Figure 1: Economic Policy Uncertainty (blue), and 7 day centered moving average (red). Source: policyuncertainty.com.
5 thoughts on “EPU on the Rise”
New Deal democrat
This is the kind of short term graph that I frequently criticize because in the longer term the values aren’t unusual at all.
But in this case, the opposite is true. A long term graph of the last 40 years shows that uncertainty has only been this high immediately after the 9/11 terrorist attacks, the September 2008 financial crisis and crash, and right after the onset of the pandemic lockdowns.
All of those were at or close to long term economic and financial market bottoms. Somehow I don’t think that is true this time.
I’ve only tossed in five categories, to keep things clear. They are personal consumption, trade, government spending overall and ex-military and private investment in equipment. I assume the reason for each is clear.
Target reported quarterly results today, noting that consumers are becoming more cautious. The goose-egg in January was an anomaly, but higher prices from tariffs are likely to compound budget strains for all but the best-off households. The best-off households have their own problem – a reverse wealth effect if stocks keep sinking.
Steel and aluminum tariffs, which are due in a couple of weeks, will raise the cost of equipment investment. Reciprocal tariffs, on Europe or across the board, will hurt consumers and investment in equipment.
The oh-so-clever idea of leaving government out of GDP calculations obviously won’t make much difference in the long run growth rate, given the small impact on the calculated pace of growth from government spending. Recessions will look worse, recoveries better, but the average won’t change much.
A little more policy uncertainty might be nice here. I’m not a China expert, but I can’t find any suggestion that this gathering will offer new ideas to get China out of its slump. Changing the growth target shows up in press reports, but that really only means a couple of things. One is that the passage of time means this year’s results are more locked in, so there’s less room to pretend things will get better. The other is that regional leaders will either be burdened with unachievable goals, or they won’t. Unachievable goals tend to produce waste and debt for only short-term gains.
Canada and Mexico shouldn’t bother with tit for tat tariffs. They probably can’t outlast the US on that score. They should instead hit the US where it will really hurt, intellectual property. If the US can just rip up trade agreements, then intellectual property rights are part of those agreements.
Most of what the US exports are not goods but services and most of these services are over-priced due to copyright and patent monopolies. Movies, music, software, pharmaceuticals. Apple, Google, Amazon, Microsoft — if they are paying bribes to Trump, then Canada and Mexico don’t need to honor their patents and copyrights.
On a housekeeping issue. Some people may still be having problems with the 403 connection error. I think it is a connection throttling setting in the server, maybe to prevent denial of service attacks from bots. The server seems to allow a fixed number of comments, maybe four or five, from one ISP address, then block all other comments from the same IP address.
You can fix this by changing your IP address. Most modems connecting to your ISP are issued “dynamic” IP addresses. That is, each time you connect to your ISP you are given a new IP address from their pile of available IPs. You keep that IP address until you disconnect from your ISP.
To disconnect and reconnect from your ISP, you can do that in your modem control window. Or if you don’t know how to do that, you can power cycle your modem.
You can check you IP address by visiting “whatismyipaddress.com”. Check the IP address before disconnecting and write it down. See if it changes when you reconnect.
This is the kind of short term graph that I frequently criticize because in the longer term the values aren’t unusual at all.
But in this case, the opposite is true. A long term graph of the last 40 years shows that uncertainty has only been this high immediately after the 9/11 terrorist attacks, the September 2008 financial crisis and crash, and right after the onset of the pandemic lockdowns.
All of those were at or close to long term economic and financial market bottoms. Somehow I don’t think that is true this time.
Not all that far off topic – Contributions to GDP grow:
https://fred.stlouisfed.org/graph/?g=1Eadq
I’ve only tossed in five categories, to keep things clear. They are personal consumption, trade, government spending overall and ex-military and private investment in equipment. I assume the reason for each is clear.
Target reported quarterly results today, noting that consumers are becoming more cautious. The goose-egg in January was an anomaly, but higher prices from tariffs are likely to compound budget strains for all but the best-off households. The best-off households have their own problem – a reverse wealth effect if stocks keep sinking.
Steel and aluminum tariffs, which are due in a couple of weeks, will raise the cost of equipment investment. Reciprocal tariffs, on Europe or across the board, will hurt consumers and investment in equipment.
The oh-so-clever idea of leaving government out of GDP calculations obviously won’t make much difference in the long run growth rate, given the small impact on the calculated pace of growth from government spending. Recessions will look worse, recoveries better, but the average won’t change much.
Also not so off topic – China’s parliament meets this week:
https://apnews.com/article/china-congress-legislature-5cf899bfc9d4705135d9dd56c8dc5212
A little more policy uncertainty might be nice here. I’m not a China expert, but I can’t find any suggestion that this gathering will offer new ideas to get China out of its slump. Changing the growth target shows up in press reports, but that really only means a couple of things. One is that the passage of time means this year’s results are more locked in, so there’s less room to pretend things will get better. The other is that regional leaders will either be burdened with unachievable goals, or they won’t. Unachievable goals tend to produce waste and debt for only short-term gains.
Canada and Mexico shouldn’t bother with tit for tat tariffs. They probably can’t outlast the US on that score. They should instead hit the US where it will really hurt, intellectual property. If the US can just rip up trade agreements, then intellectual property rights are part of those agreements.
Most of what the US exports are not goods but services and most of these services are over-priced due to copyright and patent monopolies. Movies, music, software, pharmaceuticals. Apple, Google, Amazon, Microsoft — if they are paying bribes to Trump, then Canada and Mexico don’t need to honor their patents and copyrights.
On a housekeeping issue. Some people may still be having problems with the 403 connection error. I think it is a connection throttling setting in the server, maybe to prevent denial of service attacks from bots. The server seems to allow a fixed number of comments, maybe four or five, from one ISP address, then block all other comments from the same IP address.
You can fix this by changing your IP address. Most modems connecting to your ISP are issued “dynamic” IP addresses. That is, each time you connect to your ISP you are given a new IP address from their pile of available IPs. You keep that IP address until you disconnect from your ISP.
To disconnect and reconnect from your ISP, you can do that in your modem control window. Or if you don’t know how to do that, you can power cycle your modem.
You can check you IP address by visiting “whatismyipaddress.com”. Check the IP address before disconnecting and write it down. See if it changes when you reconnect.