1. For years, I’ve been complaining about the US bullying of smaller nations. This tweet thread by Jeff Stein documents the fact that US bullying has increased dramatically over the past decade.

2. By some measures, Texas is far and away the most environmentally conscious state. Another link suggests that Texas produces more electricity from renewable energy than New York produces in total. How is that possible? It has nothing to do with their attitudes, which are far less environmentally conscious than those in places like New York and California. Instead it seems due to the fact that free markets are good for the environment, and Texas has much freer markets than California.

3. Here’s Richard Hanania:

Ezra Klein talks about how he has no idea what a left-wing version of Jordan Peterson would look like, given that liberals don’t really have a positive vision of masculinity. Conservatism is less conflicted on this issue, but its version of masculinity has no place for stoicism in the Trump era. I find few things to be more unmasculine than exaggerating the problems and challenges one faces. Right-wing spaces are nonetheless filled with individuals referring to themselves as “kulaks,” “dissidents,” or “heretics.” In a way, Trump is the perfect leader for this movement, in that he has all the vices of masculinity and few of the virtues. MAGA populism looks at what happened to Alexei Navalny and says that this only reminds us that the real victim is Trump, and I wonder how much their aggressive callousness towards the victims of Putin reflects the shame of individuals play acting as freedom fighters getting angry when confronted by the real thing.

BTW, here’s what Scott Alexander says about Hanania:

Hanania is terrible at being right-wing. He’s pro-choice, pro-immigration, pro-euthanasia, pro-vaccine, pro-globalism, pro-Ukraine, atheist, and supports the recent guilty verdict on Trump.

4. And from the same post, Alexander describes Yglesias:

Nietzsche wrote in the 1890s. There were still real nobles and emperors walking around; communists had not yet started calling capitalism “late capitalism”. Sure, his world was probably some sort of weak compromise between master and slave morality, but it was different from our weak compromise. Our weak compromise was forged through dialogue and warfare with fascism’s novel take on master morality and socialism’s novel take on slave morality. I think of Yglesias – who combines an insistence that good things are good and a proclivity for embiggenment with commitments to democracy, the welfare state, and the poorest among us – as one of its most self-conscious proponents.

Alexander has recently been on a roll.

5. Alexander also linked to an excellent post by Freddie DeBoer:

Perhaps you feel like Alice Munro pulled the wool over your eyes. You’re in good company. Many seem to be taken aback by the fact that a writer whose work spoke to them so deeply was one who could live with this kind of darkness. That attitude, I’m afraid, demonstrates an inability to understand that every artist is first and fundamentally a liar, in fiction or non. That was Munro’s great skill, and that is why you feel betrayed. A writer for The Indian Express says, “I will always question her motivations behind writing what she wrote and wonder if she actually felt this deeply or just knew how to lie with great finesse.”

But that’s the thing about great artists, darling; for them, there’s no difference.

That last line is perfect.

6. It looks like Vance is also a fan of Viktor Orban. Why am I not surprised? Trump should go with his original intention and replace Vance with Doug Burgum.

7. This interview from 2021 is exactly why you don’t want to nominate an intellectual for VP. They say really stupid stuff. Start at the 11:30 mark. Inconvenient?

8. Trump refuses to say that Vance is ready to step in as president if needed, despite being asked directly. Here’s Jim Geraghty at the National Review:

And he’s shameless about throwing his own running mate under the bus when he’s the one who picked him:

Harris Faulkner: When you look at J. D. Vance, is he ready on Day One?

Trump: Does he what?

Faulkner: Ready on Day One? If he has to be?

Trump: I’ve always had great respect for him, uh, and for the other candidates too, but I will say this. And I think this is well documented. Historically, the vice president in terms of the election does not have any impact. I mean, virtually no impact. You have two or three days where there’s a lot of commotion as to who, like you’re having it on the Democrat side, who it’s gonna be. And then that dies down and it’s all about the presidential pick. Virtually never. Has it mattered? Maybe Lyndon Johnson mattered for different reasons than what we’re talking about. Not for vote reasons, but for political reasons, other political reasons. But uh historically, the choice of a vice president makes no difference. You’re voting for the president and you can have a vice president who’s outstanding in every way. And I think J. D. is, I think that all of them would have been, but, but you’re not voting that way, you/re voting for the president, you’re voting for me.

This is a yes-or-no question, and Trump did not answer “yes.”

There’s no doubt in my mind that Trump now agrees with me—it was a horrible choice. And I agree with Vance that Trump is a reprehensible person. Both Trump and Vance have very sensible views of their running mate.

9. This is one of the best blog posts I’ve ever read, but also the most depressing. Not for the faint of heart. A good rebuttal to all of the misinformation attacking Canada’s right to die policy. (Also see this comment.)

10. Here’s National Review:

It seems that many of Vance’s economic views come from his ruminations on kitchen appliances. He has said that an old refrigerator he used to have proved that “economics is fake” because it could keep lettuce fresh for longer than newer fridges. Now he says, in his stump speech, that “We believe that a million cheap, knockoff toasters aren’t worth the price of a single American manufacturing job.”

Maybe I spoke too soon when I said that Vance was smart. (Yes, I know, there are lots of things that are so silly they could only be said by an intellectual.)

11. James Carville says don’t call them weirdos, call them creeps. After all, there’s nothing wrong with being a weirdo (I’m one myself.)

1. Here’s what happens when the West turns away from globalization:

While the United States has free-trade agreements with 11 Latin American countries, it shows no appetite for more. Uruguay’s centre-right government is negotiating an accord with China after its requests for one with the United States were rebuffed. France and others are blocking the ratification of a trade pact between the European Union (eu) and Mercosur (a five-country bloc including Brazil and Argentina) which took more than 20 years to negotiate.

2. Remember when trade barriers with China were going to reduce America’s trade deficit? As I predicted, it never happened. Here is just one of the reasons why:

The two-step is a way in which some retailers make use of a loophole in American trade rules known as the “de minimis” exemption, which means “too small to be trifled with” and allows packages worth less than $800 to enter America without facing duties. . . .

Trade through the exemption—mostly the regular import of small packages rather than any trickery—is now so large it distorts national data. Seven in ten de minimis parcels arrive from China. Shein and Temu, two large online retailers with Chinese supply chains, alone account for three in ten. Our calculations, based on China’s share of de minimis imports, suggest that America’s trade deficit in goods is 13% larger with China, and 5% larger with the world, than official numbers indicate. This may help explain a growing puzzle in Sino-American trade statistics. China says that it exports about $73bn more than America thinks it receives, and some economists believe the true gap may be more than $150bn.

3. The Economist says China is becoming a scientific superpower, but that nationalism is an issue:

Chinese collaborations are common for Western researchers. Roughly a third of papers on telecommunications by American authors involve Chinese collaborators. In imaging science, remote sensing, applied chemistry and geological engineering, the figures are between 25% and 30%. . . .

In America and Europe, political pressure is limiting collaborations with China. . . .

There are also concerns among scientists that China is turning inwards. The country has explicit aims to become self-reliant in many areas of science and technology and also shift away from international publications as a way of measuring research output. Many researchers cannot talk to the press—finding sources in China for this story was challenging. One Chinese plant scientist, who asked to remain anonymous, said that she had to seek permission a year in advance to attend overseas conferences. “It’s contradictory—on the one hand, they set restrictions so that scientists don’t have freedoms like being able to go abroad to communicate with their colleagues. But on the other hand, they don’t want China to fall behind.”

This is a central paradox of nationalism. Do you want to be strong? Or isolated from globalization?

4. But cHiNa iS the rEaL tHReaT:

Oh, and Russian TV news people are now claiming that Russia is the rightful owner of Alaska.

5. A good essay on the parallels between the pre-WWI period and today’s US/China tensions.

6. A new estimate says China’s population decline will be even worse than feared, with Pakistan likely to overtake China in less than 100 years (by extrapolation.)

7. On a more optimistic note, China is moving from being a copycat to becoming major innovator in technology:

Western R&D centres in China have been re-engineered, from places to learn about the domestic market into hotbeds of innovation whose fruits can be found in products sold everywhere.

Foreign chief executives now believe that China’s brainpower and its innovation-curious regulatory regime are crucial ingredients of their companies’ global success. Nowhere else in the world can newfangled technologies, from novel drugs to flying taxis, be tested as quickly as in China, marvels a foreign diplomat. So even as the Chinese economy slows—it grew by a surprisingly tepid 4.7% in the second quarter, year on year—and multinational businesses try to reduce their reliance on Chinese supply chains amid mounting geopolitical tension, global CEOs are desperate to protect this critical third function of their Chinese operations.

Unfortunately, every silver lining has its clouds:

Western companies would understandably hate to be shut out of this r&d paradise. Some are nonetheless bracing for such an eventuality. In June America’s Treasury department issued draft rules that would ban American firms from investing in ai, semiconductors, microelectronics and quantum computing in China. These could come into force later this year. . . .

At the same time, Mr Xi’s paranoid security apparatus is making it harder to move some intellectual property (ip) generated in China outside its borders, ignoring economically minded officials’ concomitant efforts to attract foreign investment. Exports of some ais, such as speech- and text-recognition software or even TikTok’s recommendation algorithm, now need permission from the commerce ministry. So far this has not stopped most ip from leaving the country. But this may change at any moment, says Alex Roberts of Linklaters, a law firm. “We are at a tipping point.”

8. On a lighter note, Tim Walz and I have one thing in common. We both spent our honeymoons in China, and in both cases during the first part of June, 1994.

What should the Fed do?

NGDP level targeting

But what should the Fed do right now?

NGDP level targeting

OK, but they won’t. So what should the Fed do to interest rates right now?

Set the target rate consistent with 4% NGDP growth

But what is the target rate consistent with 4% NGDP growth?

How should I know? They are the geniuses that think interest rate targeting is a sensible policy tool. Not me. Let them figure out how to use this supposedly effective policy tool.

Consider the following two possible scenarios:

1. The Fed sets the perfect fed funds target, like an Olympic gymnast nailing a landing. But it does poorly on forward guidance.

2. The Fed botches its interest rate setting, but issues sensible forward guidance.

I’d take the second scenario in a heartbeat.

PS. Two things to keep in mind:

1. The market is never wrong.

2. The market is always wrong.

If you can grok the sense in which both of these are true, you will be able to achieve a deeper perspective when thinking about the economy. I.e., the market is always the optimal forecast, but things never turn out exactly as forecast.

PPS. Here are two more:

1. What matters is changes in asset prices.

2. What matters is levels of asset prices.

The change matters for how we should change our view of the situation. Levels matter for how we should form our view of the situation.

PPPS. Part of today’s selloff may be an investor reaction to the BOJ moving back to its pre-2013 deflationary monetary policy, for reasons I’ll never understand.

I don’t follow Democratic politics closely, but those who do suggest that Michigan Governor Gretchen Whitmer would have been a strong possibility to be the nominee if there were an open primary. She’s a popular governor in a part of the country that will determine the election.

[Conditional forecast: If Harris wins Wisconsin, Michigan and Pennsylvania, she wins the election. If Trump wins even one of those 3 states (as I expect), Trump wins the election.]

But after Harris was picked. Whitmer completely dropped off the list as a possible VP candidate. Why is that?

I was recently chatting with someone about Harris’s upcoming VP pick. In my conversation, I specifically suggested “the Michigan Governor” would be the obvious choice, without mentioning her gender. When I said this ideal candidate wasn’t being considered, the person responded “What’s wrong with him?” I said, “That’s exactly the problem, the presumption that the pick will be a him.”

Here’s Wikipedia:

The Second Sex (French: Le Deuxième Sexe) is a 1949 book by the French existentialist philosopher Simone de Beauvoir, in which the author discusses the treatment of women in the present society as well as throughout all of history. Beauvoir researched and wrote the book in about 14 months between 1946 and 1949. . . .

Beauvoir asks, “What is woman?” She argues that man is considered the default, while woman is considered the “Other”: “Thus, humanity is male, and man defines woman not herself, but as relative to him.”

A lot has changed since 1949. Today, affirmative action programs favor women and minorities for certain positions. Harris herself was chosen by Biden partly because she was a woman. At the same time, I suspect that Beauvoir was on to something. A man is viewed as a human being, whereas a woman is viewed as a non-male human being. I don’t recall people being surprised that Trump picked another male to serve as his VP. People objected to Vance, but not because a presidential ticket was unbalanced if both candidates were male. There’s little doubt that Harris is not considering Whitmer precisely because she fears the electorate would view a ticket with two women as being “weird”. But why?

PS. Lots of people think in moralistic terms, and as a result their their thinking on issues of race and gender lacks nuance. For example, it can be true that blacks are favored over whites for some jobs, and also be true that whites are favored over blacks for some jobs.

It can even be true that some blacks are discriminated against because of the way that civil rights laws have been interpreted by the courts, which has led some employers to fear that they’d be unable to fire a poorly performing black employee. So they refrain from hiring people with black sounding names. You rarely hear of this problem, because it doesn’t fit well with either left or right wing moralizing. Among both the left and the right, our intuition about what’s fair doesn’t always conform to the way that the world actually works.

PPS. Studies of bias for or against female candidates have been in the news. These studies have zero bearing on the question of bias toward female candidates running for president.

PPPS. As Trump has demonstrated, a man can be nasty and rude and still be an effective candidate. A woman must come across as more appealing. Whitmer looks like the sort of woman that men would vote for:

I just saw Richard Clarida on CNBC, saying something to the effect that “The bond market is doing the Fed’s job for it”.

No, no, a thousand times no!!! Interest rates are not monetary policy. Interest rates plunged in 2008, but the bond market wasn’t doing the Fed’s job for it. Interest rates plunged in 1929-32. Interest rates are not monetary policy.

Cameron Blank direct me to this Jason Furman tweet:

To be clear, I do not have any problem with Furman’s general view on the current stance of monetary policy, or on the Fed’s decision yesterday. We have similar views. But the sharp fall in long-term rates does not make money easier, it probably makes it tighter.

Here are some things to consider:

Lower fed funds rates achieved through open market purchases are expansionary. M increases.

Lower IOR for any given monetary base is expansionary. V increases.

Lower bond yields for any given IOR and monetary base level is probably contractionary (depending on forward guidance.) Base velocity decreases.

Think of it this way. If you lower the yield on bonds, you probably reduce velocity. If the money supply is unchanged, NGDP tends to fall.

To a very great extent, monetary policy is (hopefully) skillfully adjusting the fed funds target in response to changes in the (unobservable) natural interest rate. A sharp fall in bond yields on a day when the fed funds rate is not adjusted is often a sign that the natural interest rate has fallen, making money effectively tighter. A sign that you are “behind the curve”.

Lower interest rates are not “good for the economy”; that’s reasoning from a price change. It depends on why interest rates are changing.

If I’m wrong, then what would you expect if bond yields fall another 50 basis points tomorrow? Would that be bullish news?