Hot, hot, hot

Today’s jobs report shows another big employment gain and rapidly rising nominal wages. Here’s Bloomberg quoting Seema Shah:

To have 263,000 jobs added even after policy rates have been raised by some 350 basis points is no joke. The labor market is hot, hot, hot, heaping pressure on the Fed to continue raising policy rates. It will not have gone unnoticed by Fed officials that average hourly earnings have steadily strengthened over the past three months, exceeding all expectations, and the absolute wrong direction to what they are hoping for. 

And here they quote Peter Tchir:

The big news is earnings! Last month was up 0.5% instead of original 0.4% and this month was up a whopping 0.6% (versus 0.3% expected). Fed will not like that.

bUt hiGH iNtERst rATes MeAn mOnEY is tIGht

Seriously, this is why we need level targeting.

May you avoid periods of interesting monetary policy

You may have heard of the old Chinese curse, “May you live in interesting times.” The same concept applies to monetary policy—boring is better.

Today, stocks rose sharply in response to Jay Powell’s speech. This worries me. Not the fact that stocks went up—which is fine—rather the fact that these large market reactions after Fed announcements suggest that there is still enormous uncertainty about the future path of monetary policy. A sensible monetary regime is predictable and boring.

David Beckworth directed me to this tweet:

But the Fed is taking its time in addressing the inflation problem, as Powell himself admitted:

I could answer this question by pointing to the inflation forecasts of private-sector forecasters or of FOMC participants, which broadly show a significant decline over the next year. But forecasts have been predicting just such a decline for more than a year, while inflation has moved stubbornly sideways.

Later, Powell suggested that the labor market will remain tight:

Looking back, we can see that a significant and persistent labor supply shortfall opened up during the pandemic—a shortfall that appears unlikely to fully close anytime soon.

That’s an interesting prediction given that most economists expect a recession in the near future, indeed Bloomberg’s panel insists the probability of recession within the next 11 months is 100%.

Here is some more data:

Currently, the unemployment rate is at 3.7 percent, near 50-year lows, and job openings exceed available workers by about 4 million—that is about 1.7 job openings for every person looking for work (figure 5). So far, we have seen only tentative signs of moderation of labor demand. With slower GDP growth this year, job gains have stepped down from more than 450,000 per month over the first seven months of the year to about 290,000 per month over the past three months. But this job growth remains far in excess of the pace needed to accommodate population growth over time—about 100,000 per month by many estimates. Job openings have fallen by about 1.5 million this year but remain higher than at any time before the pandemic.

It’s interesting to think about what would happen if the Fed completely failed to bring inflation down—if PCE inflation stayed at 6% forever. According to the Natural Rate Hypothesis, real variables such as employment and output would eventually return to their natural rate. Now let’s turn that around, and assume that the labor market normalizes in a year or so. Even in that case, there’s no reason to expect inflation to fall. In other words, to have any success against inflation it’s likely that the Fed will have to bring new job creation to well below 100,000/month.

To be clear, I don’t believe the Fed should target real variables and I don’t view them as reliable indicators of the stance of monetary policy. My point is that it probably won’t be enough to bring the economy back to equilibrium. The Fed’s slow response to inflation will make the inevitable pain that much greater. I hope I’m wrong.

The strange case of Robert Louis Stevenson

In the past year, I’ve been rereading an old 24-volume set of the writing of RL Stevenson. That got me wondering about his literary reputation. Is he viewed as a great writer?

Stevenson was one of Borges’s favorite authors:

If serial rereading is one way to define worship, then one of Borges’s most revered gods was Robert Louis Stevenson. This even though in Borges’s time, Stevenson’s work was basically considered kid stuff. The first seven editions of the Norton Anthology of English Literature do not deign to include Stevenson, though he finally surfaces in the eighth edition, published in 2006. Borges not only commented on books that didn’t exist. He read books — pulpy and arcane alike — that few others bothered to see.

Borges was undoubtedly a great writer, and an even greater reader. But can we take this seriously? Is it possible that Stevenson was actually a great writer, unrecognized by the literary establishment? Or is this just an odd quirk of Borges?

It turns out that Proust also loved Stevenson. Here’s Swann (speaking for Proust):

But Stevenson is a great writer, I can assure you, M. de Goncourt, a very great one, equal to the greatest.

Regarding Dr. Jekyll and Mr. Hyde, Nabokov suggested that rather than being a simple detective story, it, “belongs to the same order of art as, for instance, Madame Bovary or Dead Souls”.

Borges, Proust and Nabokov are among the most perceptive readers that have ever lived. Their testimony ought to be sufficient. But if not, we also find that Henry James greatly appreciated Stevenson. So did Walter Benjamin, Fernando Pessoa, Italo Calvino, Cesare Pavese and Bertolt Brecht.

Surely that’s enough? if not, add Hemingway, Kipling, Chesterton, Jack London, Natsumi Soseki, Javier Marias, Roberto Bolano.

There are far too many great writers on this list for us to brush away their Stevenson appreciation. So what’s going on here? It cannot be that Stevenson is too difficult for the literary establishment, as he’s also popular with average readers. I suspect it is more nearly the opposite problem—Stevenson is too pleasurable. Some critics wrongly equate greatness with difficulty.

I also see this in film. The most astute film critics recognize people like Jimmy Stewart and Cary Grant to be being among the greatest actors of all time. Average moviegoers also like their films. But there’s an intermediate layer of middlebrow taste that ranks them far below “method actors” like Marlon Brando. Some literary critics are looking for the literary equivalent of method acting (say the pessimistic psychological novel), and they are not finding it in Stevenson.

It’s best to avoid judging a work of art by preconceived idea of what art should look like; evaluate it in terms of what the artist is trying to do. Does it succeed in its own terms?

I also read Chesterton’s excellent short biography of Stevenson. At one point he is discussing a novel for adults that is often viewed as a novel for children (Treasure Island), and remarks:

First of all it was, I think, a sort of dash for liberty; and especially a dash for happiness. It was a defense of the possibility of happiness; and a kind of answer to the question, “Can a man be happy?” But it was an answer of a curious kind, defiantly delivered in rather curious circumstances. It was the escape of a prisoner as he was led in chains from the prison of Puritanism to the prison of Pessimism. Few have understood that passage in the history of manufacturing civilization of northwest Europe and America. Few have realized that the gloomier sort of modern materialism often came upon a class that was only just escaping from an equally gloomy sort of spirituality. They had hardly come out of the shadow of Calvin when they came into the shadow of Schopenhauer. From the world of the worm that dieth not, they passed into a world of men dying like worms; and in the case of some of the decadents, almost exulting in being devoured by worms like Herod. Puritanism and pessimism, in short, were prisons that stood near together; and none have ever counted how many left one only for the other; or under what a covered way they passed. Stevenson’s escapade was an escape; a sort of runaway romantic evasion for the purpose of escaping both. And as a fugitive has often fled and hidden in his mother’s house, this outlaw took refuge in his old home; barricaded himself in the nursery and almost tried to creep into the dolls’-house. And he did it upon a kind of instinct, that here had dwelt definite pleasures which the puritan could not forbid nor the pessimist deny. But it was a strange story. He had his answer to the question,”Can a man be happy?”; and it was, “Yes, before he grows to be a man.”

And this:

[M]ost men know that there is a difference between the intense momentary emotion called up by memory of the loves of youth, and the yet more instantaneous but more prefect pleasure of the memory of childhood. The former is always narrow and individual, piercing the heart like a rapier; but the latter is like a flash of lightening, for one split second revealing a whole entire landscape; it is not the memory of a particular pleasure any more than of a particular pain, but of a whole that shone with wonder. The first is only a lover remembering love; the second is like a dead man remembering life.

Borges’s favorite Stevenson novel was “The Wrecker“.

On the surface, “The Wrecker” could hardly resemble a Borges story less. At 500 pages, and full of incident, “The Wrecker” has the feel of a 27-course Victorian feast, served on a table crowded with doilies and finger bowls and odd utensils whose functions we can’t even imagine . . .

So why did Borges read and reread “The Wrecker”? What was it that he believed every detail of? And how was his own writing a way of reading Stevenson’s sacredly profane text? Borges’s readerly attention re-invents Stevenson, just as his writerly attention created those vast unwritten books that Borges chose not to write, but just to imagine and comment on.

Dodd and the other characters often marvel at how their lives have become as full of surprise and drama as a dime novel, and this is, basically, a happy thing. It’s as if to say that here, finally, are circumstances that do justice to the scope and scale of my emotions. It’s the idea of the objective correlative, done extra boyishly. In “The Wrecker,” the hyperbolized material world measures up to the outsize passions of the heart.

In contrast, Harold Bloom doesn’t even mention The Wrecker on his Western Canon, which includes these Stevenson books:

Robert Louis Stevenson:



Dr. Jekyll and Mr. Hyde

Treasure Island

The New Arabian Nights

The Master of Ballantrae

Weir of Hermiston

So who’s right? I’m not qualified to say, but when I reread Stevenson’s novels, I found The Wrecker to be the most pleasurable. (Which is high praise, as all of Stevenson’s novels are pleasurable.) It’s interesting to think about why.

Alfred Hitchcock used Jimmy Stewart and Cary Grant in many of his best American films:

Thus, it appears the Stewart–Hitchcock films of the 1950s aimed to be more serious and Stewart’s character was an exact reflection of the director himself while the Grant–Hitchcock films during the same era were more light-hearted and Grant’s character was what Hitchcock wished he could be.

The Stewart films tend to be a bit better (especially Vertigo and Rear Window), and I suspect that’s because they were more personal. Similarly, The Wrecker is the novel that’s closest to Stevenson’s life and personal interests. He knows the world of Paris, Edinburgh and San Francisco in 1880 much better than the earlier societies portrayed in his historical romances. And the dilemma faced by the protagonist (Loudon Dodd) is similar to the struggles that Stevenson faced. He rebelled from a successful father. He was drawn to both a life of literature and a life of adventure. Here’s Dodd in the opening paragraph of chapter 15:

In my early days I was a man, the most wedded to his idols of my generation. I was a dweller under roofs: the gull of that which we call civilisation; a superstitious votary of the plastic arts; a cit; and a prop of restaurants. I had a comrade in those days, somewhat of an outsider, though he moved in the company of artists, and a man famous in our small world for gallantry, knee breeches, and dry and pregnant sayings. He, looking on the long meals and waxing bellies of the French, whom I confess I somewhat imitated, branded me as “a cultivator of restaurant fat.” And I believe he had his finger on the dangerous spot; I believe, if things had gone smooth with me, I should be now swollen like a prize-ox in body, and fallen in mind to a thing perhaps as low as many types of bourgeois—the implicit or exclusive artist. That was a home word of Pinkerton’s, deserving to be writ in letters of gold on the portico of every school of art: “What I can’t see is why you should want to do nothing else.” The dull man is made, not by the nature, but by the degree of his immersion in a single business. And all the more if that be sedentary, uneventful, and ingloriously safe. More than one half of him will then remain unexercised and undeveloped; the rest will be distended and deformed by over-nutrition, over-cerebration, and the heat of rooms. And I have often marvelled at the impudence of gentlemen, who describe and pass judgment on the life of man, in almost perfect ignorance of all its necessary elements and natural careers. Those who dwell in clubs and studios may paint excellent pictures or write enchanting novels. There is one thing that they should not do: they should pass no judgment on man’s destiny, for it is a thing with which they are unacquainted. Their own life is an excrescence of the moment, doomed, in the vicissitude of history, to pass and disappear: the eternal life of man, spent under sun and rain and in rude physical effort, lies upon one side, scarce changed since the beginning.

This is a shot across the bow at future critics who would judge Stevenson by the standards of the “psychological novel”.

I suppose that one reason this novel appeals to me is that in my own life I’ve alternated between the physical and the intellectual worlds. I had an intellectual job, but lots of people I know have careers that deal with the physical world. And when I was young did a great deal of physical work.

The first paragraph of chapter 14 also resonated with me:

The sun of the morrow had not cleared the morning bank: the lake of the lagoon, the islets, and the wall of breakers now beginning to subside, still lay clearly pictured in the flushed obscurity of early day, when we stepped again upon the deck of the Flying Scud: Nares, myself, the mate, two of the hands, and one dozen bright, virgin axes, in war against that massive structure. I think we all drew pleasurable breath; so profound in man is the instinct of destruction, so engaging is the interest of the chase. For we were now about to taste, in a supreme degree, the double joys of demolishing a toy and playing “Hide the handkerchief”—sports from which we had all perhaps desisted since the days of infancy. And the toy we were to burst in pieces was a deep-sea ship; and the hidden good for which we were to hunt was a prodigious fortune.

Some of my most pleasurable experiences were successful treasure hunts—in my case for valuable prints and posters, tucked away in flea markets and out of the way antique shops.

I’ve always been a bit sickly, and Stevenson was even more so (albeit less of a whiner.) One silver lining is that good health feels better after a long illness than it does for someone who is almost never sick. (As I write this, I’ve been sick 3 of the past 4 weeks—not Covid.)

The Wrecker begins with a highly entertaining introductory section that lasts 220 pages, before Dodd finally began his adventure on a sailing ship from San Francisco to Midway Island. Here’s the first paragraph in chapter 12:

I love to recall the glad monotony of a Pacific voyage, when the trades are not stinted, and the ship, day after day, goes free. The mountain scenery of trade-wind clouds, watched (and in my case painted) under every vicissitude of light—blotting stars, withering in the moon’s glory, barring the scarlet eve, lying across the dawn collapsed into the unfeatured morning bank, or at noon raising their snowy summits between the blue roof of heaven and the blue floor of sea; the small, busy, and deliberate world of the schooner, with its unfamiliar scenes, the spearing of dolphin from the bowsprit end, the holy war on sharks, the cook making bread on the main hatch; reefing down before a violent squall, with the men hanging out on the foot-ropes; the squall itself, the catch at the heart, the opened sluices of the sky; and the relief, the renewed loveliness of life, when all is over, the sun forth again, and our out-fought enemy only a blot upon the leeward sea. I love to recall, and would that I could reproduce that life, the unforgettable, the unrememberable. The memory, which shows so wise a backwardness in registering pain, is besides an imperfect recorder of extended pleasures; and a long-continued well-being escapes (as it were, by its mass) our petty methods of commemoration. On a part of our life’s map there lies a roseate, undecipherable haze, and that is all.

That captures the feeling of exhilaration as one begins an outdoor adventure, which is even greater if one has recently recovered from an illness. And as with a treasure hunt, the voyage to the South Seas is happy in the sense that all happiness is merely a promise of future happiness.

The Wrecker is about art as a career, business as an art, and adventure as an art. It’s also one of the more perceptive books on friendship that I have read. If you ever find yourself stuck in bed with a long illness, this book will make you happier than if you were 100% healthy.

Two thirds of the way through, the book shifts onto an entirely new track, confounding our expectations. Its odd structure might help to explain why the novel has been overlooked by critics. Unusual works of art often require a second exposure to be fully appreciated. That’s true of some of the films of Stanley Kubrick, and it’s also true of Stevenson’s masterpiece—The Wrecker.

PS. I wrote this post about a month ago. Since then I read Stevenson’s final book, The Ebb Tide, published in the year he died (1894). I think it might be his best, despite also being excluding from Harold Bloom’s list.

It’s interesting to think about the fact that Stevenson and Joseph Conrad were born only 7 years apart, and yet Stevenson’s final novel was published right before Conrad’s first two novels—Almayer’s Folly (1895) and An Outcast of the Islands (1896). In those two novels, a white man near the end of his tether is stranded in a remote setting in the East Indies. Now consider the opening of The Ebb Tide:

Throughout the island world of the Pacific, scattered men of many European races and from almost every grade of society carry activity and disseminate disease. Some prosper, some vegetate. Some have mounted the steps of thrones and owned islands and navies. Others again must marry for a livelihood; a strapping, merry, chocolate-coloured dame supports them in sheer idleness; and, dressed like natives, but still retaining some foreign element of gait or attitude, still perhaps with some relic (such as a single eye-glass) of the officer and gentleman, they sprawl in palm-leaf verandahs and entertain an island audience with memoirs of the music-hall. And there are still others, less pliable, less capable, less fortunate, perhaps less base, who continue, even in these isles of plenty, to lack bread.

At the far end of the town of Papeete, three such men were seated on the beach under a purao-tree.

It was late. Long ago the band had broken up and marched musically home, a motley troop of men and women, merchant clerks and navy officers, dancing in its wake, arms about waist and crowned with garlands. Long ago darkness and silence had gone from house to house about the tiny pagan city. Only the street lamps shone on, making a glow-worm halo in the umbrageous alleys or drawing a tremulous image on the waters of the port. A sound of snoring ran among the piles of lumber by the Government pier. It was wafted ashore from the graceful clipper-bottomed schooners, where they lay moored close in like dinghies, and their crews were stretched upon the deck under the open sky or huddled in a rude tent amidst the disorder of merchandise.

But the men under the purao had no thought of sleep. The same temperature in England would have passed without remark in summer; but it was bitter cold for the South Seas. Inanimate nature knew it, and the bottle of cocoanut oil stood frozen in every bird-cage house about the island; and the men knew it, and shivered. They wore flimsy cotton clothes, the same they had sweated in by day and run the gauntlet of the tropic showers; and to complete their evil case, they had no breakfast to mention, less dinner, and no supper at all.

In the telling South Sea phrase, these three men were on the beach. Common calamity had brought them acquainted, as the three most miserable English-speaking creatures in Tahiti; and beyond their misery, they knew next to nothing of each other, not even their true names. For each had made a long apprenticeship in going downward; and each, at some stage of the descent, had been shamed into the adoption of an alias. And yet not one of them had figured in a court of justice; two were men of kindly virtues; and one, as he sat and shivered under the purao, had a tattered Virgil in his pocket.

Only a great novelist would describe Tahiti as “bitter cold”, or make on the beach sound so forlorn.

This is a long way from the blissful romance of Treasure Island. Indeed, it might be Stevenson’s most Conradian novel, as it also contains a sort of Kurtz-like figure. Even the title is Conradian. Conrad excelled in novellas, and The Ebb Tide is like two novella’s joined together—which means it contains two great opening chapters.

PPS. In December 1980, an obscure Madison newspaper named City Lights published an article on a used bookstore. It contained this excerpt:

Interestingly, each volume is roughly 1 1/4 inches thick, but the page count varies from a bit over 300 to as much as 650. How is that possible? The thickness of the paper varies in each volume in such a way that the set will look uniform on a bookshelf. It’s one of those Edwardian complete sets where some of the pages must be separated before they can be read. I’m old school; I can’t read on Kindle—it has to be a real book. Hardcover is much preferred to paperback, and a book from 1901 (such as this set) is much preferred to a modern printing.

Happy Thanksgiving. I give thanks that a person such as Robert Louis Stevenson once existed. Even his letters are well worth reading.

The Great Multicultural North

Matt Yglesias directed me to this tweet:

And here’s China:

The China Statistical Yearbook 2022 states that only 10.6 million people were born in China in 2021, the lowest total since 1961. The country’s population grew by just 480,000, also the lowest figure in decades.

In percentage terms, that’s roughly 1.8% for Canada, 0.3% for the US, and 0.03% for China. Next year China’s expected to hit zero.

Immigration explains much of the difference between the US and Canada:

The federal Liberal government has unveiled plans for a massive increase in the number of immigrants entering Canada, with a goal of seeing 500,000 people arrive each year by 2025 as it seeks to address a critical labour shortage across the country.

While the plan was largely welcomed by industry groups and others, there are questions about whether it goes far enough – and whether it is even achievable, given a large backlog of applications at Immigration, Refugees and Citizenship Canada. . . .

The new plan envisions a flood of new arrivals that will see 465,000 people come in from outside the country in 2023, rising to 500,000 in 2025. By comparison, the immigration department says 405,000 permanent residents were admitted last year.

To put that in perspective, 500,000 immigrants to Canada would be like 4 million immigrants to the US.

For most of my life, Canada’s population was about 11% of the US population, and grew at the same rate. Now it’s almost 12%, and growing much faster. Perhaps someday Canada will deserve its G7 status.

PS. I also have an article on Canada at Econlog.

The wisdom of Larry Summers

I see a tiny glimmer of hope on the China issue. There is beginning to be some pushback against the cold warriors in the US government. Here’s Bloomberg:

Former Treasury Secretary Lawrence Summers warned US policy makers to focus on building the country’s own economic strengths in its contest with China, rather than on attacking its adversary.

“If we change our focus from building ourselves up to tearing China down, I think we will be making a very risky and very unfortunate choice,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. The US should instead concentrate on its own innovation, infrastructure, education and challenges such as opioid deaths, he said.

Summers also suggested that recent rhetoric coming out of the US government has increased the risk of a US-China war over Taiwan, which would be madness:

“We need to be very careful about giving China the sense that we are trying to change the traditional one-China policy,” said Summers, a Harvard University professor and paid contributor to Bloomberg Television. “Because I think that could risk disastrous conflict.”

This caught my attention:

The right approach is instead to “stand up for some of our fundamental interests in security and fair economic competition — but to leave it at that point,” he said. “I think ultimately we will prevail in this broad contest with China,” he said. 

I’m not sure what he means here. Taken literally, I agree with the statement. Fair economic competition is in our interest. But if he’s implying that the US supports fair economic competition, then I strongly disagree. I know of no other nation that flouts international trade agreements with such insolent disregard for the rule of law. It’s as if we think the rules don’t apply to us.

Another Bloomberg piece points out that Europeans are resisting the US push toward a new cold war:

President Xi Jinping started his week overseas mending ties with the US, and ended it with European leaders making the case for resisting the Biden administration’s sweeping chip curbs on China. . . .

On Friday, French President Emmanuel Macron called for engagement with Beijing and resisting efforts to divide the world into competing blocs. That followed similar appeals from German Chancellor Olaf Scholz, who visited China earlier this month, and efforts by Dutch Prime Minister Mark Rutte to coordinate with other key chipmaking nations in resisting US pressure. 

China is a danger to Taiwan. Putin’s Russia is a danger to much of the developed world. Commenters sometimes tell me that that there’s less that a 50-50 chance of a nuclear war with Russia, as if I’m supposed to be reassured that there’s less than a even chance of a few hundred millions deaths.

If China invades Taiwan, then put economic sanctions on China, just as we’ve done with Russia. Until then, all of our focus should be on stopping Russia. We need to do much more to help Ukraine (but stop short of US military involvement.)