Figure 1: US private nonfarm payroll employment (dark blue), and Wisconsin (red), both in logs, normalized to 2017M01. Source: BLS, DWD, author’s calculations.
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The Fed: Drumpffeind
So sayeth Donald Trump today. From FoxBusiness:
“My biggest threat is the Fed,” Trump said on Tuesday during an interview with FOX Business’ Trish Regan. “Because the Fed is raising rates too fast, and it’s too independent,” he complained.
Trump: “I think the Fed has gone crazy”
Implicitly, Trump is saying John Taylor is crazy, since the original Taylor rule would imply even faster rises in the Fed funds rate (I am inferring from Professor Taylor’s discussion of neutral rates. Below I plot the implied Fed funds rate, assuming no interest rate smoothing, the Laubach-Williams one-sided estimate of the real natural rate, and a target variable of 4 quarter PCE inflation.
I’m Already Tired of Winning: MidWest Ag Trade Edition
A reader alerts me – from CNBC, indications farmers are going to take a hit, as export volume drops off a cliff.
United States tariffs are beginning to take their toll on farmers and the storage, shipping and freight operations they need to move their crops to market.
In North Dakota, soybeans from 2017 are still in storage after China pulled its contracts. Of the 15.9 million bushels left from that year’s crop, 12.1 million bushels are sitting in grain elevators. That is an increase of 68 percent.
More on the International Travel “Trump Slump”
Has spending on international travel to and tourism in the US dropped more than expected based on world GDP and the value of the dollar? Yes.
Guest Contribution: “Bill Nordhaus & Paul Romer, Nobel Prize winners”
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.
The Tourist “Trump Slump”
As international tourist arrivals have risen globally, those for the US have declined, as noted here.
The Mini-Recession of 2015-16?
Neil Irwin at the NYT has an interesting article on the localized recession in 2016. One conclusion he makes:
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US Tariff Levels Now at Emerging Market Levels
The following graph compares average tariff levels across countries.
One can take comfort from the fact US tariff rates are historically low.
I have two observations:
- We live in an era of global value chains, so that the value added has been chopped up and split across nations. In this context, a tariff of 10% on final value is a lot more than 10% on value added.
- This shock to global value chains comes on the back of an already stretched logistics network.
The latter point is highlighted by the following graph:
The latter is perhaps a temporary phenomenon, likely to end when the economy goes into recession. However, the former is likely more persistent.
Global value chains have been built up over decades; rejiggering these chains to accommodate tariffs of indefinite duration is sure to be disruptive, possibly inflationary (although that depends on monetary policy).
Does the Fed Care about the Rest-of-the-World?
That’s a title I borrowed from a paper by Barry Eichengreen; the actual title is “International environment and US monetary policy: a textual analysis” written by Laurent Ferrara and Charles-Emmanuel Teuf:
What role does the international environment play in shaping US monetary policy decisions? To measure its influence, we construct an international indicator extracted from minutes of Fed monetary policy committee meetings.