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.
August 26, 2022 — Among the most salient of economic developments in the last two years have been big movements in the prices of oil, minerals, and agricultural commodities. It was hard to miss the big rise in commodity prices. The Brent oil price increased from a low $20 a barrel in April 2020, during the first Covid-19 wave, to a peak of $122, in March 2022, after Russia invaded Ukraine. But it was not just oil. The price of copper doubled over this period. Wheat more than doubled. And so on. Global indices of commodity prices almost tripled from April 2020 to March 2022.
These figures are in dollars. Prices rose even more when viewed in terms of euros, yen, won, or other currencies.
Not quite as widely observed is that prices of many commodities fell somewhat over the summer. The price of oil decreased by about 30 percent between early June and mid-August. The politically sensitive American price of gasoline also has fallen 20 percent since June, from $5/gallon to $4 in mid-August. The overall CRB index has fallen 12 percent as of August 17
Is this dip in commodity prices just temporary? Or is it a sign that they have peaked and can be expected to fall further in the future?
- Why are prices of different commodities so correlated?
Mostly, the prices of different commodities are highly correlated. In many cases, this is due to direct microeconomic linkages. When the price of oil rises, the costs to wheat producers rise, because harvesting equipment runs on diesel while fertilizer is made from natural gas, which puts upward pressure on grain prices. But the correlation across widely disparate energy, mineral and agricultural commodities begs for a macroeconomic explanation.
There are two macroeconomic reasons to think that commodity prices in general will fall further. One of them is self-evident, the other less so.
Different stories apply to different commodities, of course, due to microeconomic particulars. The price of natural gas in Europe is bound to rise, as the continent learns to manage winter without Russian gas. But the story is likely to be different elsewhere.
- Global growth
The most obvious macroeconomic factor is the overall level of economic activity. GDP is an important determinant of the demand for commodities and therefore their real price. Less obviously, the real interest rate is another determinant. As of now, the outlook for world growth (slowing) and the outlook for interest rates (upward) both suggest a downward path for commodity prices.
Strong global growth, especially in China, can explain the major upswings of commodity prices in 2004-07, 2010-11, and 2021. Conversely, abrupt recessions can explain the plunge in commodity prices from June 2008 to February 2009 (during the Great Recession), and again from January to April 2020 (in the pandemic recession). This leaves unexplained, for the moment, the spike in commodity prices in the first half of 2008 and the decline in 2014-15.
Global growth is currently slowing, for well-known reasons. China’s growth rate has faltered dramatically (particularly in the commodity-intensive manufacturing sector). It actually turned negative in the second quarter, as Shanghai and some other cities endured shutdowns in support of a futile zero-Covid policy. Europe is hard-hit by the side effects of the Russian invasion of Ukraine. Even US growth is slower in 2022 than it was last year, with many proclaiming that a recession has begun. (Personally, however, I am still willing to bet that no US recession started in the first part of the year and that either first-quarter or second-quarter GDP will be revised upward by end-September.)
Overall, according to the IMF’s most recent World Economic Outlook update, global growth is projected to slow substantially, from 6.1 % in 2021, to 3.2 % in 2022 and 2.9 % in 2023. Slowing growth means lower demand for commodities, and hence lower prices.
- Real interest rates
In addition, as the Fed and other central banks tighten monetary policy, real interest rates are expected to rise. This is likely to lower commodity prices, and not just because high real interest rates make a recession more likely. Interest rates have an effect independently of GDP, both in theory and statistically.
The theory of the relationship between interest rates and commodity prices is long-established. I like the “overshooting” formulation of the theory. The simplest intuition behind the relationship is that the interest rate is a “cost of carrying” inventories. A rise in the interest rate reduces firms’ demand for holding inventories and therefore reduces the commodity price.
Three other mechanisms operate, in addition to inventories. First, for an exhaustible resource, an increase in the interest rate increases the incentive to extract today, rather than leaving deposits in the ground for tomorrow. Second, for commodities that have been “financialized,” an increase in the interest rate encourages institutional investors to shift out of the commodities asset class and into treasury bills. Third, for a commodity that is internationally traded, an increase in the domestic real interest rate may cause a real appreciation of the domestic currency, which works to lower the domestic-currency price of the commodity.
The relationship between real interest rates and commodity prices is also established statistically, by econometric analyses that range from:
(i) simple correlations; to
(ii) regressions that control for other important determinants, such as GDP and inventories in a “carry trade” model; to
(iii) high-frequency event studies, which are much less sensitive to the econometric problems of the regressions, namely issues of causality and time series properties.
Two episodes illustrate the claim that the effect of monetary policy operates independently of the effect of GDP. Neither the spike in dollar commodity prices in the first half of 2008 nor the decline in 2014-15 can be explained by fluctuations in economic activity; but they can be interpreted as the result of easy US monetary policy (QE) and tightening US monetary policy (the end of QE), respectively.
Real interest rates currently appear to be on a firm upward trend, both because nominal interest rates will rise and because inflation will fall. That could mean that real prices of oil, minerals, and agricultural products are on their way down.
This post written by Jeffrey Frankel.
https://twitter.com/pleasesaveour/status/1562964810525859840
RightForge hosts Truth Social so they expect Trump to pay them for their services. Of course the Deadbeat in Chief has not.
Alot of useful information and insights. Let me start here:
the prices of different commodities are highly correlated.
We all know why a gold standard is not a great monetary policy (well maybe not all of us as evidenced by Stephen Moore, Lawrence Kudlow, Judy Shelton, Bruce Hall, and JohnH). Stephen Moore has been touting a commodity standard thinking it is more diversified than a gold standard. But this suggests his commodity standard would have similar problems as the gold standard. And Trump wanted to put this clown on the FED?
“The price of natural gas in Europe is bound to rise, as the continent learns to manage winter without Russian gas. But the story is likely to be different elsewhere.”
Why the story is different should be explained to our Kelly Anne dimwit Bruce Hall as he actually thinks the high prices in Germany will spill over in terms of high prices here. Yea I know there have been posts on this in the past but I get the sense that Bruce never reads them.
“Europe electricity prices soar as tough winter looms”
https://news.yahoo.com/europe-electricity-prices-soar-tough-122644020.html
Of course, pgl can’t tell which way is up, as we saw yesterday when he claimed that mortgage rates were going down, when in fact they were going up again. Same is true of lumber prices a year ago when they were starting to rise again.
WTF is wrong with you? Pointless childish rants with my name attached? Come on dude but everyone gets it. Your are a sad little crybaby.
“Of course, pgl can’t tell which way is up, as we saw yesterday when he claimed that mortgage rates were going down,”
Another lie. I predicted reported mortgage rates would rise. They did more than I predicted but I noted early on they rose from 5.13% to 5.55%. But keep on lying as I guess it makes you feel better. Of course if your mommy changed your diaper more than once a week, maybe you just might stop wasting everyone’s time.
JohnH did not read the first sentence of his own link:
European electricity prices soared to new records on Friday, presaging a bitter winter as Russia’s invasion of Ukraine inflicts economic pain across the continent.
Your master Putin invaded Ukraine. So blame yourself instead of everyone else. Oh wait – you enjoy watching Ukrainian women being raped by Russian soldiers. Got it!
Non-sequitor much? What does Europe’s special broblem with gas prices, whch Frankel explained as the result of Russia’s war on Ukraine, have to do with pgl?
Johnny, your symptoms are getting worse.
Johnny has become Princeton Steve’s new BFF so whenever Stevie lies to us – Johnny has to back up the world’s most incompetent consultant.
Oooo, Kelly Anne still inhabiting your head?
https://finance.yahoo.com/news/york-fuel-supply-low-triggered-181232855.html
Enjoy the winter, just like your friends in Europe.
Kelly Anne sent you that to post? Did you bother to even read it? I did so let me splain it to you little Ricky. Our President is taking actions to keep my heating costs down. Sounds like a good idea to me. Could you ask Kelly Anne to stop sending you things to post here that you do not even remotely understand.
Oooo, the POTUS is going to keep your heating cost down? Keep dreaming. Maybe if he sniffs your hair enough you’ll feel warm. Just ignore the shortages he has help create with his policies and proclamations (against fossil fuels).
I’m glad that Dr. Frankel linked to FRED for the price of copper which saves me for asking Dr. Chinn a question as to why FRED had stopped the reporting of commodities after its 12/15/2021 posting of commodity prices. It seems FRED is back to updating these monthly reporting of such prices as in this one on the global price of coal, which also skyrocketed earlier this year:
https://fred.stlouisfed.org/series/PCOALAUUSDM/
The link to FRED’s reporting of the Global Price Index of All Commodities is interesting.
Is this the index advocates for his horrific ideas with respect to monetary policy? I’m wondering if any bright economist has looked at the implications for the US economic history had this dumb idea became monetary policy 20 years ago.
his referring to Stephen Moore.
https://www.nytimes.com/2022/08/26/business/uk-energy-price-cap.html
August 26, 2022
Household Energy Bills in Britain to Soar 80 Percent
A regulator detailed the latest increase in gas and electric charges, driven up by the war in Ukraine and expected to further stoke inflation.
By Stanley Reed and Mark Landler
Energy prices paid by most British households are set to rise 80 percent this fall, putting further pressure on consumers squeezed by higher prices and posing a daunting challenge for the next prime minister.
A big jump in energy bills had been forecast for weeks, but the specific numbers released Friday morning by Britain’s energy regulator — a typical British household would pay 3,549 pounds (about $4,200) over a year for electricity and natural gas, from the current £1,971 — hit like a thunderclap in a country already reeling from double-digit inflation.
It is the latest economic blow to European consumers and businesses as the war in Ukraine stretches already tight markets for energy.
“This will be devastating for many families,” Jonathan Brearley, chief executive of the regulatory agency, Ofgem, told the BBC. Looking into early next year, he said, “the difficult news I have to give today is that prices look like they are continuing to rise.”
The increase in the so-called energy cap, which takes effect in October and covers about 24 million households, follows a 54 percent rise in April.
The news of the price increases came during a moment of deep political drift in Britain, with Prime Minister Boris Johnson preparing to leave office and his Conservative Party preoccupied by a contest to replace him. Mr. Johnson has left it for his successor to craft a response to the skyrocketing energy costs.
The front-runner to replace Mr. Johnson, Liz Truss, has promised targeted aid to help those hardest hit by higher bills, though she has steadfastly refused to detail her plans. She and her opponent, Rishi Sunak, both reject more sweeping measures, like using state subsidies to freeze the energy price cap for two years….
https://english.news.cn/20220826/b514a7eea6544ac1b11c4c3087bc6907/c.html
August 26, 2022
Cost-of-living crisis could exacerbate social divide in UK, scholar warns
Inflation in Britain has hit successive new highs since the winter of 2021. The latest figures show that the consumer price index (CPI) surged by 10.1 percent in the 12 months to July, the highest level in 40 years, according to the Office for National Statistics.
LONDON — The cost-of-living crisis in the United Kingdom (UK) could exacerbate social division, furthering the divide between the country’s rich and poor, a leading London-based academic has warned.
“There is a lot of evidence that the cost-of-living crisis is becoming more prolific and more serious,” public policy expert and associate professor Dr. Patrick Diamond from Queen Mary University of London told Xinhua in an exclusive interview.
It is less clear whether the crisis will change society, but it is certainly going to accelerate and deepen some of the divisions in the country, Diamond said.
“It doesn’t necessarily directly change society, but obviously it does raise a lot of questions about social cohesion when you have some groups who are facing these kinds of cost-of-living pressures, the rise in poverty and so on,” he said.
Inflation in Britain has hit successive new highs since the winter of 2021. The latest figures show that the consumer price index (CPI) surged by 10.1 percent in the 12 months to July, the highest level in 40 years, according to the Office for National Statistics (ONS).
But wage increases have failed to catch up. After taking inflation into account, real pay among employees between April and June this year fell at the fastest pace in more than two decades, the ONS said.
On a day-to-day basis, some people are already spending less on goods and services, eating out less or using fewer leisure facilities, Diamond said, noting that there are lots of anecdotes about greater use of food banks and child poverty in terms of children not getting access to school meals.
An ONS survey published last month said three-quarters of adults in the UK have reported being very or somewhat worried about the rising cost of living.
“Certainly, the cost-of-living crisis is growing in its visibility, and no doubt this will continue over the next few months. We haven’t yet hit winter.”
Indeed, the situation may get much worse this coming winter due to a widely anticipated huge increase in the energy price cap in October.
Higher energy prices are expected to push the UK’s inflation to 13 percent in the fourth quarter of the year and inflation is likely to remain at very elevated levels throughout much of 2023, the Bank of England said earlier this month….
Oh, look, ltr has a new meme:
China GOOD, United Kingdom BAD
A refreshing change of pace!
We all know Dr. Oz is a charlatan but DAMN:
Dr. Mehmet Oz encouraged the Trump White House to push hydroxychloroquine research, emails show.
Oz, the Republican candidate for Senate in Pennsylvania, sent clips of his show to Jared Kushner.
Numerous studies have found hydroxychloroquine is not an effective treatment for COVID-19. Dr. Mehmet Oz’s Democratic rival, Pennsylvania Lt. Gov. John Fetterman, said it’s “actually not surprising” that, according to a new report, Oz pushed former President Donald Trump’s administration for research on an unproven COVID-19 treatment. In the early weeks of the pandemic, former President Donald Trump embraced hydroxychloroquine, a treatment for malaria, as a possible treatment for COVID-19. Trump described hydroxychloroquine, along with another drug, as potentially “one of the biggest game changers in the history of medicine.” Behind the scenes, as well on Fox News and his own daytime television show, Dr. Mehmet Oz was encouraging optimism about the drug despite there being little evidence at the time that it worked. Since then, numerous studies have shown is not an effective treatment for COVID-19.
It wasn’t just Trump and Oz. Bruce Hall pushed hydroxychloroquine as did Scott Atkins. And Brucie was trying to tell us even this week that we should have listened to Atkins. These lies never die.
https://www.msn.com/en-us/news/politics/fetterman-campaign-says-its-actually-not-surprising-that-rival-oz-urged-the-trump-administration-to-push-research-into-an-unproven-covid-treatment/ar-AA116d6y
@ pgl
To me advocating for those things with trump and his amoral worthless son-in-law tells me something I have suspected for awhile. Now I feel 100% certain. I honestly think, and I’m not trying to “be funny” or use hyperbole. I totally mean this in a sincere/earnest way. I think Dr. Oz is a true sociopath. And it’s not terribly surprising based on he travels in the same circles as Oprah and “Dr” Phil. Dude is seriously sick.
Apologies to Dr. Frankel I just got back from grocery shopping in super hot heat and unloaded a lot of groceries and refueling the old Toyota. I never mean to disrespect Dr. Frankel. To me, If Menzie Chinn is Jedi Luke Skywalker, than that means Professor Frankel is our Yoda (only much taller than Yoda). So we totally respect Professor Frankel and I plan on giving some thoughts on this post later when I have thoroughly read it and let my mind process it before typing blather.
Right now Professor Frankel is thinking “Let’s see here, I went through all the pain and sweat and spent time to get my Doctorate, get my tenure, give my wisdom to my many protégés like Menzie, so some degenerate jerkwad in Oklahoma could call me Yoda?? Where did I go wrong God??”
To think Max Sawicky used to refer to Alan Greenspan as Yoda.
Hahahaha, I’m trying to keep this clean out of respect to Menzie, “something something” Max Sawicky. We here on this blog know. OUR cult knows, Professor Frankel is the real Master Yoda. Let’s cut off with this Greenspan/Emperor Palpatine stuff. Hahahahah, Oh man.
We left our last dentist because, among other dumb Covid-related things, he mentioned to my spouse in passing that he was taking hydroxychloroquin on a regular basis to fight Covid. My spouse asked if he was worried about hallucinations, as people from malaria-high countries (it’s a malaria drug) know you aren’t supposed to take it for more than a few weeks. No response.
Stupid, stupid man. Never touching our teeth again.
https://www.nytimes.com/2022/08/23/opinion/inflation-prices-food-employment-policy.html
August 23, 2022
Must we suffer to bring inflation down?
By Paul Krugman
Not long ago, many people were predicting a long, hot summer of inflation. To their surprise — and, for some Republicans, dismay — that isn’t happening. Overall consumer prices were flat in July, and nowcasts — estimates based on preliminary data — suggest that inflation will remain low in August.
However, I don’t know any economists who believe that inflation has been beaten. Much of the recent good news is the result of falling gas prices, which won’t continue. It’s true that we’ll probably get another round of good news from falling food prices: The Food and Agriculture Organization’s index of global food prices plunged in July, and the effect will probably show up in supermarket aisles in a few months:
https://static01.nyt.com/images/2022/08/23/opinion/krugman230822_1/krugman230822_1-jumbo.png?quality=75&auto=webp
Relief is coming at the supermarket.
In fact, beef is already getting cheaper.
Still, the Federal Reserve has learned from much experience not to let policy be driven by movements in volatile food and energy prices, and underlying inflation still looks high. So the Fed isn’t about to pivot; it will keep raising interest rates to cool off the economy, which is highly likely to lead to at least some rise in unemployment and quite possibly a recession.
In pursuing this strategy, the Fed is following policy orthodoxy. But are there less painful, heterodox strategies we could be following instead?
I’d like to believe that there are, and heterodoxy sometimes works. Unfortunately, I can’t see it working under current U.S. conditions.
What do I mean by heterodox policy? Broadly speaking, there are two ways to bring inflation down without putting the economy through a painful squeeze. One is what we used to call incomes policy: direct government intervention, whether through controls or moral suasion, to limit price increases. The other is policy to hold prices down by expanding supply.
Do incomes policies ever work? Yes. The classic example is Israel in the 1980s, a nation that experienced very high inflation, then brought inflation way down:
https://static01.nyt.com/images/2022/08/23/opinion/krugman230822_2/krugman230822_2-jumbo.png?quality=75&auto=webp
Israel’s great disinflation….
It seems overall inflation is also falling:
https://www.cnbc.com/2022/08/26/feds-preferred-inflation-measure-shows-price-pressures-eased-in-july.html
The personal consumption expenditures price index showed a year-over-year rise of 6.3% in July, down from 6.8% in June.
The reading actually fell 0.1% month over month.
The core PCE index, which excludes volatile food and energy prices, had a 4.6% rise year over year and a gain of 0.1% month over month, coming in softer than forecasts on both counts.
Now most people would see this as good news but Kelly Anne “Alternative Facts” Conway must be working extra hard for her daily email telling Bruce Hall what to write about this. I can’t wait see Brucie’s latest attempt to spin this as hyperinflation!
https://www.bls.gov/news.release/cpi.t01.htm
BLS reports its CPI level for July 2022 which is only SLIGHTLY higher than it was for June 2022 and still lower than it was for May 2022.
“China’s growth rate has faltered dramatically (particularly in the commodity-intensive manufacturing sector). It actually turned negative in the second quarter, as Shanghai and some other cities endured shutdowns in support of a futile zero-Covid policy.”
Expected ratio of ltr-to-non-ltr comments here: 1:1 (it’s just a dig at Chinese growth, not “ceaseless racism”)
Expected ltr comments about how this is like persecuting the Jews: 0
Ladies and gentlemen, place your bets.
Many of our frequent commenters lack the confidence to wager. I have opened up the “Johnny bet” to all regular commenters, and nobody has taken me up on it. It’s odd – they seem so confident when they have nothing at stake.
The ratio is not even 1:3 right now. I’m so glad no one has taken me up on my bet!
Nothing about how criticizing Beijing is like the Holocaust yet, so there’s that.
Not to be an inflation hawk but the wholesale prices of bananas have gone bananas:
https://fred.stlouisfed.org/series/PBANSOPUSDM/
FRED reports prices in terms of metric tons with a metric ton being 2200 pounds. So back in Nov, 2021, the wholesale price was only $0.52 per pound but now is $0.69 per pound. I love bananas but damn!
That may be secular. Before Covid I read that we should expect rising banana prices. Something about the dominant banana crop being not very resilient. Soon it’ll be peanut butter and plantain sandwiches. The children will cry.
Really interesting comments from Frankel, especially the overall framing of the co-movement of commodity prices and how he conceptualizes the effects of rate increases (with a 90-year-old still relevant Hotelling reference!).
Thank you for this, I totally missed it in the essay text:
https://en.wikipedia.org/wiki/Hotelling%27s_law
Haven’t we heard this before? Why believe it now?
Before you start chirping your usual garbage, you might try READING the entire post and the papers it linked to. Or you could continue on with your worthless trolling which it seems to be all you are capable of doing.
rsm,
Heard what before? That there appears to be a correlation between different commodity prices, although not remotely absolute? Yes, we have heard that before. It is in fact a long established and well known fact. So there is very good reason to believe it now.
A BEA release also suggested prices fell last month:
https://www.bea.gov/news/2022/personal-income-and-outlays-july-2022
Personal Income and Outlays, July 2022
Personal income increased $47.0 billion (0.2 percent) in July, according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $37.6 billion (0.2 percent) and personal consumption expenditures (PCE) increased $23.7 billion (0.1 percent).
The PCE price index decreased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent (table 9). Real DPI increased 0.3 percent in July and real PCE increased 0.2 percent; goods increased 0.2 percent and services increased 0.2 percent (tables 5 and 7).
Who is Inna Yashchyshyn and why does she matter?
https://newsinteractive.post-gazette.com/anna-de-rothschild-trump-mar-a-lago-security-fbi-investigation/
Let’s see. An attractive woman who posed under the name Anna de Rothschild boasting of her family roots to the European banking dynasty, donning designer clothes, a Rolex watch, and driving a $170,000 black Mercedes-Benz SUV. She gets to hang out at Maro Lago with Trump and Lindsey Graham all the while likely a secret agent for Putin Gee – she likely had access to those national security secrets Trump has been keeping at Maro Lago. What could go wrong?
https://www.nytimes.com/2022/08/26/business/economy/jerome-powell-inflation.html
August 26, 2022
Jerome Powell Warns That the War on Inflation May Be Painful
The Federal Reserve chair pledged to resolutely fight rapid price increases, arguing the bigger mistake would be allowing price increases to become entrenched.
By Jeanna Smialek
JACKSON, Wyo. — Jerome H. Powell, the chair of the Federal Reserve, warned that the central bank’s campaign to beat back the fastest inflation in decades would come at a cost to workers and overall growth. But he emphasized that the Fed must continue raising interest rates — and keep them elevated for a while — to prevent rapid price increases from becoming a more permanent feature of the American economy.
“Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance,” Mr. Powell said in a speech on Friday. “While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.”
He then added: “These are the unfortunate costs of reducing inflation.” …
https://fred.stlouisfed.org/graph/?g=CgJo
January 15, 2020
Sticky Consumer Price Index and Sticky Consumer Price Index less Shelter, 2020-2022
(Percent change)
https://fred.stlouisfed.org/graph/?g=FvRm
January 15, 2020
Sticky Consumer Price Index less Shelter and less Food & Energy, 2020-2022
(Percent change)
China’s growth rate has faltered dramatically (particularly in the commodity-intensive manufacturing sector). It actually turned negative in the second quarter, as Shanghai and some other cities endured shutdowns in support of a futile zero-Covid policy.
— Jeffrey Frankel
[ The Chinese coronavirus policy has been wonderfully successful, saving hundreds of thousands of lives and preserving the health of tens of millions. Should Chinese public health protection have limited growth for a time, that is a limiting hundreds of millions of Chinese have been and are grateful for. ]
It didn’t save those lives it just postponed their death a year or two. Covid will harvest what is Covid’s now that the new super infectious strains are in circulation. Good news is that the new strains are only 2-3 times as deadly as a bad flue strain – so we can live with them without needing to shut down things. Bad news for China is that nobody has told Xi (or he doesn’t listen to those who told him).
Australia got it right running a zero Covid policy until everybody had been vaccinated – then dropping it after the omicron variant shifted the balance and made it obvious that the trade off was to big to justify those strict policies.
True and New Zealand did it even better.
wonderfully successful
wonderfully successful
wonderfully successful
[… ceaseless racism]
Which has nothing to do with Dr. Frankel’s. Given the high prices for commodities like copper and iron ore one would expect these sectors to cut back on production. Basic economics.
ltr,
“Hundreds of millions” may be grateful, but China has about 14 hundreds of millions and other hundreds of millions may be less grateful, especially as death rates from other diseases have risen due to the extreme lockdowns with people unable to get to hospitals or doctors.
I have mocked Steven Kopits’s call for westerners to hound the PRC to become more democratic, but in fact it would be good if popular opinion had more ways of influencing public decisionmaking in the PRC. The current policy is clearly very much what Xi wants, and it increasingly looks that it may be causing more deaths and damage than it is saving.
https://news.cgtn.com/news/2022-08-26/Chinese-mainland-records-312-new-confirmed-COVID-19-cases-1cNXEAfpfvq/index.html
August 25, 2022
Chinese mainland records 312 new confirmed COVID-19 cases
The Chinese mainland recorded 312 confirmed COVID-19 cases on Thursday, with 262 attributed to local transmissions and 50 from overseas, data from the National Health Commission showed on Friday.
A total of 1,316 asymptomatic cases were also recorded on Thursday, and 22,447 asymptomatic patients remain under medical observation.
The cumulative number of confirmed cases on the Chinese mainland is 241,348, with the death toll from COVID-19 standing at 5,226.
Chinese mainland new locally transmitted cases
https://news.cgtn.com/news/2022-08-26/Chinese-mainland-records-312-new-confirmed-COVID-19-cases-1cNXEAfpfvq/img/b27099014fc04fafb0a18756067bee47/b27099014fc04fafb0a18756067bee47.jpeg
Chinese mainland new imported cases
https://news.cgtn.com/news/2022-08-26/Chinese-mainland-records-312-new-confirmed-COVID-19-cases-1cNXEAfpfvq/img/16aa595494e44102a94978c087ef8f22/16aa595494e44102a94978c087ef8f22.jpeg
Chinese mainland new asymptomatic cases
https://news.cgtn.com/news/2022-08-26/Chinese-mainland-records-312-new-confirmed-COVID-19-cases-1cNXEAfpfvq/img/59b79518ac1a4b8c82facd20939f9e3b/59b79518ac1a4b8c82facd20939f9e3b.jpeg
https://www.worldometers.info/coronavirus/
August 25, 2022
Coronavirus
United States
Cases ( 95,844,677)
Deaths ( 1,068,111)
Deaths per million ( 3,213)
China
Cases ( 241,036)
Deaths ( 5,226)
Deaths per million ( 4)
ltr,
Nobel Prizes in US, 400; Nobel Prizes in China, 1.
https://www.brookings.edu/research/new-data-shows-long-covid-is-keeping-as-many-as-4-million-people-out-of-work/
August 24, 2022
New data shows long Covid is keeping as many as 4 million people out of work
By Katie Bach
Since the depths of the COVID-19 pandemic through today, news about labor shortages and missing workers has dominated headlines. The question everyone still seems to be asking is: Why?
In January 2022, Brookings Metro published a report * that assessed the impact of long Covid on the labor market. Data on the condition’s prevalence was limited, so the report used various studies to make a conservative estimate: 1.6 million full-time equivalent workers could be out of work due to long Covid. With 10.6 million unfilled jobs at the time, long Covid potentially accounted for 15% of the labor shortage.
This June, the Census Bureau finally added four questions about long Covid to its Household Pulse Survey (HPS), giving researchers a better understanding of the condition’s prevalence. This report uses the new data to assess the labor market impact and economic burden of long Covid, and finds that:
a) Around 16 million working-age Americans (those aged 18 to 65) have long Covid today.
b) Of those, 2 to 4 million are out of work due to long Covid.
c) The annual cost of those lost wages alone is around $170 billion a year (and potentially as high as $230 billion)….
https://www.nytimes.com/2022/08/25/opinion/long-covid-pandemic.html
August 25, 2022
If You’re Suffering After Being Sick With Covid, It’s Not Just in Your Head
By Zeynep Tufekci
[ Caitlin
Delaware
My life changed after October 2020. I have made some improvement but the memory loss, fatigue, brain fog, and migraines still plague me. I am a physician. My career is in shambles and I don’t know if I’ll work full time again. I’ve got credit card debt from the time when I wasn’t working at all. My savings are depleted. My retirement funds are neglected. My student debt is enormous. I have begun to lose hope. I hold it together as best I can for the sake of my kids, but my bright future burned to ashes. I am 39 years old. ]
Zeynep Tufekci is a professor at Columbia University.
Hey, you’re a regular NYTimes reader, ltr. How come you missed this one?
OPINION
PAUL KRUGMAN
Of Dictators and Trade Surpluses
Aug. 22, 2022
By Paul Krugman
Opinion Columnist
阅读简体中文版閱讀繁體中文版
According to a new NBC News poll, U.S. voters now consider “threats to democracy” the most important issue facing the nation, which is both disturbing and a welcome sign that people are paying attention. It’s also worth noting that this isn’t just an American issue. Democracy is eroding worldwide; according to the latest survey from the Economist Intelligence Unit, there are now 59 fully authoritarian regimes out there, home to 37 percent of the world’s population.
Of these 59 regimes, however, only two — China and Russia — are powerful enough to pose major challenges to the international order.
The two nations are, of course, very different. China is a bona fide superpower, whose economy has by some measures overtaken the United States’. Russia is a third-rate power in economic terms, and events since Feb. 24 suggest that its military was and is weaker than most observers imagined. It does, however, have nukes.
One thing China and Russia have in common, however, is that both are currently running very large trade surpluses. Are these surpluses signs of strength? Are they evidence that autocracy works?
No, in both cases the surpluses are signs of weakness. And the current situation offers a useful corrective to the common notion — favored, among others, by Donald Trump — that a country that sells more than it buys is somehow a “winner.”
Start with Russia, whose trade surplus has ballooned since Vladimir Putin invaded Ukraine. What’s that about? The answer is that it’s largely a result of Western economic sanctions, which have been surprisingly effective — albeit not in the way many expected.
When the invasion began, there were widespread calls for an embargo on Russian exports of oil and gas. In reality, however, Russia has had little trouble maintaining its oil exports; it is selling crude at a discount, but high global prices mean that plenty of money is still coming in. And while there has been a sharp fall in Russian gas exports to Europe, this reflects the Putin regime’s efforts to put pressure on the West rather than the other way around.
What sanctions have done, instead, is undermine Russia’s ability to import, especially its ability to buy crucial industrial inputs. One example of the problem: Reports indicate that Russian airlines are grounding some of their planes to cannibalize them for spare parts they can no longer buy abroad.
Editors’ Picks
Riders Catch a Little Too Much Air on a Detroit Slide
‘When I Come in From the Bullpen, the Other Team’s in Trouble’
BeReal Captures Our Nostalgia for a Time When Social Media Was Boring
Continue reading the main story
So Russia’s trade surplus is actually bad news for Putin, a sign that his country is having trouble using its cash to purchase goods it needs to maintain its war effort.
China’s problem is different: Its trade surplus is a result of long-running internal problems that may, finally, be coming to a head.
Outside observers have long noticed that too little of China’s national income filters down to the public, so that consumer spending has remained weak despite rapid economic growth. Instead, the nation has maintained more or less full employment by channeling cheap credit into increasingly unproductive investment spending, above all a bloated housing market supported by ever-growing private debt.
China has managed to keep this ultimately unsustainable game running for a remarkably long time. At this point, however, China’s housing market appears to be crashing and consumer demand appears to be plunging. This is dragging down the country’s imports — which makes its trade surplus bigger. Again, a surplus can be a sign of weakness, not strength.
Two more points about China. First, its economy is also suffering from the government’s refusal to revisit a failing Covid strategy, relying on relatively ineffective domestic vaccines and a disruptive policy of draconian lockdowns to contain the pandemic.
Second, under current conditions, weak Chinese demand is, unintentionally, a boon to the rest of the world.
A dozen years ago the world economy was suffering from inadequate demand, and Chinese trade surpluses made the problem worse by sucking purchasing power away from the rest of the world. Today, however, the world economy is suffering from inadequate supply, which has led to high inflation in many countries. In this context Chinese weakness is actually good for the rest of us: Falling Chinese demand is putting a lid on the prices of oil and other commodities, reducing global inflationary pressure.
So what can we learn from dictators and their trade surpluses?
As I said, we’re getting a demonstration that exporting more than you’re importing doesn’t mean that you’re winning: In different ways both Russia’s and China’s trade surpluses represent failure rather than success.
And at a broader level, we’re seeing the trouble with dictatorships, where nobody can tell the leader when he’s wrong. Putin seems to have invaded Ukraine in part because everyone was too afraid to warn him about the limits of Russian military power; China’s Covid response has gone from role model to cautionary tale, probably because nobody dares tell Xi Jinping that his signature policies aren’t working.
So autocracy may be on the march — but not because it works better than democracy. It doesn’t.
Related article:
Buera, F. J., & Shin, Y. (2013). Financial frictions and the persistence of history: A quantitative exploration. Journal of Political Economy, 121(2), 221-272.
Subsidized labor bills might pump up investment by making labor cheap, but at some point you need to switch over to the opposite – making labor expensive and comfortable, like in an advanced country (which China isn’t).
Another article, closely related to the Buera & Shinn one:
Itskhoki, O., & Moll, B. (2019). Optimal development policies with financial frictions. Econometrica, 87(1), 139-173.
WARNING: Applied Macro! Worse, continuous time applied macro!!
https://www.aap.org/en/pages/2019-novel-coronavirus-covid-19-infections/children-and-covid-19-state-level-data-report/
August 18, 2022
Cumulative Number of Child COVID-19 Cases
Almost 14.4 million children are reported to have tested positive for COVID-19 since the onset of the pandemic according to available state reports; over 358,000 of these cases have been added in the past 4 weeks. Approximately 6.5 million reported cases have been added in 2022.
14,362,007 total child COVID-19 cases reported, and children represented 18.4% (14,362,007 / 78,010,034) of all cases
Overall rate: 19,082 cases per 100,000 children in the population
American Academy of Pediatrics
Children’s Hospital Association
Frankel is discussing commodity prices, and doing so with complete objectivety. Why are you getting all defensive? What exactly is the point, other than a paycheck from Beijing, to all of your off-topic intrusions? Bad manners.
The original commodity boom which started almost 20 years ago was driven by China’s rapid economic development. Just reporting the facts mam!
I remember when I was in China, and I was a “late bloomer” “Ignatius J Riley” and I was experiencing many things for the first time, And I kept saying to everybody, “I’m not the ‘ideal’ American, I’m the worst of America” and you never could make them believe that, They kept this thing, where if a plane dropped them in a parachute, this sad inept American guy “Uncle Moses” was the “typical” American they’d meet, and some of them (not all) you couldn’t make them feel any different about it. It puts a kind of “pressure” on you, to be “top game” which , of course, I never met that standard.
“no one listens to both sides, except the neighbors”
“You won’t believe this Sh*t” is how the trucker tells it…….
Dear Pr Frankel,
your comments on QE is puzzling :
“(…) Two episodes illustrate the claim that the effect of monetary policy operates independently of the effect of GDP. Neither the spike in dollar commodity prices in the first half of 2008 nor the decline in 2014-15 can be explained by fluctuations in economic activity; but they can be interpreted as the result of easy US monetary policy (QE) and tightening US monetary policy (the end of QE), respectively.(…)”
I do not see the way QE in November 2008 could trigger the spike in oil price in the first half of 2008 ?
My view would be that QE (1, 2 and 3) triggered production, then overproduction of shale oil, that resulted in 2014 in the oil price collapse ?
https://theshiftproject.org/en/article/is-monetary-policy-carbon-neutral/
Très cordialement
He’s talking about nominal, dollar-denominated prices, not real prices. That’s why he mentions the effect of monetary policy independent of GDP. Market floods with dollars, value of dollar falls, commodity prices (in dollars) go up. And vice versa.
Good piece. Commodity prices have to an approximation peaked. In this cycle.
That said, oil and natural gas prices will likely stay high for a while and will continue to redistribute wealth around the world. It is rather impressive to watch the Europeans self-inflict damage for the economic benefit of the USA.
What is really fascinating is to observe how the USA and NATO partners have managed to resurrect the non-aligned movement. BRICSA risks shifting trade patterns in a way that are not favourable to US interests. I see an accelerated decline in US hegemony. Please note that contrary to Sachs, I view hegemony as a valuable asset.