That’s a comment by Steven Kopits.
“…we had a debate about whether M2 was mean reverting or not. The data says it is.”
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Author Archives: Menzie Chinn
Guest Contribution: “Fifty Years of Floating”
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.
Weekly Macro Indicators, thru 3/18
Here’re some indicators at the weeky frequency for the real economy. Bloomberg notes that GDPNow (3/16) combined with SEP median of 0.4% growth rate for 2023 implies 3 quarters of negative GDP growth starting in Q2. The latest data below relate to late in Q1.
Stress
St. Louis Financial Stress and Chicago Financial Conditions Indices.
Market Implied Fed Funds Path, Post-FOMC
Up relative to yesterday (or the 19th), as expected given Powell’s statement. However, still way down relative to March 8th.
“Forecasting Summer School: Modeling and Forecasting the International Dimensions”
That’s the title of the 6th annual Forecasting Summer School, June 24-25, at the University of Virginia Darden School of Business, Charlottesville, where I’ll be the instructor. The deadline in March 27.
Swedish Inflation: Blame It on Biden!
The evidence is overwhelming. As Steven Kopits comments:
Yes, Powell and Yellen [are at fault for causing the inflation and resulting banking crisis]. Nothing new there.
And, yes, the US can export inflation. If a US fiscal impulse goes into a full employment (or upwardly constrained employment) economy, then the difference will show up in imports. We would expect to see a blow-out in the trade deficit and clogging of ports. Which we did. And we would expect that supply chains across the world would be under pressure with price increases across the globe. Which we did. So, yes, best I can tell, the US is able to export inflation.
What Would Interest Rates Have to Be for Unrealized Losses to Be Zero
Consider the following graph of unrealized losses on securities held by reporting banks (from Rupkey/Financial Markets This Week):
How Unique Was SVB?
Pretty unique, in terms of size, and the combination of uninsured deposits and held-to-maturity securities. From the Economist:
Recession Chances: Fed Pause vs. Banking Shock
Goldman Sachs raised the probability of recession from 25% to 35% in light of the SVB related turmoil (although their guess is still lower than the consensus). This prompted me to wonder what was the net effect of the turmoil and Fed response (less tightening) on economic activity.