Guest Contribution: “The G20 agenda in the pandemic’s year 2”

Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy  School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version appeared at Project Syndicate.


Rome will host the 2021 Summit of the G20 Heads of Government in October. Officials of member countries, including The finance ministers and central bank governors, are preparing for it.

The G20 meeting will come at a time of great uncertainty as concerns the health and economic effects of the pandemic in Year 2.  Although the mechanisms of international cooperation have been badly bruised by events of recent years, they are more important than ever, in light of the interconnectedness across nations that the pandemic so vividly demonstrates.

Of what, specifically, should international cooperation in such bodies as the G20 consist?  To begin with, by “cooperation,” I am not in this case referring to coordinated setting of national monetary or fiscal policies.  For the most part, countries can, on their own, move those levers in the directions that are right for them.

Areas on which the G20 should focus include three: financial stability, trade, and vaccination.  This is in addition to other important areas, especially the  existential issue of global climate change, which should and will receive a lot of attention.

  1. International financial stability

Many countries in 2020 responded to the health crisis and economic recession with government spending.  Of course, Emerging Market and Developing Economies (EMDEs) are not able to finance deficits as easily as the United States (with the “exorbitant privilege” enjoyed by its dollar) or even Europe. But the need was acute, and it is fortunate that many EMDEs were able to increase spending at all, without having to pay sky-high interest rates. The Fed and other major central banks made it possible, by aggressive monetary stimulus.  Indeed, initial declines in EMDE currencies, securities prices, and commodity prices in March 2020 were only reversed after the Fed easing.

But now, in 2021, everyone has higher ratios of public debt to GDP. Also, though major EMs have continued to bring down the share of government debt that is denominated in foreign currency, too much EM corporate debt is dollar-denominated, resulting in precarious currency mismatch. At some point in the future, the Fed will signal an end to monetary ease and a coming rise in interest rates.  At that point, investors will lose enthusiasm and pull out of risky assets in general. EMDE debtors will be vulnerable to financial crises akin to those that struck in the 1980s and 90s, or akin, on a lesser scale, to the taper tantrum of 2013.

The financial situation must be judged particularly fragile if one thinks there is a bubble component to today’s high prices for risky assets. Some say that soaring markets are based on economic fundamentals, for example, that price/earnings ratios in the US stock market are so high because of the prospects from digitalization and other productivity-enhancing technological innovation.  Personally, I see a lot of frivolous financial innovation that does not enhance productivity.  Four examples: 6,000 crypto-currencies, meme stocks, SPACs, and Non-Fungible Tokens.

The G20 can help lead the way to reduce the likelihood and severity of any coming EM debt crisis.  The Debt Service Suspension Initiative was a good first step.  But it was only a postponement of payments to one class of international creditors, governments.  It is widely recognized that provisions for possible debt restructuring need to be extended to the cases of international creditors who are private financial institutions (and also to Chinese public lenders that claim to be private).  Separately, the new allocation of SDRs (Special Drawing Rights), agreed by the members of the IMF in August, is a positive measure.

 

  1. Convergence and Trade

At the beginning of the pandemic, it appeared that the impact was more severe in most advanced countries than in most EMDEs, with the exception of South America.  But advanced economies have begun an unusually strong economic recovery, spurred by macroeconomic stimulus plus the vaccines.  Meanwhile, the “other half” is falling behind.  Indeed, the IMF in its most recent update to the World Economic Outlook, while marking up the forecasts to the US and other advanced economies, marked down the growth rates for EMDEs by an equal amount. Millions of people in developing countries have been thrown back into extreme poverty.  (The World Bank estimates 150 million in 2020.)

This economic divergence is all the more striking because it was preceded by a period of economic convergence: the EMDEs had been growing substantially faster than the advanced economies, at least from the turn of the century up until 2014 (when China started to slow and dollar prices for commodities fell).  Among many other explanations for the catch-up period is that global trade increased roughly twice as fast as GDP during the decades preceding the Global Financial Crisis.  Since 2009, however, the ratio of trade to GDP has lost its upward trend, even before Trump’s tariffs and the pandemic.

Unfashionable as it is to say it, the situation calls for some good old-fashioned trade liberalization. For example, the US and China should roll back trade barriers, which they have raised over the last four years.  A particular sector ripe for liberalization is trade in environmentally beneficial products, such as equipment used to produce wind and solar power.  G20 members should work with the WTO to agree on international rules guiding Carbon Border Adjustment Taxes, to be sure they can be used, but not abused.

The G20 should also work with the OECD to see to completion the exciting recent progress toward a global framework for corporate taxation.

  1. Vaccination

Most importantly, the US and other rich countries should allocate a bit more of their multi-trillion spending to making vaccines more extensively available to low and middle-income countries.  It is ridiculous for us to chase after the remaining vaccine skeptics at home, trying to coax them into accepting the benefits of this scientific miracle, without at the same time doing more to bring the benefits to those countries where very few have yet had the opportunity to get vaccinated.  Ruchir Agarwal and Gita Gopinath of the IMF have proposed a plan of action to get more vaccines produced and distributed.

Even someone allergic to altruism should favor programs for vaccination in other parts of the world.  So long as this coronavirus runs wild anywhere, it is a danger to everyone everywhere.  Such is the nature of international interdependence.

 


This post written by Jeffrey Frankel.

90 thoughts on “Guest Contribution: “The G20 agenda in the pandemic’s year 2”

    1. Gregory Bott

      Nothing personally, but both look like political animal’s. Nothing said, is nothing more than I have heard from Democratic voters. They needed to say nothing. Carlson the Afghan war supporter especially. Yet, you make this post.

  1. JohnH

    Interesting that rising inequality did’t make the list, and tax avoidance barely made the list with a spare, single sentence

    1. pgl

      Now you are stalking Jeff Frankel the way you stalk Paul Krugman. Sorry dude – but they can choose what to write in a single post not you. And if you think the G20 has never discussed multinational tax evasion – then you the dumbest person EVER. Google Base Erosion and Profit Shifting and you will see a massive amount of discussion of this issue.

      Come on – have you not embarrassed your mom enough. Please stop writing stupid comments.

      1. JohnH

        Pgl seems to think that the G-20 should NOT be discussing inequality and tax avoidance.

        The least Frankel could do is to point out that the world’s political leaders are avoiding two of the biggest issues of our time. Why give them a free pass?

        1. pgl

          “Pgl seems to think that the G-20 should NOT be discussing inequality and tax avoidance.”

          Lord – the dumbest lie ever. I just said the G20 has spent years talking about Base Erosion and Profit Shifting, which is a good thing. Now if you too lazy to understand what that is – not my fault. You really are a pathetically dumb troll. But please stop embarrassing your mother with this garbage.

        2. Barkley Rosser

          JohnH,

          The entire second topic is about income distribution, but it is gong under the label “convergence.”

          What probably has you confused is that they are addressing it at the national level, are poorer nations catching up to richer ones, converging on them. Indeed, a lot of that is happening, see China and also India. It is a fact that at this national level recent trends have been towards less inequality, mostly because of the rise of China in particular.

          There is rising inequality within many nations, but that is something that the G20 generallyi views as beyond its purview, something for nations to deal with on their own. The G20 is focused on these relations between nations.

          1. pgl

            One would think JohnH would have gotten your point had he read and understood this:

            “the “other half” is falling behind. Indeed, the IMF in its most recent update to the World Economic Outlook, while marking up the forecasts to the US and other advanced economies, marked down the growth rates for EMDEs by an equal amount. Millions of people in developing countries have been thrown back into extreme poverty. (The World Bank estimates 150 million in 2020.)”

            But of course this was in plain English, which of course went over JohnH’s head.

          2. Barkley Rosser

            pgl,

            There is a split. Some nations are catching up, again with China the poster boy, with lots of people in them. Their ongoing growth is reducing global inequality according to some measures. But there are others, the poorest nations, almost none of which are in the G20, with the arguable exception of India, which is growing, but there are many of the poorest nations that have gotten into worse shape during this pandemic period.

          3. JohnH

            It’s really, really nice that the G20 and Frankel care so deeply about jobs outside the United States. For Trump supporters, it’s like waving a red flag in front of a bull. And then Frankel proposes that the third world export more solar and wind power, which do generate jobs…for a short time while the farms are being constructed, but not many on an ongoing basis. And then the exporters experience Dutch disease, crowding out other activities that do generate jobs, while while wealthy elites corner the gains. Brilliant! Just brilliant!

            It’s the same Western nonsense as the propaganda that says the US cares deeply about Afghan women, and then proceeds to drone funeral processions and wedding parties. The truth is that war hits women particularly hard, and they’re better off without it. And people of third world countries are probably no better off with a massive energy export sector.

          4. Barkley Rosser

            JohnH,

            Wow, this is a singularly out-of-it comment by you.

            So somehow you do not think the G20 should be discussing jobs or poverty or anything that is outside of the US and that does not specifically involve US workers. Really? This is an international body concerned with global issues. The poverty they are most concerned about is indeed that in other nations that are much poorer than is the US, whose workers are much poorer than the US’s workers. The G20 is supposed to only discuss issues that directly affect US workers and nothing else? Just how out of your mind are you, JohnH? Or maybe you think the US should simply withdraw from the G20? Even Trump did not do that, although he liked to withdraw from international agreements.

            Your comments about Frenkel’s trade proposal for poorer nations also makes no sense. He is proposing that they sell equipment that can be used to produce solar and wind power, not that they sell those themselves. Why would such activities be one shot deals that would be over immediately? And what on earth do farms have to do with this, these farms you claim would be “constructed” for this. Is equipment for solar and wind power produced on farms? First I have heard of it.

            This is singularly incoherent, JohnH. Did you even read this post before you began making knee jerk remarks that make you look like an utter moron?

    2. macroduck

      Johnny, you remember when you crashed and burned by pretending to know that the U.S. doesn’t pulish median income data? You danced and danced and danced, trying to dance your way out of being absolutely, completely wrong about everything?

      Well, as Ronald Reagan like to say, “there you go again.” (I assume from your behavior that you have a soft spot for RR.) Does the G20 have anything to say about income inequality? Yes. You’ve simply missed it because you are more interested in spouting than learning.

      Do you know why the G20 addresses income inequality? Because inequality is now officially and completely a thing. The G20 doesn’t exist to take action, and so it cannot take action against inequality. The G20, like the G7 and all the other Gs, exists to allow leaders to meet face-to-face, exchange views and look for opportunities to cooperate. The paper they churn out is to deal with the mostly unwelcomed attention of the press. G20 leaders have to say something and the papers they churn out are something.

      So of course the G20 addresses income inequality, because it’s a thing. Jumping to the conclusion that they don’t when they do reveals both that you (reliably) jump to conclusions and that you have no idea what the G20 is all about. If you did understand, you’d have said to yourself “I wonder where the inequality stuff is?” and you’d have looked for it instead of jumping to the conclusion that it wasn’t there.

      Now, do we have to watch you dance and dance and dance again?

      1. macroduck

        Here is what I gleaned from just one G20 Communique regarding various initiatives addressing income inequality:

        G20 July Communique:

        “After many years of discussions and building on the progress made last year, we have achieved a historic agreement on a more stable and fairer international tax architecture.”

        Upshot of the tax proposal? A minimum corporate tax to reduce tax avoidance — aiming at a flatter after-tax income distribution.

        “We welcome the progress achieved under the Debt Service Suspension Initiative (DSSI). As of July 2, 45 countries have requested to benefit from the first extension of the DSSI (to June 2021), amounting to an estimated USD 4.6 billion of debt service deferred in the first half of 2021.”

        Do I need to explain this?

        “We welcome the progress made by the Global Partnership for Financial Inclusion in advancing the 2020 Financial Inclusion Action Plan and look forward to the high-level symposium on coping with new and existing vulnerabilities in a post-pandemic world and to the menu of policy options for enhancing digital financial inclusion for individuals and micro, small and medium-sized enterprises, both to be delivered in October.”

        Or this?

        Of course, these don’t amount to a first condemnation of income inequality. Is flaming rhetoric what you expected from a G20 statement? Rather these bits of text represent coordinated efforts toward actual remedies for actual causes of income in quality. Boring, right? If one were to look at other communiques, one would find other examples.

        Please, please don’t tell us the G20 must learn to communicate more clearly with regular folks. You didn’t bother to read what was there. It does no good to write a text at your reading level I you aren’t going to read it.

    1. Barkley Rosser

      johnny,

      Oh really? He was planning to leave without even a shred of preparation for getting anybody out. Biden announced the exit back in April and told Americans then to get out, and various people had been getting taken out gradually since mid-July. If you think Trump’s withdrawal would not have been followed swiftly by the collapse of the afghan government and military, you are deluded. So, bottom line: if Trump had done it it would have been a whole lot worse.

      1. pgl

        “He was planning to leave without even a shred of preparation for getting anybody out.”

        Well what should one expect when a racist like Stephen Miller was in charge? Trump today went Tucker Carlson on us and criticize Biden for letting brown Muslims move into our lilly white neighborhoods. Trump even called our Afghan allies terrorists.

      2. paddy kivlin

        woulda, coulda, shoulda does nothing but ‘pass the buck’…..

        what trump may have done is irrelevant since 20 jan 2021.

        the miscue was the idea that it would take the ana 90 days to collapse.

        whoooda dunk that taliban never left kabul!

        that assumption allowed closing balad?

        that presumption created complacency in getting citizens out and a disregard for “allies”.

        c-17 can carry tanks in…..

    2. pgl

      Seriously? Trump was the one who drove that Doha Agreement. Of course Trump would have just left our Afghan allies there to die as hates brown Muslims too.

    3. CoRev

      Johnny, please, please don’t bring up the latest and perhaps greatest failure of this administration. Haven’t you noticed how hard they have been trying to ignore the earlier elephant sized problems.

    4. 2slugbaits

      Johnny Are you an expert on the retrograde of personnel and materiel? Do you have any relevant experience in that area?

      1. paddy kivlin

        the neocon branch of the adults running the country since trump left must have no one from before 1991.

        i recall neo, and am long retired from any planning role.

        1. Barkley Rosser

          paddy,

          You think that the Biden crowd are neocons? Real neocons think we should never have left Afghanistan, that we should have doubled down and Biden should have sent in a new surge of troops to stay there forever, more or less.

          In this regard neither Biden nor Trump are/were neocons. Both have sought to have the US leave Afghanistan, and that is what Biden is doing, messy as it is turning out to be to do so.

        2. 2slugbaits

          paddy kivlin Today’s mess in Afghanistan is the near inevitable result of the Bush/Cheney Administration’s decision to allow A-Q and the Taliban to escape from Tora Bora rather than finishing them off when A-Q and the Taliban were trapped. The Administration made that decision because they were concerned that ending things in Afghanistan too early would frustrate their efforts to connect Saddam Hussein with Osama bin Laden. The decision to go to war against Saddam was finalized the last week of September 2001 and killing A-Q and the Taliban in December 2001 would have hurt their case for war against Saddam. The Administration always thought they could conduct a mopping up operation against A-Q at their leisure and after the war against Saddam. They were mistaken.

          As to retrograde planning, the 1991 withdrawal from Kuwait was the textbook case of how not to do retrograde of personnel and materiel. Dumping tens of thousands of CONEX containers in a 4 mile ditch in the sand is not a responsible plan. Hosing down materiel with salt water in order to pass Dept of Agriculture requirements was not a responsible plan. The 1991 evacuation was a clusterf*** if ever there was one.

    5. macroduck

      Johnny,

      You’re probably right. Trump wouldn’t have let an evacuation happen.

      After all, he declared a pull-out that would occur after the election, making it somebody else’s problem. Even if he’d been re-elected, it would have been somebody else’s problem. Trump, at the suggestion of Steven Miller, hollowed out the visa program for those who assist the U.S. overseas, making it far harder to arrange orderly immigration for them. Those two actions make clear that the airport spectacle would not have happened under Trump. He’d have said “screw ’em” and avoided the bad optics of humanitarian effort.

  2. 2slugbaits

    It is ridiculous for us to chase after the remaining vaccine skeptics at home, trying to coax them into accepting the benefits of this scientific miracle,

    100 percent agree. I’ll go even further. At this point there is no excuse for anyone over age 18 who isn’t vaccinated. If you’re an unvaccinated adult and come down with COVID, hospitals should simply refuse to admit you. Maybe stuff you in a tent at the other end of the parking lot. Being in the parking lot will make it easier for the hearse. It’s ethically indefensible for people who incur non-COVID emergencies (e.g., heart attacks, strokes, gunshot trauma, car accidents, etc.) to be left to die in the emergency waiting room because some idiotic MAGA hatter was too stupid to get a vaccine and is now occupying an ICU bed. Shoot the wounded and move on.

    1. Moses Herzog

      @ 2slugbaits
      While I’m mildly shocked to see you write these comments, it gives me a large sense of mental comfort and feeling better about myself. Because, I view you as the man who is very moderate in his comments and tolerant. These are closer to my own type things I might type here (that’s probably kinda frightening to you, and IF it is frightening reading I closely agree with you, I “get it”). I view you, it kills me to say, probably more intelligent than me that’s not something I easily admit to anyone, and certainly levels above me in book smarts or institutional education type smarts (and “book smarts” is not meant in any derogatory sense, quite the opposite). I mean, I really find myself largely agree with you on this and wanting to applaud you, yet semi-shocked your thoughts here near mirror my own. I just, I just don’t understand….. “them”…..

      1. 2slugbaits

        Well, I think people have to accept a certain amount of personal responsibility. Isn’t that what Republicans always preach? Taking responsibility means accepting the consequences of your actions…or in this case inactions. As I said, I view it as ethically reprehensible for someone who has deliberately chosen not to get vaccinated to take up an ICU bed and ICU medical staff attention at the expense of those who have acted responsibly. And I apply this same reasoning to my own family. One of my four sisters is a total anti-vaxer. She also believes in the ivermectin nonsense. And you’ll be surprised to know that she has three graduate degrees from some pretty respectable universities. But she’s very gullible and is a total MAGA hatter who is convinced she’ll be saved from COVID by being raptured. I’m serious. But even though she’s my sister, I don’t think hospitals should admit her if she does come down with COVID.

    2. Moses Herzog

      @ 2slugbaits
      You may have missed me put this up in another recent thread:
      https://www.yahoo.com/news/unvaccinated-pregnant-nurse-unborn-baby-151737417.html

      She’s a NURSE with a tiny little human being she is responsible for. A health care worker…….. I mean, I just, I just don’t get it, and if I think about it long enough, it’s hard to find the right words—-is there a word to describe an emotion right at the middle point between extremely annoyed and exasperated at how dumb people can be?? How did she think the vaccine would affect the baby worse than the full on virus?? HOW?!?!?!?!?!

    3. paddy kivlin

      2s,

      so many health and life style choices! there is no excuse for a large percent of cardiac burdens on icu and deaths.

      are you aware that age and co-morbidity affect covid outcomes among humans?

      are you aware of the consumer risk and producer risk specs for the efficacy tests that approved these miracles? do you think consumer risk acceptable to a heathy 18 year old, why?

      my favorite question: do you think casualty propagation in humans is same as integrated circuits? that is a million people for half a year is half a million years of casualty history?

      i do not think a healthy 18 yo is wrong to predict the vaccine more dangerous than the virus…..

      of course, a few decisions about the future go wrong………

      1. pgl

        “i do not think a healthy 18 yo is wrong to predict the vaccine more dangerous than the virus”

        This is akin to the idea that playing Russian roulette increases one’s life expectancy.

      2. 2slugbaits

        paddy kivlin There’s a big difference between cardiac arrests due to “life style choices” and ending up in the ICU because someone refused to get a vaccine. As a practical matter there is no way to disentangle the relative contributions between “life style” and genetics. That’s not the case with vaccines; that’s a decision that is entirely a matter of personal responsibility.

        are you aware of the consumer risk and producer risk specs for the efficacy tests that approved these miracles?

        Yes. Are you? Doesn’t sound like it.

        i do not think a healthy 18 yo is wrong to predict the vaccine more dangerous than the virus…..

        Guess again. In my state 10 percent of hospitalizations are in the 18-29 y/o group. In any event, my comment wasn’t about the right of idiotic teenagers refusing to get a vaccine. My comment was about the obligation of hospitals to treat those idiots at the expense of responsible people who do get vaccinated. If you won’t get a vaccine, then don’t come crying to the ER when you do get sick.

      3. macroduck

        paddy,

        You’ve gone with that blatantly self-aggrandizing choice of standards we see so often from the “science ain’t so great” crowd — your personal view.

        “i do not think a healthy 18 yo is wrong to predict the vaccine more dangerous than the virus…..” is not worth writing down. What you think is simply not important to the discussion. What you think could be based on spending too much time in low-information activities like faux news viewing or reading old Trump tests. Or on an early bump on the head. Or reading editorials.

        I you have a point to make, then make it. Preferably in complete sentences. What you think ain’t worth the electrons it’s written on.

  3. joseph

    Johnny: “Kabul : Donald Trump wouldn’t let this happen.”

    March 8, 2017: A Kabul hospital was attacked during which 49 people were killed and 63 injured.
    May 31, 2017: A truck bomb in Kabul killed 150 and injured 413.
    June 3, 2017: Explosions killed 20 people at a funeral and protest march decrying the lack of security in Kabul.
    July 24, 2017: Suicide bombing in Kabul killed 35 people.
    December 28, 2017: Suicide bombing at a cultural center in Kabul killed 50 and injured 80.
    January 20, 2018: Gunmen attack on Inter-Continental Hotel in Kabul killed 40 and injured 14.
    January 27, 2018: A suicide driver in Sidarat Square in Kabul killed 103 and injured 235.
    March 21, 2018: Suicide bombing in Kabul killed 33 and wounded 65.
    April 22, 2018: Suicide bombing in Kabul killed 69 and wounded dozens.
    April 30, 2018: Suicide bombers in Kabul killed 28 and injured 50.
    August 15, 2018: Suicide bombing at school in kabul killed 48 and injured 67.
    September 5, 2018: Suicide bomb in Kabul killed 26 and injured 91.
    November 20. 2018: Suicide bomb in Kabul killed 55 and injured 94.
    December 24, 2018: Suicide attack in Kabul killed 43 and injured 10.
    July 1, 2019: Gunmen and a bomb in Kabul killed 45 and injured 116.
    July 28, 2019: Bombing in Kabul killed 20 and injured 50.
    August 17, 2019: Suicide bombing in Kabul killed 92 and injured 140.
    September 17, 2019: Suicide bombings in Kabul killed 48 and injured 80.
    March 6, 2020: Sniper gunmen in building killed 32 and injured 81.
    March 25, 2020: Bombers and gunmen in Kabul killed 25 and wounded many others.
    May 12, 2020: Gunmen attacked a Kabul maternity ward and killed 24 and injured 16 including Doctors Without Borders personnel.
    October 24, 2020: Suicide bombing at school killed 24 students.
    November 2, 2020: Gunmen at Kabul University killed 32 and injured 50.

    These are only a sample of the violence in Kabul during the Trump administration. There were at least 50 other terrorist attacks in Kabul. There were 64 U.S. soldiers killed.

    Have you heard of these? Americans haven’t given a damn about deaths in Afghanistan for a very long time — until this month when the news obsesses on it 24/7 for some reason.

    Here is a post showing the amount of time the three network news shows devoted to Afghanistan during the carnage of the last 4 years — about 5 minutes a week. Except for all of 2020 when they averaged 1.9 seconds a week. But suddenly now they just can’t get enough of it.
    https://jabberwocking.com/chart-of-the-day-broadcast-news-coverage-of-afghanistan/

    1. macroduck

      Wow! I enjoy tossing the occasional fact at these goons, but you really went to town. Not that the goons care about facts.

      1. Moses Herzog

        There’s some government web page that tabulates these numbers, I forgot, military related. But the dates and context by Joseph here at more insight. Somehow I doubt our joseph made a single error on that one.

        1. Moses Herzog

          *add more insight.

          Kinda tired tonight. Too hot the last 3 or so days and Not enough Monster drink.

    2. pgl

      And what was the response from the Trump Administration – not a damn thing. Trump was the Coward in Chief.

  4. Moses Herzog

    Well, according to our two resident national security experts, Barker “I need attention” Rosser, and “Andrew Cuomo loves nursing home residents and females” pgl This is all Pompeo’s fault. and Taliban has now become America’s only hope to save us all from ISIS. Honorable mention to pgl’s and Barker Junior’s National Security Deputies “baffling” and “Dr. Dysmalist” for showing us all the light to salvation:
    pgl —->> http://econbrowser.com/archives/2021/08/messages-from-the-bond-market#comment-258280

    pgl —–>> http://econbrowser.com/archives/2021/08/messages-from-the-bond-market#comment-258284

    Barker Rosser Junior ——->> http://econbrowser.com/archives/2021/08/messages-from-the-bond-market#comment-258332

    Dr. Dismalyst ——>> http://econbrowser.com/archives/2021/08/messages-from-the-bond-market#comment-258278

    baffling —–>> http://econbrowser.com/archives/2021/08/messages-from-the-bond-market#comment-258271

    Everything is going according to plan. Now that Taliban has saved US soldiers from ISIS, and Pompeo is now (apparently???~~~who else here, other than pgl, knew the secret that Pompeo is Biden’s Head of National Security??? Biden’s Head of National Security, the Barker of Harrisonburg and the Georgia raised “New Yorker”, have now save us all from certain doom, and the haze of battle confusion:
    https://www.theguardian.com/world/live/2021/aug/26/afghanistan-live-news-updates-evacuation-refugees-taliban-kabul-airport-latest

    Hopefully all of these foreign policy experts can enlighten us all again in the very near future. God bless the senile.

    1. Barkley Rosser

      Moses,

      This is an unbelievably stupid post by you (and you have just been praising 2 slugbaits for being one of the very few people you admit might be smarter than you here). Did you not pay attention to what happened today? ISIS-K of Afghanistan just had two suicide bombers kill 12 US soldiers, as well as injuring a bunch of others and a bunch of Afghans. It is now fully open that the US military and the Taliban are actively cooperating against this nasty group.

      So you are ridiculing me for posting yesterday here something from David Ignatius (whom I know you dislike, although he is a lot more well informed than you are and than most other people as well, including a lot of others better informed than you are) explaining all this, which I agreed with. It turns out that he and I are right, but somehow you think this is worthy of ridicule. And you are spouting claims here that somehow you are even remotely smart?

      1. 2slugbaits

        Barkley Rosser the US military and the Taliban

        My only gripe with your comment is that you modified “the Taliban” using the definite article. It would be more accurate to think of “the Taliban” as a placeholder term for a collection of fragile alliances among dozens of rival tribal leaders. I suspect that the most likely outcome of the debacle in Afghanistan will be continuing civil war fueled by various regional powers (Iran, Russia and China) supporting various proxy warlords. Our best case result would probably be the emergence of a strong Taliban that’s able to form a viable government ASAP.

        1. Barkley Rosser

          Well, brilliant 2 slug, everybody else refers to them as “the Taliban.” Just going along. That an entity has divisions does not mean that it is not still an an entity that can have “the” before its title.

          It is my understanding that there are three factions in the Taliban. I do not know what defines each of these factions: tribes? ethnic groups? differences in theology? alliances with different outsiders? Obviously these factions could fall to fighting each other, leading to a disintegration of THE Taliban, which might than become Taliban A, Taliban B, etc.

          It certainly looks like they are going to be in a full-blown war with ISIS-K, not to mention the holdouts supporting the previous government in the Panjshir Valley. I am not making any predictions on how any of those conflicts will turn out. It may be that the US or Europeans will support the Panjshir guys, but I doubt any major outside power will support ISIS-K. Maybe outsiders will side with different factions of the Taliban, but then again, maybe not. War is likely in Afghanistan, but then, what else is new?

        2. pgl

          My only complaint with Barkley’s comment is it was 13 Americans who were killed along with 95 Afghans. A truly horrific day but I guess that will not stop the partisan sniping that has become more important than the people trying to do the right thing.

        3. Moses Herzog

          @ 2slugbaits
          There’ll be ZERO similarities here to Libya/Iraq at all. /sarc

          National security expert pgL has assured us that with Biden’s secret/stealth National Security Chief Mike Pompeo running the Afghani theater somewhere in a White House secret tunnel, with Jill Biden bringing Pompeo occasional refreshments on a silver tray, there will be no violent tribal activity or factions. pgl has passed on to me through clandestine notes that Pompeo has assured the Biden inner circle that the Taliban will be one happy family, and as yesterday showed can very easily manage ISIS. If we’re lucky National Security expert pgl will invite Hillary and together they will hold a special press conference where they can declare near the Kabul Airport “ISIS and more extreme factions of Taliban are now dead!!!” and we can get that special cackle from Hillary that she gave us after she unleashed complete chaos and human sex trafficking on the women and young boys of Libya,
          https://www.realclearpolitics.com/video/2015/06/19/flashback_2011_hillary_clinton_laughs_about_killing_moammar_gaddafi_we_came_we_saw_he_died.html

          pgl, Barker Junior, and Stealth Biden NSC Chief Pompeo will lead us all to peaceful times ahead. Anybody have a handy 45 vinyl record of Kumbaya handy?? We can play it every time the Taliban “saves” USA soldiers and Afghani citizens from ISIS and more extreme Taliban factions. Or should we have Hillary’s Qaddafi cackle on loop every time the Taliban saves Afghani citizens?? I tell you what, I’ll use that here on the blog every time I feel we’ve had one of those “special moments” of “Taliban heroism” of Afghani citizens against ISIS and other violent factions. It’ll be “fun”.

          1. Barkley Rosser

            Oh gag, Moses, what worthless drivel. Pres. Biden himself in his presser after the ISIS-K attack noted we can work with Taliban against common enemy ISIS-K as it is in both of our interests without being friends or trusting each other on anything else.

            And here you are with even Menzie pointing out how totally incomprehensible and unbelievable you have become in your attacks on Nancy Pelosi. So, under strong criticism for your sick obsession with irrationally attacking older powerful women you now do so against two of the, former First Lady, Hillary Clinton, whom you have previously trashed, and now current FLOTUS Jill Biden. Really? You want to add her to the list of older powerful women you are obsessively and sickly going after? Just how sick and demented are you? Disgusting.

          2. Barkley Rosser

            Given that Moses has added Jill Biden to his list of older powerful women to mock, I have been thinking about it, and I think I have figured out where all this is coming from, and especially his obsession with Pelosi and ice cream that leads him to puke when somebody points out something competent she has done.

            I think the problem is that Moses’s mother made ice cream, and not only did she stick his head in vats of the stuff when he was a naughty boy,, but it was very low quality ice cream . Even so, she tried to sell it, but it was so bad that she had to make the price very low, and even then she could barely sell any. The upshot was that the family was poor and had to subsist on her crummy ice cream.

            This explains his extreme resentment of Nancy Pelosi publicly eating expensive and presumably very good quality ice cream. It reminds him of his unhappy childhood of having been made to eat his mother’s awful ice cream and putting his head into vats of the stuff. Presumably Moses has it in his head that Jill Biden is taking expensive high quality ice cream on those trays she is supposedly taking to Mike Pompeo in that secret tunnel, which, of course, puts her into that same awful category with Nancy Pelosi.

            If only Moses’s mother had made good quality ice cream and not stuck his head into it when he was naughty, which we know he was a lot.

      2. pgl

        “Did you not pay attention to what happened today? ISIS-K of Afghanistan just had two suicide bombers kill 12 US soldiers, as well as injuring a bunch of others and a bunch of Afghans.”

        Joseph noted all the terrorist attacks since 2017 and at least old drunk Uncle Moses admitted he got those facts right. But old drunk Uncle Moses remains angry that anyone would question Sec. of State Jabba the Hut (Pompeo).

        I heard that certain Republicans are now fund raising off of this terrorist attack as if their election will insure this never happens again. Maybe old drunk Uncle Moses can help them run their campaigns.

      1. Moses Herzog

        No worries, I’ve already phoned your home nurse. She told me she’s late today because she had a hard time finding your favorite brand of Georgia-made pork rinds.

        1. pgl

          Never mind I don’t eat pork but I’m sure you eat only the really cheap cuts (which of course could make one very sick but then your mental state would not suffer).

      2. Moses Herzog

        For the record, just that she can keep up with your 8 psych meds still under clinical studies and not get them confused with each other on time and doses tells me she’s doing a hell of a job for you.

        1. pgl

          Of course I have taken any drugs as I do not need them. But I am happy to subsidize your incessant drug habit with my tax dollars.

    2. Dr. Dysmalist

      Moses,

      Your only contributions have been to scream about the initial chaos of the evacuation and put all the blame for this incompetently prosecuted war on Biden just because he’s ending it. Oh, and to disingenuously imply that the chaos was continuing when, in fact, it was not.

      Make no mistake; the chaos has been baked into this cake ever since Trump started negotiating with the Taliban while excluding the Afghan government, and Stephen Miller convinced him to severely cripple the Special Immigrant Visa program for our Afghan allies. Most of the baking was accomplished by the Pentagon’s, and The Blob’s, foot dragging on withdrawal

      The closest you’ve come to suggesting a better way is to parrot the members of The Blob, the same ones who got us into this mess and continually lied to perpetuate it, and who want to keep sending soldiers and Marines in there, i.e., continue the charade until some indeterminate point into the future. You may think that following the advice of those with a documented 20 year history of lying is a good idea, but I think it’s charitably described as naive and misguided. In fact, I think one can plausibly and convincingly argue that following the advice of that discredited crowd is insane.

      If you have a constructive idea of how to extract our people, let’s hear it. Continuing to criticize in the nastiest, most trolling, way possible is destructive, not constructive. You haven’t refuted the substance of anything any of us has written. You haven’t added value to the discussion. Flaming those of us who’ve disagreed with you, especially those who have command of more facts than you do (or at least have employed), is just old-man-yelling-at-clouds BS. You’ve sunk to the level of the Usual Suspects.

      All the evidence strongly suggests that, as screwed up as this has been at times, there did not and does not exist a better way to get our people and allies out.

      1. pgl

        Contribution? Moses does not believe in making contributions or constructive comments. Then again – you and everyone else figured that out a long time ago.

  5. Paul Mathis

    Larry Summers Loses His Mind: Fed Policy Is Like Afghanistan!

    (Bloomberg) Former Treasury Secretary Larry Summers compared the Federal Reserve’s efforts to bolster the economy to the wars in Vietnam and Afghanistan, arguing all three epitomized the dangers of sticking to inept strategies.

    “The American experience in Vietnam and Afghanistan teaches an important lesson. Making policy incrementally — focusing on adjusting the current policy path to avoid near-term pain, rather than stepping back and assessing whether the current state of affairs makes sense — can lead to terrible outcomes.” He claims this was “the central lesson Daniel Ellsberg drew from the Pentagon Papers.” Fortunately, some of us lived through the entire Vietnam fiasco and know better.

    The Fed’s quantitative easing policy has gone on too long, claims Summers, and is “the result of a month-by-month decision-making process. But viewed from the perspective of current economic conditions, it cannot be justified and presents its own danger. This is the crux of the matter. The Fed is running quantitative easing at current levels not because anyone has analyzed that as appropriate given current conditions. Rather, there is a felt need to maintain credibility given previous commitments and a reluctance to accept the immediate pain and dislocation associated with changing course, coupled with faith in the ability to manage the situation down the road.” So the analysts at the Fed are incompetent about what is appropriate given current conditions. Good to know that Larry has figured it all out.

    “This kind of incrementalist thinking did not end well in Vietnam or Afghanistan. Of course, it is also true, as Afghanistan demonstrates, that precipitate change of a problematic course can be very costly.” So which is it Larry? Maybe he hasn’t figured it out.

    Summers argued that the Fed’s refusal to back away from its monthly purchases of Treasury and mortgage bonds was similarly dangerous given the current state of inflation and the economy. Summers argued that the U.S. is “near peak delta,” ( Larry is also an epidemiologist in his spare time) and even if it weren’t, Fed bond purchases would do nothing to prevent the inevitable drop in consumer activity. He also said the Fed was only maintaining its presence in the bond market because it was afraid of the consequences of withdrawing, evoking the U.S. withdrawals from Saigon and Kabul. So here is a difference: nobody is getting killed by QE.

    “The Fed is running quantitative easing at current levels not because anyone has analyzed that as appropriate given current conditions (again, those morons at the Fed should wake up and smell the Starbucks). Rather, there is a felt need to maintain credibility given previous commitments and a reluctance to accept the immediate pain and dislocation associated with changing course, coupled with faith in the ability to manage the situation down the road,” Summers said. Larry loves him some pain, apparently.

    It was exactly 8 years ago that Summers was denied the Fed Chair nomination by five Dem Senators (Joe Manchin again) and he has been bitter ever since. The deal he had made with Obama collapsed and Janet Yellen was nominated. We dodged a huge bullet.

    1. pgl

      I bet had Summers been an economic advisor to FDR in 1937 that he would have recommended even more fiscal restraint. Whatever happened to the wise co-author of those DeLong papers calling for an expected inflation target of 5%?

    2. joseph

      “The QE program is over.”

      Not quite. As you can see below, the Federal Reserve is still expanding its balance sheet, buying an additional $80 billion of bonds a month since March of 2020 and continuing at least through September. There is no announcement yet to stop, let alone unwind.

      https://www.newyorkfed.org/markets/domestic-market-operations/monetary-policy-implementation/treasury-securities/treasury-securities-operational-details
      https://fred.stlouisfed.org/series/WALCL

  6. joseph

    Yes, Larry Summers, certified sociopath. He once was so bold as to say “Why can’t we discuss the possibility that women are genetically inferior to men in the sciences” at a seminar about sexism in the sciences, no less. He has been described by associates working with him that he can be “difficult” which is polite academese for “flaming a**hole.”

    Summers as chair of the National Economic Council is as responsible as anyone for the anemic response of the Obama administration to the Great Recession. He is the one who personally bullied and rudely shot down Christine Romer on the NEC when she dared to point out (as a genetically inferior woman, no doubt) that the ARRA was grossly inadequate. He’s responsible for a decade of grinding slow recovery causing misery for millions.

    Summers’ botched job as NEC chair during the last economic crisis makes him singularly unqualified to criticize those working on this financial crisis. He should be ignored if not actively reviled.

    1. pgl

      “He is the one who personally bullied and rudely shot down Christine Romer on the NEC when she dared to point out (as a genetically inferior woman, no doubt) that the ARRA was grossly inadequate.”

      Exactly. Of course the defenders of that silly Gerald Friedman paper bullied the same Dr. Romer as they had no clue what she was telling President Obama in early 2009.

    2. Dr. Dysmalist

      Yes, everything joseph said.

      I’m going to do a Ron Popeil here and” But wait, there’s more!”

      Quoting Summers, “There is a felt need to maintain credibility … ” I think Summers has done himself a great disservice by not trying to maintain his own credibility, especially over the course of the pandemic, instead of assuming that he has great credibility simply by being Larry Summers. From now on, I’ll adopt the heuristic that anything he says or writes is Bilge Sediment unless he provides conclusive evidence to the contrary.

      Bye, Larry. Don’t let the door hit you in the a$$ on the way out.

  7. Moses Herzog

    Couple of your early lines cracked me up, mainly because they were so dead on accurate. I audibly cackled sitting alone looking at a computer screen which is relatively rare for me. If I wanted to get super nit-picky here, I would say things like QE can be “life and death” in that economic hardships can break-up families, actuate higher suicide rates, make a lifetime burden of debt, etc. But I agree with 98% of what you’ve said here and agree that using war comparisons is largely inappropriate, to the point of being offensive.

    Well done and enjoyed the sardonic humor. Of course I happen to agree with it. And you may have noticed my thoughts on John Cochrane as it relates to inflation during pandemic circumstances..

    1. Moses Herzog

      I thought I clicked the reply button, this just above comment was aimed at Mr. Mathis’s very enjoyable short essay.

  8. ltr

    https://news.cgtn.com/news/2021-08-27/Chinese-mainland-reports-32-new-confirmed-COVID-19-cases-133NG9nnatW/index.html

    August 27, 2021

    Chinese mainland reports 32 new COVID-19 cases

    The Chinese mainland recorded 32 new confirmed COVID-19 cases on Thursday – 2 local transmissions and 30 from overseas, the latest data from the National Health Commission showed on Friday.

    In addition, 22 new asymptomatic cases were recorded, while 463 asymptomatic patients remain under medical observation.

    This brings the number of confirmed COVID-19 cases on the Chinese mainland to 94,765, with the death toll unchanged at 4,636.

    Chinese mainland new locally transmitted cases

    https://news.cgtn.com/news/2021-08-27/Chinese-mainland-reports-32-new-confirmed-COVID-19-cases-133NG9nnatW/img/5bb4aecfc38c4197a5e37e9f049cd1fc/5bb4aecfc38c4197a5e37e9f049cd1fc.jpeg

    Chinese mainland new imported cases

    https://news.cgtn.com/news/2021-08-27/Chinese-mainland-reports-32-new-confirmed-COVID-19-cases-133NG9nnatW/img/ed548bbe423a4afda6a73f4ebd56e488/ed548bbe423a4afda6a73f4ebd56e488.jpeg

    Chinese mainland new asymptomatic cases

    https://news.cgtn.com/news/2021-08-27/Chinese-mainland-reports-32-new-confirmed-COVID-19-cases-133NG9nnatW/img/46ec9dbda1b64272be73d72ef7a6bfc8/46ec9dbda1b64272be73d72ef7a6bfc8.jpeg

  9. ltr

    http://www.news.cn/english/2021-08/27/c_1310152406.htm

    August 27, 2021

    Over 2 bln doses of COVID-19 vaccines administered in China

    BEIJING — More than 2 billion doses of COVID-19 vaccines had been administered in China as of Thursday, data from the National Health Commission showed Friday.

    [ Chinese coronavirus vaccine yearly production capacity is more than 5 billion doses. Along with over 2.003 billion doses of Chinese vaccines administered domestically, another 800 million doses have been distributed internationally. A number of countries are now producing Chinese vaccines from delivered raw materials. ]

  10. ltr

    https://fred.stlouisfed.org/graph/?g=F0zU

    January 30, 2020

    Personal consumption expenditures price index and Personal consumption expenditures less food & energy price index, 2020-2021

    (Percent change)

    https://fred.stlouisfed.org/graph/?g=FLue

    January 30, 2020

    Personal Consumption Expenditures price index less food & energy, PCE services and PCE goods, 2020-2021

    (Percent change)

    https://fred.stlouisfed.org/graph/?g=FLok

    January 30, 2018

    Personal Consumption Expenditures price index less food & energy, PCE services and PCE goods, 2017-2021

    (Percent change)

  11. ltr

    But now, in 2021, everyone has higher ratios of public debt to GDP. Also, though major EMs have continued to bring down the share of government debt that is denominated in foreign currency, too much EM corporate debt is dollar-denominated, resulting in precarious currency mismatch. At some point in the future, the Fed will signal an end to monetary ease and a coming rise in interest rates. At that point, investors will lose enthusiasm and pull out of risky assets in general. EMDE debtors will be vulnerable to financial crises akin to those that struck in the 1980s and 90s, or akin, on a lesser scale, to the taper tantrum of 2013….

    — Jeffrey Frankel

    [ A prime concern. ]

  12. pgl

    Peloton just released its financials for fiscal year ended June 30, 2021 and sales topped $4 billion for the year. So one has to wonder why its high flying stock price has actually declined over the year:
    https://finance.yahoo.com/quote/PTON/

    Of course investigations by the SEC and the DOJ over the safety of its bikes plus the drop in its purchase price from $1900 to $1500 just may have shareholders worried.

  13. Paul Mathis

    Update:

    Fortunately, Jay Powell is ignoring Summers’ advice just as the rest of the world does. Why the WaPo gives him a huge stage to fearmonger about inflation is not clear.

  14. ltr

    Frankel proposes that the third world export more solar and wind power, which do generate jobs…for a short time while the farms are being constructed, but not many on an ongoing basis. And then the exporters experience Dutch disease, crowding out other activities that do generate jobs…

    — JohnH

    [ This is interestingly incorrect in that solar energy component production in China has been transforming agriculture in a significant number of difficult to farm regions. Solar use and production allowing for high productivity farming from fruits and vegetables to fish, with maintenance of solar components having become an industry as such. ]

    1. ltr

      The Chinese economy is dual circulation, domestic consumption and export, with domestic consumption the prime focus. Also, ecology in production and consumption is to be emphasized. Solar production in China would be indefinitely sustainable for domestic purposes were there no component exports. When thinking about solar farming, think about vast land-water coverage of what was largely unproductive or limited production acreage.

    2. pgl

      “And then the exporters experience Dutch disease, crowding out other activities that do generate jobs, while while wealthy elites corner the gains.”

      Let’s ask JohnH what the Dutch disease even is. I guarantee this troll have no clue.

    3. ltr

      http://www.news.cn/english/2021-08/25/c_1310148501.htm

      August 25, 2021

      South Africa’s unemployment rate rose to 34.4 percent from 32.6 percent in the second quarter of 2021, according to data released by Statistics South Africa.

      JOHANNESBURG — South Africa’s unemployment rate increased to 34.4 percent from 32.6 percent in the second quarter of 2021, data released by Statistics South Africa (Stats SA * ) revealed on Tuesday.

      This was the country’s highest joblessness rate since the first quarter of 2008.

      Releasing the report, Statistician General Risenga Maluleke said unemployment went up by 584,000 to 7,8 million when compared to the first quarter of this year. The expanded definition of unemployment rose by 1.2 percent to 44.4 percent compared to the first quarter.

      The expanded definition includes people who have given up job hunting. Maluleke said the number of discouraged work-seekers increased by 5.9 percent after the number rose by 186,000….

      * http://www.statssa.gov.za/

      [ Solar could be a prime productive product for the domestic and export market in South Africa, having a profound anti-poverty impact as in China. ]

    4. ltr

      https://en.wikipedia.org/wiki/Dutch_disease

      In economics, the Dutch disease is the apparent causal relationship between the increase in the economic development of a specific sector (for example natural resources) and a decline in other sectors (like the manufacturing sector or agriculture)….

      [ Precisely what is not happening in China, and with planning should never happen in any economy. ]

    1. pgl

      Good news. Florida courts told the governor to go suck it – Florida school districts can order mask mandates even if DeSantis throws a temper tantrum.

      1. Ivan

        I guess he will have to find another way to make sure Florida residents get sick, so he can use government funding to distribute a COVID drug, that one of his biggest campaign contributors makes obscene amounts of profits on.

        The amazing thing is that this governor has higher % approval than disapproval in FL. It appears that half the people live in some alternate universe where a man that try to block simple and effective measures against a deadly plague is doing a good job. Same people who are ready to poison themself with a life-stock drug based on some internet rumor – but will reject anything that has passed the stringent expert approval process of FDA/CDC.

  15. ltr

    http://www.news.cn/english/2021-08/27/c_1310152699.htm

    August 27, 2021

    China to further release national metal reserves

    BEIJING — China’s state reserves authority said Friday that the country would release the third batch of national reserves of copper, aluminum, and zinc this year.

    Some 30,000 tonnes of copper, 70,000 tonnes of aluminum, and 50,000 tonnes of zinc will be released from the national reserves in early September, the National Food and Strategic Reserves Administration announced.

    Only processing and manufacturing enterprises of copper, aluminum, and zinc will be eligible to bid, and the purchased metal shall be used for production promptly. It shall not be resold or hoarded, said the administration….

    [ As for inflation prospects, Chinese regulators are again releasing commodity reserves directly to companies and monitoring use to limit production cost increases. So far the use of reserves has been effective, especially so for relatively smaller producers, and Chinese reserves are extensive so the price cushion will be there for quite a while. ]

    1. pgl

      national reserves of copper, aluminum, and zinc?

      Do you have any clue how much of these 3 commodities China tends to import? The global price of zinc is not exactly soaring but aluminum prices are rising and copper prices are soaring. The release of these reserves is not going to stop this in China for long.

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