Remarkable Things People Say

In this case, one person. Steven Kopits writes:

4. The US is immune to an oil shock on paper as we are ostensibly energy independent in oil. We’ve seen this play out before. US oil consumption declined from June 2011 to December 2012 — 18 months — without the US falling into recession, something which is historically unprecedented in modern times. By contrast, Europe fell into a steep recession during this period — Q4 2011 through Q1 2013.

While it’s true that there’s not a terms of trade shock due to higher oil prices when oil prices rise, and there’s not a “transfer effect” when US is in trade balance, higher oil prices do feed into the general price level; in old parlance, that’s called a “cost push” shock (see Figure 3 in this post), and would reduce output in the absence of countervailing macro policies.

Kopits ascribes the fact that Europe went into recession due to their being a net oil importer. Could be. I would tend to ascribe it to the Greek debt crisis, and associated austerity measures pursued in the euro area. Pretty much all the economists I know of would ascribe more causality to that event, rather than Euro area being a net oil importer.

 

32 thoughts on “Remarkable Things People Say

  1. GREGORY BOTT

    Rising US oil exports will eventually spring the Saudi’s back into action. Their oil men ain’t happy with the Kingdom at all right now. Remember, all grifts end.

    Reply
    1. Moses Herzog

      I swear to God I was thinking of the same exact phrase and to post it here last night, but my feeble mind couldn’t quite remember how the phrase went. I could only remember it had to do with a hammer and nails. Too much blog interaction with Barkley is like bathing your bare brain in stomach bile…… getting weak…. losing power….. must…… contact…… home planet…..

      Reply
  2. Moses Herzog

    This was captured from a drone, the tornado in Andover again, so the same tornado I already showed Menzie and Professor Hamilton’s blog from a different viewpoint.
    https://twitter.com/ReedTimmerAccu/status/1520542108033159168?cxt=HHwWgMC49ba_hpoqAAAA

    Reed Timmer is the “professional” stormchaser who captured that footage. You can find him on Twitter and YT, he will be following the action in Oklahoma tomorrow I am certain.

    We will be under another “medium” level tornado watch around 3:30 pm today (Monday). So I will go do some shopping (including alcohol) and then hopefully be home by 14:00 local and then “hunker down” watching radar on the internet. Then Wednesday, it’ll start up all over again~~roughly the same risk level, “medium”. It’s relatively normal here. A town in Oklahoma named Moore has been ravaged twice in the last 20 years. ALL my life I have been lucky on these type things. As if someone above said “OK, he’s not a great guy, but let’s give him a break on this tornado stuff”. Wish me some luck again guys. I don’t have much family left, I figure if God takes me it’s probably one of the better choices he could make based on “collateral damage”.

    Reply
  3. pgl

    Stevie has told us many times that only oil matters, which of course is as absurd as many of his other declarative statements.

    Reply
  4. Moses Herzog

    Semi-famous analyst Hong Hao of China has been silenced. Apparently nobody gave Hong Hao the communal songbook that commenter ltr sings out of everyday. Maybe a few strikes to the side of his head or a threat to Hong Hao’s girlfriend or wife will do the trick, and Hong Hao will start singing in unison, like a good little boy. But he’s been a very bad schoolboy lately so Xi Jinping had to take him out behind the woodshed. Once Hong Hao has his testicles removed we can all go back to “normal”.

    Reply
  5. ltr

    ….has his testicles removed….
    ….has his testicles removed….
    ….has his testicles removed….

    [ Definitive, terrorizing racism. ]

    Reply
    1. Ivan

      Agree, it should have said: “have his testicles sunbathed”. It apparently was what happened to Tucker Carlson. UV light is how we sterilize things.

      Reply
    2. bafflng

      that reminds me. ltr made an unsubstantiated accusation of racism against me. and has never apologized for such threatening language towards me. ltr, i still expect an apology for such salacious and unprovoked commentary meant to silence me. but i will not be silenced by your bullying. i will continue to stand up to you and keep optimistic about the world, in spite of your bullying and hatred directed towards me. i am proud that you cannot silence me with your bullying, ltr.

      Reply
  6. ltr

    https://news.cgtn.com/news/2022-05-02/Chinese-mainland-records-865-new-confirmed-COVID-19-cases-19Hq9WYWWty/index.html

    May 2, 2022

    Chinese mainland records 865 new confirmed COVID-19 cases

    The Chinese mainland recorded 865 new confirmed COVID-19 cases on Sunday with 846 linked to local transmissions and 19 from overseas, data from the National Health Commission showed on Monday.

    A total of 6,957 new asymptomatic cases were also recorded on Sunday, and 156,131 asymptomatic patients remain under medical observation.

    Confirmed cases on the Chinese mainland now total 217,452, with the death toll at 5,092.

    Chinese mainland new locally transmitted cases

    https://news.cgtn.com/news/2022-05-02/Chinese-mainland-records-865-new-confirmed-COVID-19-cases-19Hq9WYWWty/img/c1661c52d864472cbb01952238a0e4a8/c1661c52d864472cbb01952238a0e4a8.jpeg

    Chinese mainland new imported cases

    https://news.cgtn.com/news/2022-05-02/Chinese-mainland-records-865-new-confirmed-COVID-19-cases-19Hq9WYWWty/img/179cfb1a13804f999e2a4d0c10aa8b97/179cfb1a13804f999e2a4d0c10aa8b97.jpeg

    Chinese mainland new asymptomatic cases

    https://news.cgtn.com/news/2022-05-02/Chinese-mainland-records-865-new-confirmed-COVID-19-cases-19Hq9WYWWty/img/6a875cab0f3c41aa887fd5fb3752d726/6a875cab0f3c41aa887fd5fb3752d726.jpeg

    Reply
    1. baffling

      “A total of 6,957 new covid cases were also recorded on Sunday, and 156,131 covid patients remain under medical observation.”
      this is the appropriately edited statement that ltr meant to provide. asymptomatic is still a covid positive case.

      Reply
  7. Steven Kopits

    Both remarkable and sensible.

    The cause of a brutal recession in Europe during Q4 2011 – Q1 2013 remains unexplained in policy circles. Or more precisely, the proposed explanation is less than compelling. The economist Scott Sumner posited that Europe fell into recession following a 50 basis point rise in the Euro Zone discount rate in mid-2011. While this no doubt contributed to the downturn, it is hard to believe that a half percent increase in interest rates would send Europe into a six quarter recession. I discuss the topic more here: http://www.prienga.com/blog/2014/10/17/did-the-ecb-tank-the-euro-zone

    Instead, oil prices once again returned to high levels, with Brent regularly in the $100 – 115 range. With this, oil consumption in both the US and Europe began to decline, and such declines in oil consumption due to high prices — normally characterized as an oil shock — invariably leads to recession. With one exception: the US after 2012. Although oil consumption initially declined, it stabilized after 2012 and the US was spared recession. Note, though, that the US was not spared economic pain, with the economist Larry Summers reviving Alvin Hanson’s depression-era term ‘secular stagnation’ to describe the performance of the US economy during this period.

    Europe did fall into recession, just as we would expect.

    Note also that an oil shock cannotbe compensated by “countervailing macro policies”. The reason is simple. If there is a largely fixed pool of available oil, then that must be allocated among the various consuming countries. If the supply declines, then importing countries must sooner or later consume less roughly on a pro rata basis. This is a volume, not price constraint, although prices will serve as the allocation mechanism. If oil is an enabling commodity like air and water, then those activities dependent on oil must be reduced to the level consistent with the available oil supply less any feasible efficiency gains and easy substitution available in the short term. If one tries to use monetary policy, that is, easy money, to solve this problem, it will likely deliver stagflation, just as seen in the 1970s. Monetary policy may, to an extent, lubricate the system to allow it to adjust faster, but the pain of adjustment to lower oil volumes cannot be avoided. An oil shock is not a monetary phenomenon. It is an event in the real economy which monetary policy cannot fix.

    As for Greece. Let us imagine a country the current account of which depends heavily on, say, tourism, which in turn is sensitive to the price of oil. Let’s further assume that this country imports virtually 100% of its oil. And let us further assume that this country is trapped in a currency union and cannot devalue its currency. Given an oil shock, how could this country adjust? Would it not have to achieve internal devaluation, which could take years and cause a never ending depression, particularly if the exchange rate is set the tolerances of more productive nations in the union? A crisis in Greece would be the poster boy for an oil shock without an appropriate adjustment mechanism.

    Finally, to suggest a Greek financial crisis could cause a recession in Europe is not entirely convincing. Greece’s GDP is all of 2% of that of the EU. It would be like a financial crisis in Indiana taking down the US economy. Conceivable, but it does not jump out at you.

    Note in all this the current account looms large. The adjustment is driven by a need to rebalance the trade deficit, in oil in this case. Clearly, if a country is a net oil exporter, then an oil shock is ostensibly a positive for the economy. If oil prices go to $120, no one is going to worry about the negative impact on the Saudi economy. They will be printing money. If the US is independent in oil, then pressures from higher oil prices should be offset by gains in the oil sector. There is no pressure to adjust the current account, trade deficit, or exchange rate, at least not based on the oil trade.

    You are correct, however, is noting that there will be sectoral pressures. Thus, the mid-continent will be printing money even as the coasts are suffering, as they are now. These pressures will also appear in oil producing countries. Note that the Arab Spring coincided with high oil prices, in part reflected in high food prices. Political instability in the OPEC countries is, somewhat counter-intuitively, associated with high — not low — oil prices.

    In my opinion, the single most exposed country to these pressures is now China. China imports 2/3 of its oil consumption, more exposed than even the US was in 2008. The 2008 oil shock was, of course, caused by China (it was a demand, not supply, shock), and therefore China did not materially suffer in that downturn. In an oil shock caused by a supply outage, China is fully exposed today.

    https://www.princetonpolicy.com/ppa-blog/2022/3/22/yjuj46vaqz6i45ee5qx173dzgg701d

    Reply
    1. baffling

      steven, i do not find your explanation compelling. however, assuming your assessment has some validity, this simply reinforces the notion that the world should continue to explore non oil energy sources. oil should not be an energy source the world relies upon.

      Reply
      1. pgl

        It is not compelling. Our host has a brand new blog post on this topic. Stevie bloviates without any logic or real evidence as damn it – he must be the expert on everything because he says so.

        Reply
    2. pgl

      “The cause of a brutal recession in Europe during Q4 2011 – Q1 2013 remains unexplained in policy circles. Or more precisely, the proposed explanation is less than compelling. The economist Scott Sumner posited that Europe fell into recession following a 50 basis point rise in the Euro Zone discount rate in mid-2011. While this no doubt contributed to the downturn, it is hard to believe that a half percent increase in interest rates would send Europe into a six quarter recession.”

      You want us to read your latest worthless blog post but you start with this babble. I have seen lots of plausible explanations for what happened in Europe. Merely because you do not understand basic economics is no reason to claim that was not explained. And yes a 50 basis point increase in interest rates could do a lot of damage in an economy as fragile as those in southern Europe.

      Come on Stevie – stop blovating about a topic you do not even remotely grasp.

      Reply
      1. Barkley Rosser

        pgl,

        I have sneered at Sumner here as “overrated,” (and elsewhere also), but on this point he makes a reasonable point.

        As it is, this looks like a situation where there are muliiple factors pushing in the same direction. There was a period of high oil prices that did not help the EU economies. But there also was a financial crisis after the Greek effective default. Measuring the impact of the Greek problems by looking at the size of its economy is not useful. The financial impact went well beyond that and did indeed hurt most of the PIGS economies.

        Reply
    3. AndrewG

      “The cause of a brutal recession in Europe during Q4 2011 – Q1 2013 remains unexplained in policy circles”

      What???

      Reply
  8. Ivan

    Oh the trappings of tunnel vision and linear paradigms. I guess Steven Kopits never got much of any scientific training.

    Reply
    1. pgl

      He has told us many times two things:

      (1) he never took a macroeconomic class in his life;

      (2)he is THE EXPERT on everything.,

      Reply
  9. pgl

    “Kopits ascribes the fact that Europe went into recession due to their being a net oil importer. Could be. I would tend to ascribe it to the Greek debt crisis, and associated austerity measures pursued in the euro area. Pretty much all the economists I know of would ascribe more causality to that event, rather than Euro area being a net oil importer.”

    Stevie is basically telling us that people trained in international macroeconomics are incompetent in their own field whereas OIl Is Everything Stevie deserve a Nobel Prize for his incoherent babble. See his comments and his latest worthless blog post. Only Oil Matters according to Stevie pooh.

    Reply
  10. ltr

    http://econbrowser.com/archives/2022/03/recession-talk#comment-271171

    March 25, 2022

    Han enslavers
    Han enslavers
    Han enslavers

    Would the Han enslavers just torture
    Would the Han enslavers just torture
    Would the Han enslavers just torture

    http://econbrowser.com/archives/2022/04/what-to-make-of-the-chinese-sovereign-yield-curve#comment-273255

    April 26, 2022

    Also those are not slaves in Xinjiang, they are all volunteering to make lollipops for Han people because of the Han’s benevolence to them of allowing Uighurs to breathe….

    http://econbrowser.com/archives/2022/04/guest-contribution-energy-policies-can-be-both-geopolitical-and-green#comment-273471

    April 28, 2022

    Then there’s energy policies meant to support genocide….

    Well, we can’t expect Beijing not to enthusiastically support mass murder can we?? It would be so out of character for them. It’s like Confucius once said: “You can take the villager out of the village, but you can’t take the amoralism out of the amoralist.”

    [ Definitive, terrorizing racism. Such was the racism that was spread in Germany and beyond in the 1930s. ]

    Reply
    1. AndrewG

      Other things also spread in the 1930’s: concentration camps, economic nationalism, state controlled media, cults of personality held up by state controlled media, threats to national sovereignty…

      Reply
    2. baffling

      notice the lack of concern by ltr for those uighyers forced into prison and reeducation camps.
      ltr, when you systematically eliminate a culture, it is considered a genocide. Such was the racism that was spread in Germany and beyond in the 1930s, and western china today.

      Reply
      1. Barkley Rosser

        baffling,

        Now now. Have you not seen ltr report to us on how poverty is being reduced in Xinjiang? That justifies anything.

        Reply
  11. ltr

    https://english.news.cn/20220502/221bea0b61534546b39a8f493fdd72a5/c.html

    May 2, 2022

    Chinese EVs gaining popularity in Israel with green vision

    Chinese automakers have gained more and more popularity in the Israeli market with electric vehicles (EVs) amid the Israeli government’s ambitions to gradually phase out fossil fuel vehicles.

    In a showroom of China’s automaker Geely Auto Group in the central Israeli city of Tel Aviv, Segal Yafa, a buyer from the south of the city, has signed a contract for three China-manufactured Geometry C electric vehicles.

    “One for my husband, one for myself, and one for my friend,” Yafa told Xinhua.

    Most Israelis began to know about the Chinese brand Geely since its launch of Geometry C EV in November 2021. With dashing looks and affordable prices, Geometry C has achieved a strong market share here quickly, becoming the winner in the “Best Buy of the Year” category for 2022 nominated by Israel’s major car magazine Auto.

    “Good price, strong power and less pollution… it gains a good reputation,” Yafa explained the reason for her choice.

    Ronan Yablon, CEO of Geely Israel, told Xinhua that they have received more than 8,000 orders in less than five months.

    Geely is a good example of the Chinese EVs in the Israeli market over recent years amid an ambitious green vision of the country.

    According to a plan initiated by the Israeli Ministry of Energy in 2018, the import of vehicles powered by polluting fuels will be banned as of 2030, which makes EVs an irreplaceable choice for the public.

    “The plan affects the welfare of all, and should not be delayed,” read a statement from the ministry about the plan.

    Yablon noted that “one of the most important goals with electric vehicles is to lower pollution.”

    To encourage the import and purchase of EVs, the Israeli government has offered tax incentives and free registration for EVs. Until 2023, Israel plans to tax EVs at a significantly lower rate of 10 percent, compared with regular vehicles at 83 percent.

    In addition, a total of 30 million new shekels (9.11 million U.S. dollars) have been allocated for the public EV charging infrastructure across the country.

    “Most consumers in Israel are the middle class who value price advantages. We do have European EV makers, but they are more expensive, and Chinese EVs are good value for money,” Tomer Hadar, an automotive editor for Calcalist, Israel’s largest financial newspaper, told Xinhua….

    Reply

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