Personal income and consumption for January, and manufacturing and trade industry sales for December, were released last week. The PCE deflator for January was also released, rounding out January inflation numbers.
Risk and Uncertainty Measures
VIX, Economic Policy Uncertainty, and Geopolitical Risk:
Cutting SWIFT, Sanctioning Central Bank of Russia
In the old literature on sanctions, costs imposed on the economy had to be pretty large in order to effect change (Hufbauer notes sanctions had an average impact around 2% of GDP, which wasn’t much; sanctions on Iraq were on the order of 5%). Those announced on Russia so far would not have that magnitude of impact in the short run (maybe different in the longer run). However, cutting off Russia from SWIFT — in addition to other restrictions on financial transactions — might come closer. Sanctioning the Central Bank of Russia, apparently under consideration, might come yet closer.
Thirty One Months Ago – Transcript/Shakedown for Javelins
As declassified by the President, a transcript of the July 25, 2019 telecon between Mr. Trump and the President of Ukraine:
“The Day of Infamy”
A post on VoxUkraine by Yuriy Gorodnichenko (Dept. of Economics, UC Berkeley):
…
February 24, 2022 is the day of infamy too: Russia attacked Ukraine, bombed Ukrainian cities, killed innocent Ukrainians on the Ukrainian soil. It can’t be clearer: Russia is the aggressor; Ukraine is the victim. Ukraine has only one threat to Putin: Ukraine can be a free and successful country and thus give hope to Russians to become one day a free, successful country too. As I said before, this is the war with far reaching consequences for the global order, for the free world, and for the security for each of us no matter where we are.
It is a test for all of us.
Entire post here.
Yields Expected over Next Three Months
The implied Treasury yield 2-3 months ahead, based on 3 month and 1 month yields has fallen in the past two days.
Depressions and Recessions
A reader writes:
If you want to explain the difference between a recession and a depression, or why it took seven years for the economy to regain previous highs after 2008, well, go ahead. I’m all ears.
Russian Asset Prices Today
Ruble down about 7%, sovereign bond yields up 4.7 percentage points in 6 days, stock market down 1/3 in one day.
Predictions – Oil Prices and Recoveries and Recessions
A bit over 12 years ago, one prognosticator Steven Kopits wrote:
With the 9.4% unemployment report WTI oil prices are, I believe, effectively at a post-crash high.
I think the economic news suggests that we are running up the back of the “V”.
This is good news and bad news. The good news: an unexpectedly sharp recovery. The bad news: Our analysis suggests the US falls back into recession above $80 oil, and I think we’ll have a chance to test the hypothesis relatively soon.
Russia EMP Watch
One way to assess external financial stress is to look at exchange market pressure (EMP) – the change in the exchange rate, change in reserves, and change in interest rates, possibly weighted by inverse of standard deviations. or otherwise (see e.g., Patnaik, et al. (2017) for several different versions).