Risk and Uncertainty, Market and Geopolitical

One way to visualize:

Disposition of some US naval groups (CSGs, etc.), as of Nov. 2.

Source: USNI.

Highlighting the seriousness of the situation, it has been two decades since two CSGs have operated in the Mediterranean simultaneously; and two decades prior to that for the previous episode.


Figure 1: VIX (left scale, blue), Geopolitical Risk index (right scale, tan), Global EPU at market prices (green, right scale). Source: CBOE via FRED, Caldara and Iacoviello, policyuncertainty.com.


47 thoughts on “Risk and Uncertainty, Market and Geopolitical

    1. Noneconomist

      How about a Here’sJohnH on how Russia could end its current military invasion and no longer prolong what you’ve term a “pointless, futile, wasteful war.” That way, no more children and their parents will be sacrificial lambs to Russian expansion.
      No what about necessary. Just comment on here and now. Support your hand wringing with your true feelings. As a self styled marcher for peace and a valuable member of a Fortune_____ (fill in the number) Company, you should have no trouble doing so.
      What are you afraid of?

      1. JohnH

        Without a negotiated settlement–something the US blocked in April 2022–many more are going to die. Now there are indications that the West is finally amenable to negotiations. This is a development we should all support…and should have supported from the outset.

        1. pgl

          “Something the US blocked in April 2022”

          You tried to tell this lie earlier but you got busted. Come on Jonny boy – why all the lies? Just admit you get off seeing Ukrainian children murdered.

        2. pgl

          Jonny boy’s claim that the US blocked a peace deal in the spring of 2022 relied to some alleged claim from Naftali Bennett. I already provided this:

          Former Israeli prime minister rebuts claim, boosted by Russia, that the US blocked a Ukraine peace agreement: ‘It’s unsure there was any deal to be made’


          Former Israeli Prime Minister Naftali Bennett discussed his efforts to broker peace between Ukraine and Russia.
          Pro-Russia commentators have focused on his saying that a peace deal was “blocked” by the West.
          But Bennett has clarified that no such deal existed — and said talks broke down because of apparent Russian war crimes.

          Since the little liar JohnH never replied when I busted him earlier and decided to repeat his lie, I provide it again.

          Then again we have always known little Jonny boy is a serial lie. So hey!

          1. JohnH

            Here’s a good history of negotiations regarding Ukraine. “Three separate times in the early weeks of the war, negotiations produced the real possibility of peace. The third even yielded a tentative agreement that was, according to Putin, signed. Both sides made “huge concessions,” including Ukraine promising each time not to join NATO. But each time, the U.S. put a stop to the promise of a diplomatic solution and peace, allowing the war to go on and to escalate, seemingly in the pursuit of U.S., not Ukrainian, interests.”

            1) “The U.S. said no to the Belarus talks.-”
            2) “[Naftali] Bennett said that “there was a good chance of reaching a ceasefire.” But the pattern of U.S. obstruction first evident in Belarus continued. Bennett says the West made the decision “to keep striking Putin.” “So, they blocked it?” his interviewer asked. “They blocked it,” Bennett replied.”
            3)Istanbul: ” Turkish Foreign Minister Mevlut Cavusoglu said that, because of the talks, “Turkey did not think that the Russia-Ukraine war would continue much longer.” But, he said, “There are countries within NATO who want the war to continue.” “Following the NATO foreign ministers’ meeting,” he explained, “it was the impression that…there are those within the NATO member states that want the war to continue, let the war continue and Russia get weaker.”

            Cavusoglu’s account does not stand alone. Numan Kurtulmus, the deputy chairman of Erdogan’s ruling party, has hinted at the same obstruction and at the same pursuit of larger goals. He told CNN TURK that “We know that our President is talking to the leaders of both countries. In certain matters, progress was made, reaching the final point, then suddenly we see that the war is accelerating… Someone is trying not to end the war. The United States sees the prolongation of the war as its interest…”

          2. Noneconomist

            “Russianhistory is sobering. To this day, it is one of almost relentless expansion. Beginning in the. 15th century, the Duchy of Moscow (which later called itself Russia) progressively seized territory in all directions to become, and remain, the world’s largest country. That expansionist drive hasn’t subsided since the collapse of the Soviet Union in 1991, which Russian President Vladimir Putin views as a temporary setback.
            Belarus has been brought almost entirely under the Kremlin’s control, parts of Georgia and Moldavia have been Re occupied, and Ukraine is once again the target of Russia’s sustained imperialist project.
            The past does not necessarily predict the future, but countries have foreign policy traditions and dynamics that should not be ignored.”
            Alexander j. Moytl
            Professor of Political science
            Rutgers University. “‘Foreign Policy”. 8/25/23

          3. pgl

            “[Naftali] Bennett said that “there was a good chance of reaching a ceasefire.”

            This is the 3rd time Jonny boy misrepresented what this man has said. I have provided his fuller comments which undermines the spin Jonny boy is trying.

            Come on – this kind of blatant and repeated dishonesty should grounds to have this worthless troll banned.

        3. Noneconomist

          Finally! The invasion had your approval. You have no problem with the invaders continuing to make war on civilians including women and children. You’re not anti war. So stop the bs that you are. Your fraudulent posts have fooled no one.
          If you really are against pointless wars, you would have been against this one from the beginning. No negotiated settlement necessary, and thousands of children and their parents would still be alive.
          Not necessary for you to continue to lie and obfuscate. You continually do a very poor job of hiding who you really are..

          1. JohnH

            If you don’t want a negotiated settlement, then you want the war, the killing and destruction to continue. The only alternative is the total exhaustion and defeat of one of the sides.

            That day may be fast approaching for Ukraine: “US officials are concerned that Ukraine is running out of troops and have hinted at peace talks with Russia, report says” https://www.businessinsider.com/western-officials-suggest-ukraine-consider-peace-talks-russia-2023-11?op=1

            But the general consensus here seems to be the Ukraine fight to the last Ukrainian. Who benefits from that? Wouldn’t everyone, except for US geopolitical ambitions, have been better off if negotiations had succeeded a year and a half ago?

          2. Noneconomist

            If no invasion had taken place, no negotiation would be necessary.. if you don’t want troops to withdraw, YOU want their war crimes to continue. No invasion, no war crimes, no exhaustion of troops. And no massacred civilians.
            Your argument, like you, lacks substance. You have no concern for a just peace, Pretending you do further exposes you to much more deserved ridicule. Listening to you blather on about pointless, futile war is about as close to profane hypocrisy as you can get.
            Clearly YOU want the war because you believe Russian expansion will continue. Your posts have proven that consistently.
            You’re not fooling anyone here. Except perhaps yourself.
            Continue to lie as children die. It’s what YOU choose to do.

        4. baffling

          “Without a negotiated settlement”
          johnny, why should ukraine negotiate a settlement with a country who illegally and immorally invaded their land? the russians are at fault here, and should not be rewarded for bad behavior.

          1. JohnH

            “Why should Vietnam and Iraq have negotiated a settlement with a country who illegally and immorally invaded their land?”

          2. baffling

            “Why should Vietnam and Iraq have negotiated a settlement with a country who illegally and immorally invaded their land?”
            Johnny, this is whataboutism. Vietnam and Iraq have absolutely nothing to do with Russia illegally invading Ukraine. this is simply a distraction tactic. but your comment implies you have no issue with Russia’s action, but you do have an issue with the USA.

        5. Macroduck

          Johnny has instructions to imply that the U.S. is the driving force behind Russia’s war in Ukraine.

          He has insisted that the U.S. broke promises made around the time of the Minsk accord, that the U.S. told Zelenskyy not to negotiate with Russia early in this second round of invading Ukraine. Now, he harps on the need for a negotiated settlement, without ever having admitted to his earlier lies.

          There are two ways that wars end. Utter defeat of one party, or negotiation. Since neither party in this war is capable of utterly defeating the other without the use of nuclear weapons (which, recall, Putin threatened early in the war), it’s obvious that there will be a negotiated settlement. We don’t need an Putin’s paid shill to lecture us about that.

          There are two big questions which must be answered on the way to a negotiated end to this war. Where will the border be drawn? What security guarantees will be made? Ukraine cannot afford to accept fraudulent guarantees from Russia, given that Russia’s doctrine for pursuing aggression includes harrassing rivals during periods of “peace”, stirring up domestic discord and attempting to dominate the domestic politics of neighboring states. Russian officials have said Ukraine is an historical fraud, that ot doesn’t exist. Russia has invade Ukraine twice in the past decade. Russia has killed, kidnapped, tortured and raped Ukrainians by the thousands while moaning about Nazis – Oooo, scary! Halloween is over.

          So, Johnny, instead to pretending to some sort of special wisdom, why don’t you fire up that bought-and-paid-for adolescent brain of your and tell us what security guarantees Russia can offer in good faith?

          This ought to be a hoot…

          1. JohnH

            So, Tricky Ducky, what is your endgame for Ukraine? You claim to hate the carnage and destruction, but you don’t support negotiations?

            You must realize that the other alternative, which you seem to avidly support, is a version of the Vietnam era “destroying a village in order to save it” or fighting to the last Ukrainian. After all, the prospect of Ukraine actually prevailing against Russia is increasingly bleak. Is insisting that they continue to fight and die really a humanitarian outcome?

            In retrospect, wouldn’t it have been better to abide by the Minsk Accords, negotiate before the war, or negotiate in the early months of the conflict? Or do you really think that it was it better to let a country be destroyed by obstructing peaceful settlements reached in Minsk, Istanbul, and by Naftali Bennett?

            Sometimes discretion is the better part of valor. Fighting to the last Ukranian would seem to be one of those times.

          2. Menzie Chinn Post author

            JohnH: On 9/2/2022, you quoted RT: “Ukraine suffers heavy losses in failed offensive”. That was just before Ukrainian armed forces recovered vast swathes of Russian occupied Ukraine.

            I find it amazing that you continue to prognosticate on something you have had so little success in accurately predicting.

          3. Noneconomist

            ‘’Russia has violated every agreement involving Ukraine’s territorial integrity that it has signed in the past 30 years. A negotiated settlement would only be temporary until Russia decides to continue its attempt to take over all of Ukraine. A lasting negotiated settlement will be possible only if Ukraine defeats Russia or if a post Putin government is willing to jettison its imperial designs.”
            Angela Stent
            Senior Fellow Brookings “Foreign Affairs” 1/24/23

          4. pgl

            Jonny boy has now turned to Ted Snider who is a Rand Paul wannabe to support his lies about the US allegedly blocking a peace deal. If you read enough of Jonny boy’s new alleged authority, you might believe the Russian army has nearly succeeded in its invasion of Ukraine. I guess this gets little Jonny boy screaming in his Kremlin miniskirt.

          5. pgl

            Jonny boy is now claiming Ukraine violated the Minsk Accords. Seriously? I guess little Jonny boy does not realize that there have been a series of Minsk agreements – all of which were violated by the Russians. And in 2022 Putin declared that they no longer existed.

            Jonny boy tells all sorts of lies. All of which are easily exposed as lies. Yea Jonny boy is that stupid.

          6. pgl

            “He has insisted that the U.S. broke promises made around the time of the Minsk accord”

            Jonny boy is an idiot as he thinks there was only one Minsk accord. Now the first one was in 2014 which Putin violated. There were more which Putin declared no longer existed in 2022 just as he started his invasion of Ukraine.

            When Jonny boy blames this on the US – he is doing what Jonny boy does. LYING.

  1. James

    Hi Menzie
    Couple of items that I found worthwhile reading this weekend: “U.S. trade is dominated by our neighbors, Canada and Mexico. But Asia is by far more important to both our imports and exports than the Middle East.” Fascinating that trade with Vietnam is more than most Middle East countries combined. Also I knew that trade with Canada and Mexico was large but interesting to see in comparison to other countries. https://www.noahpinion.blog/p/asia-is-much-more-important-to-us
    Also I agree with Mr Nichols – we need to start informing people in diners about how small a percentage is our foreign aid of budget and why we spend this money rather than playing up Trump’s/GOP talking points. https://www.theatlantic.com/newsletters/archive/2023/10/the-diner-trap/675841/ And to the woman complaining about food prices – does she know that Mike Johnson’s wealthy donors/members of his church have received millions in farm subsidies over the years: https://farm.ewg.org/addrsearch.php?search_input_text=caddo+parish (I used to live in Southern Arkansas and Caddo Parish were mostly cotton farmers but there were a lot of soya farmers as well.)
    (As an aside – Rep Mike Johnson (R-LA) is another demonstration of my axiom – if you want responsible governance vote for Democrats.)
    Best regards,

  2. Anonymous

    I am old enough, and used to read Aviation Week regularly, to remember an AF captain writing letter (which got printed!) about how a CVN can launch maybe 20 strike sorties per day…. it was around the end of the first Gulf War.

    The next week an AF general officer wrote a letter apologizing for the captain pointing out the obvious.

    The “dance” to refuel, functional check and rearm a strike sortie is too much for a rolling deck!

      1. Menzie Chinn Post author

        JohnH: There are (at least) two determinants of capital investment in standard neoclassical models. First is the user cost of capital (tax adjusted real interest rate), and the marginal productivity of capital which depends on the estimated usefulness of that capital in making real output. In a standard accelerator model, that depends on the change in GDP. In a financial accelerator model, net worth also comes into play. Do you ever read any journal articles on the things you purport to understand, or at a minimum, a textbook?

        1. pgl

          Macroduck et al. have already made this point in layman’s term. While it is a good thing you so eloquently put it in terms of economics but does anyone believe for a second Jonny boy will get it?

      2. pgl

        One more time troll. Shifts of the investment demand curve versus shift along the demand curve. Of course Dr. Chinn has noted this in more formal terms but we get you flunked even freshman economics.

      3. pgl

        I’m trying to remember how I taught this to a bunch of freshmen that were not the brightest tools in the box (which means they were 10 times smarter than JohnH) but here goes. Assume a classical (full employment) closed economy (no exports or imports) to keep things simple.

        Business investment (B) + Residential investment (H) = National savings (S) where
        B = b0 – b1(r), r = the real interest rate;
        H = ho – h1(r), and
        S = s0 + s1(r).

        Focus on an increase in the business investment curve (b0 rises and h0 and s0 do not change).

        Real interest rates rise by b0/(b1 + h1 + s1) and
        Business investment rises by b0 – b1(r) = b0[h1 + s1].
        Of course residential investment falls and national savings rise.

        So yea business investment rises as its demand curve shifts outward. And the model predicts a fall in residential investment which is occurring even if little Jonny boy tries to argue it is not. Yea – little Jonny boy does not get the data so I suspect he will not get this incredibly simple model either.

      4. Ivan

        Its almost like interest cost is not the only thing that drives factory construction? Who could ever have predicted?

      5. Macroduck

        Asked and answered, boy. You don’t have the honesty to recognize points already made. Get lost.

  3. pgl

    Time to take out some trash – this time the persistent lies from climate change denier CoRev. First this lying troll tried to tell us that the Institute for Energy Research is a reliable source even though it is bought and paid for by Big Oil and the Koch Brothers. Then the little moron try to slip Paul Homewood slimy blog as a reliable source. CoRev has tried to before and I had to remind him over and over about this critique:

    Climate change deniers trying to fool the public again about extreme weather
    Commentary on 15 February, 2019


    But CoRev does not care as a liar has to lie over and over again.

  4. Macroduck

    I owe Johnny an apology. In the prior come ts section, I said Jihnny claimed high interest rates increase wealth. I’m not sure that he has never said high interest rates increase wealth – directly. I have so far not found him making that claim. What Johnny claimed was that high interest rates increase income:

    “JohnH October 15, 2023 at 6:02 pm

    Funny…It’s always interesting to see Ducky mention the negative impact of high interest rates on the “wealth effect” but fail to make any mention of high interest rates giving an income boost which may well be helping consumers maintain their spending spree…”

    This is simply wrong. Interest payments are zero sum, a transfer of income from borrower to lender.

    Now, since wealth is based on past saving, and saving is derived from income, Johnny’s mistaken claim about high interest rates increasing income does imply that high interest rates increase wealth. Increased wealth accompanies increased income. – that’s a simple empirical fact. But as I say, I haven’t caught him outright writing down the error which his initial error implies.

    1. pgl

      I might suggest we consult with the Ando-Modigliani life cycle model alas this well known model is too deep for Jonny boy’s little brain.

    2. pgl

      “It’s always interesting to see Ducky mention the negative impact of high interest rates on the “wealth effect” but fail to make any mention of high interest rates giving an income boost which may well be helping consumers maintain their spending spree…”

      Yea I remember little Jonny boy making this comment. This might be true for rich people that have a lot of financial assets and little financial debt.

      But what about those poor people that Jonny boy pretends to champion who do not have much in the way of financial assets but do possess financial debt. I guess in his zest to be invited to the grown up table little Jonny boy threw them under the bus.

    3. baffling

      what johnny has been saying is that high interest rates are good for the average household, and low interest rates are bad for the average household. and he uses the argument that with higher rates, the average household gets more interest payments. what he does not acknowledge, is that the average household has more debt than savings. so higher interest rates are a net negative for those households. not to mention, that higher rates correlate with higher inflation, which does not help the consumer led average household.

  5. pgl


    Republican Florida Representative Cory Mills claimed that “paid actors” are pretending to be killed in Gaza under the bombardment from Israel following the 7 October attack by Hamas. “What the mainstream media is saying about the indiscriminate fire and the actors — I mean you literally have paid actors who are pretending to be killed, pretending to be treated,” he said in Kissimmee outside Orlando on Saturday, where the Florida Freedom Summit was being hosted. “So what I ask every individual as we already do here in America, educate yourself and find good, positive outsources and stop trusting mainstream media that corrupts the minds of every single American at home,” he added.

    This outrageous claim by MAGA hatter Cory Mills has no basis but I’m sure the Trump News Networks will hype his remarks.

    1. pgl

      Thanks for reminding me to check on WTI prices which little Stevie formerly from Princeton heading past $100. Nope – below $81.70.

Comments are closed.