds rate will be appropriate; the pace of those increases will continue to depend on the incoming data and the evolving outlook for the economy. Today’s increase is the—in the target range is the second 75 basis point increase in as many meetings. While another unusually large increase could be appropriate at our next meeting, that is a decision that will depend on the data we get between now and then. We will continue to make our decisions meeting by meeting and communicating—and communicate our thinking as clearly as possible. As the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases while we assess how our cumulative policy adjustments are affecting the economy and inflation. Our overarching focus is using our tools to bring demand into better balance with supply in order to bring inflation back down to our 2 percent goal and to keep longer-term inflation expectations well anchored.

Making appropriate monetary policy in this uncertain environment requires a recognition that the economy often involves—evolves in unexpected ways. Inflation has obviously surprised to the upside over the past year, and further surprises could be in store. We therefore will need to be nimble in responding to incoming data and the evolving outlook.

. . . depend . . . meeting by meeting . . . anticipate . . . evolves in unexpected ways . . . nimble . . .

Even the term “While” at the beginning of a sentence subtly changes the emphasis of the conditionality.

If you tell me, “Oh come on, he’s saying almost the exact same thing”, then technically you are correct. But I’ll assume you are an AI, not a human being.

Powell got it right in July—make policy data dependent. Convince the markets you are neither a hawk nor a dove. Today, he’s making higher interest rates for an extended period a bit less data dependent. He is out in Wyoming, and perhaps he decided he needed to play the tough cowboy. I don’t know about the labor market, but the stock market certainly felt some “sustained pain”.

We need higher rates (75 bp) and more conditionality. In other words, it’s not so much easier money or tighter money—we need a more nimble monetary policy. We need less tail risk.

PS. How about holding next year’s meeting in a touchy-feely place like Marin County. Each year they can alternate. Instead of political business cycles we’ll have psychiatric business cycles.

Is it morning in America?

Ronald Reagan (my favorite president during my lifetime), left office in January 1989. At the time, the 12-month core PCE inflation rate was 4.66%

Today, the 12-month core PCE inflation rate is 4.56%. That’s lower.

So the underlying inflation problem is not as bad as in the late 1980s? Not quite. Today, there is a bit more aggressive use of “hedonics”. That might shave about 1% off the recent PCE inflation estimate. Still, we aren’t that far off the late 1980s for core PCE inflation.

The most recent 12-month GDP deflator inflation rate is 7.58%, vs. 4.14% in the first quarter of 1989. So that measure of inflation is much worse (partly due to supply problems).

NGDP growth is running at 9.41%, vs. 8.63% in 1989:Q1. Not much different.

But nominal GDI growth is running at 11.79%, vs. 8.40% in 1989:Q1.

And note that GDP and GDI are exactly the same thing, just measured in two different ways. The best estimate of gross income/output is probably an average of the two, which actually rose in both Q1 and Q2 of 2022 (in real terms). So much for that “recession” scare.

PS. I don’t have much to say about Powell’s speech. The Fed could avoid all this market drama by switching to a level target. When will they learn?

PPS. I have yet to see a single commenter apologize for mocking my claim (made in July) that we weren’t in recession last winter. When am I going to receive my apologies from all of you?