Lenin, capitalists, rope.

Bloomberg: reports there will be no more “excuses”:

President Donald Trump said he doesn’t want to limit trade with China by overusing national security “excuses,” citing his interest in selling jet engines to Beijing.

It was always about mercantilism, not national security.

PS. Here’s an interesting timeline:

August 2019, Trump hints that he might commute the sentence of Rod Blagojevich, a corrupt former Illinois governor. (Actually, it’s enough to say “former Illinois governor.”)

January 2020, Blagojevich (who is a Democrat) pens an op ed where he criticizes the impeachment effort against Trump.

February 2020, Trump commuted Blagojevich’s sentence.

PPS. Almost every day I see an article on how central banks are increasingly ineffective. Meanwhile, the new head of the IMF is suggesting that the BOJ needs to relax (implicitly lower) its inflation target to conserve ammunition. This is truly a new dark age of monetary economics, much like 1933-68.

PPPS. I have a new Mercatus working paper on currency manipulation. Here’s the abstract:

Currency Manipulation, Saving Manipulation, and the Current Account Balance

Concern over currency manipulation plays a major role in international economic diplomacy. Unfortunately, the concept is not well defined, and the most coherent explanations apply to a concept more accurately termed “saving manipulation,” as it has little to do with market exchange rates. I argue that the costs of currency manipulation are far lower than they are widely assumed to be and that the optimal response is either to do nothing or to boost domestic saving rates.

It’s a long paper, so make sure you pay attention to the John Cochrane quote discussed on page 15. Try to figure out the sense in which Cochrane is right, and the sense in which he’s wrong.



9 Responses to “Lenin, capitalists, rope.”

  1. Gravatar of Edward Edward
    18. February 2020 at 12:36


    Interesting article, Scott,

    Your thoughts?

  2. Gravatar of ssumner ssumner
    18. February 2020 at 15:18

    Just say no.

    BTW, is this true?

    “Chinese students have stopped applying to American universities,”

  3. Gravatar of Benjamin Cole Benjamin Cole
    18. February 2020 at 16:14

    PPS. Almost every day I see an article on how central banks are increasingly ineffective. Meanwhile, the new head of the IMF is suggesting that the BOJ needs to relax (implicitly lower) its inflation target to conserve ammunition. This is truly a new dark age of monetary economics, much like 1933-68.—-Scott Sumner

    The IMF and the BIS may be retreating into the Dark Ages (or they never left) but there is certainly innovative thinking going on in the field of monetary economics.

    Stanley Fischer is perhaps the foremost figure associated with the idea of money-financed fiscal programs. While such programs were effectively used in the Great Depression by Japan (the only major nation to largely sidestep the Great Depression) they have never received much attention in Western macroeconomic circles.

    Ben Bernanke has advocated money-financed fiscal programs, aka helicopter drops, for Japan. Adair Turner is another name that is looking at the issue with fresh eyes.

    I think many in the central-banking community are re-assessing the efficaciousness of lower interest rates and quantitative easing in a world of globalized capital markets. Cutting interest rates and increasing central bank balance sheets are not bad policies, they are just weak tea.

    In addition, attempting to implement monetary policy largely through the clunky commercial banking system, and the endogenous creation of money, is worth re-examining.

    For whatever reason, monetary economics often becomes ossified, and practitioners exhibit the rigid zeal of acolytes before a sacred totem.

    I can’t imagine any sane person would, from scratch, devise the resent system for implementing domestic monetary policy, that is the Federal Reserve and the commercial banks, that we have today. Perhaps Rube Goldberg would, on a bad day.

  4. Gravatar of agrippa postumus agrippa postumus
    18. February 2020 at 16:29


    smack down?

  5. Gravatar of Mark Mark
    19. February 2020 at 02:36

    The Lenin capitalists rope quote is very ironic because the largest (and perhaps even the only significant) historical example of a country selling another country a vital resource that the buyer then used to attack the seller is the USSR selling oil to Nazi Germany (which Germany had no other major sources for).

  6. Gravatar of John Hall John Hall
    19. February 2020 at 03:18

    Reading through the new paper now. Came across this line at the bottom of page 7
    “While monetary policy does not have any permanent effect on the real exchange rate, other government policies might have a long-run impact on real exchange rates and current account balances.”

    It just seems phrased a little strangely, particularly with that first real italicized.

  7. Gravatar of Michael Rulle Michael Rulle
    19. February 2020 at 07:19

    1–TRUMP and CHINA———Yes, Trump’s stated trade views versus China may be erratic, mercantilist and non-sensical. Although I don’t really know——but if we are hunting for contradictions among politicians’ statements, they are easy to find. But I agree it would clearly be better to have consistency.

    Or, if we ignored the words and watched the actions, what would we think? My sense is the marginal impact of his China trade policies——other than about 5 or 6 volatile days in the markets, is close to zero. When we let WTO set the rules, I don’t recall many criticisms (other than from pols) about “this or that” action—-so it is hard to compare “random Trump” from technocratic WTO.

    2)Trump and Pardons/Commutations——At least he does not wait until his term is done. So all can vote with full knowledge—-why that is not a plus over past presidents is odd. Further, it is really willfully blind to not look at his over all policies on prison reform—-which I have always believed was, and still is, required. He did surprise me on that, and he continues to work on it.

    For sure, the Blagojevich commutation is completely political. My guess it is purely “option buying”. He was selling Obama’s seat to Jackson’s son. He is hoping to buy information——sort of like Hillary—-but not from Russians.

    3)Monetary Policy and Dark Ages——Assuming your views are mostly correct on proper approach to monetary policy—-which I do assume—(but looking forward to your book) I am not optimistic about the predominant views. For someone like me, the most distressing thing is how unable promoters of the “ammunition theory” of monetary policy are able to explain their reasoning. It feels like beliefs in Talismans.

    They see bogeymen everywhere—-all leading to a compulsion to want to protect us from tomorrow by causing damage today.

  8. Gravatar of Mike Sandifer Mike Sandifer
    19. February 2020 at 08:42

    Michael Rulle,

    The following statement from you is objectively wrong:

    “My sense is the marginal impact of his China trade policies——other than about 5 or 6 volatile days in the markets, is close to zero.”

    Given the stock and bond market reactions to news about worsening trade wars with China, especially during the 4th quarter of 2018, indicate that the real effects were expected to be noticeable and permanent. The most the stock market can decline for a policy impacting a single year forward is only equal to the discount rate, which pre-crash was less than 5%. The S&P 500 declined about 18% over that short period.

    Perhaps half of that decline was due to nominal factors, meaning the Fed tightened policy at the same time. But, that means half was real. That translates into a real shock to growth of up to half a percent of GDP, in the short-run, with the effect fading asymptotically in the long run, as the economy adjusts.

    While far from catastrophic, the effects were real, measurable, and permanent, though fading in the long run.

    Also, if Trump had any true knowledge of what was going on, he would understand that the Fed’s interest rate targeting policy has a short-run disinflationary bias, meaning he should expect tighter money to magnify the effects of the real shocks his trade restrictions and China’s retaliation cause.

    If you do more math and less lazy musing, you might oppose Trump somewhat more.

  9. Gravatar of ssumner ssumner
    19. February 2020 at 10:05

    agrippa, I may do a post on that.

    Mark, Interesting.

    John. Money affects nominal exchange rates in the long run, but not real exchange rates.

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