On reading my admonition to consult my paper with Oli Coibion, reader Ed Hanson writes:
Do you really have a problem explaining to those who can not follow your paper? I hope you do not teach undergraduate beginning economic courses. Unless. of course, your intention is to decrease economic understanding in the world. But then again, I suspect that exactly what you want, because only the economic illiterate and the power elite could support socialism.
Despite provision of numerous references, reader CoRev writes:
… it’s a big IF that soybeans futures are LONG TERM predictors at all.
I find skepticism of forecasting capabilities usually justified. However, when that skepticism is not supported by any citations, I consider such skepticism self-serving. Hence, I am going to go step-by-step for those who are not familiar with econometric methods and assessment metrics, in the hopes of educating people about the challenges of systematic prediction. Here I use as an example soybeans.
Because they expire today! And at this time, barring transport costs, etc., the futures and spot prices should converge. At 814, they are down 22.4% from levels recorded in late May.
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(With apologies to Barbara Tuchman.)
From Bloomberg, “U.S.-China Trade Talks Grind to a Halt”, in the wake of the announcement of $200 billion additional in taxable imports:
High-level trade talks between the U.S. and China have ground to a halt as the Trump administration threatens to escalate a trade war that shows little sign of abating, according to five people familiar with the matter.
That’s a comment made by an Econbrowser reader. Initially, I thought this was the stupidest thing that had been written since Don Luskin decried recession doomsayers in September of 2008. Upon reflection, I still think it’s pretty stupid, but the statement could be better re-written as “Trade can be war by other means.”
The announcement of proposed items is here. From the announcement:
USTR and the interagency Section 301 Committee carefully reviewed the public comments and the testimony from the public hearing. USTR and the Section 301 Committee also carefully reviewed the extent to which the tariff subheadings in the April 6, 2018 notice include products containing industrially significant technology, including technologies and products related to China’s “Made in China 2025” industrial policy program.
Reader Bruce Hall writes:
Just noticed that steel prices have generally fallen over the past 6 months. https://www.marketwatch.com/investing/index/steel?countrycode=xx . …
Mr. Hall seemingly links to a stock price index, rather than the price of steel. No matter; here are two relevant series, as compiled by the St. Louis Fed.
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Soybean futures prices for July have been falling since early March, ever since Mr. Trump announced imminent Section 232 sanctions on steel and aluminum imports. Is the drop coincidental, weather/harvest condition driven, or trade policy driven?
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That’s a new article at the outstanding web portal VoxEU, coauthored by Matthieu Bussière, Menzie Chinn, Laurent Ferrara, and Jonas Heipertz, and based on this paper:
The ‘Fama puzzle’ is the finding that ex post depreciation and interest differentials are negatively correlated, contrary to what theory suggests. This column re-examines the puzzle for eight advanced country exchange rates against the US dollar, over the period up to February 2016. The rejection of the joint hypothesis of uncovered interest parity and rational expectations still occurs, but with much less frequency. In contrast to earlier findings, the Fama regression coefficient is positive and large in the period after the Global Crisis, but survey-based measures of exchange rate expectations reveal greater evidence in favour of uncovered interest parity.
Some observers claimed the fungibility of soybeans would mean little impact on US soybean prices. Unless the Bloomberg terminals are being hacked by the Russians…
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