WEI continues to decline.
Figure 1: Weekly Economic Index (blue), and Baumeister, Leiva-Leon, Sims Weekly Economic Conditions Index plus 2% (tan), both annualized %. Source: NY Fed via FRED, Baumeister et al.
I think that the tumult due to the on-off-on again tariffs provides a cautionary note about using past correlations to infer current conditions. Note that the Weekly Economic Index (Lewis-Mertens-Stock) jumps around “Liberation Day”; did this represent actual higher production sales? I think partly no, insofar as the weight on railroad freight is 0.3, and so part of the movement in WEI is due to front-loading imports and associated transport to stockpiles.
dumped all of my Tesla stock earlier in the day. wish I had done it last week. trump-musk is gonna get ugly. Harvard should be happy trump has shifted his ire elsewhere. how much of the modern world is maga willing to let trump burn?
Economics has suffered repeated erosion of its tools. The housing collapse, Covid and now tariff bafoonery all undermine the economic relationships on which models are built. That means economics can do less to assist in planning. Business, households and government all face less certainty about the future when they can’t see very clearly into the future.
Economists can help, but not enough to overcome the loss of knowledge caused by broken economic relationships.
What have we done in prior episodes of increased uncertainty? Sometimes, we’ve engaged in thrift. That’s when ole Mr. Paradox bites us in the backside.
Off topic – Ukraine’s spectacular take-down of Russia’s nuclear deterent force, and how Putin’s bluff has been called.
Back in September, Russia changed its doctrine for using nuclear weapons. AP characterized the changes as a strong warning, but it seems to me to acknowledge weakness, as most bluffs do:
https://apnews.com/article/russia-nuclear-doctrine-putin-aggressor-fd2f2664c2589cdadfe84bd0bdb7275e
“In a strong, new warning to the West, President Vladimir Putin said Wednesday that any nation’s conventional attack on Russia that is supported by a nuclear power will be considered a joint attack on his country.
“The threat, outlined in a revision of Moscow’s nuclear doctrine, was clearly aimed at discouraging the West from allowing Ukraine to strike Russia with longer-range weapons and appears to significantly lower the threshold for the possible use of Russia’s nuclear arsenal.”
Ukraine’s drone attack on Russia’s bombers struck deep inside Russia, which is enough to trigger a nuclear attack, under the new doctrine.
The fact that Ukraine destroyed a significant part of Russia’s deterent capacity sort of makes it worse, but in a way that makes the threat of a nuclear response less credible. When your deterence is weakened, escalation is not a good choice. Very clever of Ukraine.
So, Russia’s bluff has been called. Now what? Terrorism!:
https://www.reuters.com/world/russia-says-it-will-respond-ukrainian-attacks-when-it-sees-fit-2025-06-05/
Ya know how Ukraine was reported to have not told the U.S. about the attack on Russia’s bombers? So we aren’t responsible, and also it was “terrorism” rather than “conventional”, so Russia’s fraidy-cat new nuclear doctrine isn’t trigggered. Not by “conventional” and not by “supported by a nuclear power”. Yay.
The accusation of terrorism against Ukraine is not new, which makes it handier now. Here’s an earlier example:
https://www.yahoo.com/news/putin-accuses-ukraine-terrorism-following-181224348.html
Russia also tried to claim that Ukraine was implicated in an actual terrorist attack in March of last year:
https://www.bbc.com/news/world-europe-68652380
So Terrorism!, and Putin dodges having to either make good or, strictly speaking, back down on his repeated threats of ending the world if Ukraine fights back.