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3. The link to the English version of the report (warning: a rather voluminous 500+ pages) is available at bit.ly/3hYC0eT
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Struck by the importance of the collapse of networks in understanding major macro fluctuations. Three examples:
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I feel the use of ``stagflation’’ is wrong. We are not seeing anything like stagnation. What we are seeing instead is very strong growth, fueled by private and public demand, hitting supply constraints, and leading to some sharp price increases. Nothing to do with stagflation.
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Janos Kornai died yesterday. He was one of my heroes, not just because of his research, but because the way he lived his life. Here is an interview of him I did in 1998. kornai-janos.hu/Blanchard1999%…
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Concerns about the Biden stimulus plan bit.ly/3qsCMGL were justified. Inflation is running much above what was forecast. We should now concentrate on what comes next, what the Fed may need to do, and what the implications may be. A few thoughts: bit.ly/3n8s7yO
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For the last year, I have been working on a book on fiscal policy under low interest rates. It will be published by MIT Press in 2022. Meanwhile, MIT Press has made the draft available to all on an open source site, …y-under-low-interest-rates.pubpub.org
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A fascinating graph in many ways. The starting point. The steady collapse over 80 years. The sharp, but limited reversal. (from Daniel Wadenstrom, bit.ly/3Fqzicr )
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1. If it is confirmed that even 3 doses of Sinovac are ineffective against Omicron, China now has 1.4b non immunized citizens... This has major economic implications for China and for the world.
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2. Given China's zero-covid policy, this implies frequent and major lockdowns, with a large effect on activity in China.
It also implies major effects on trade. Sharp limits on travel, inbound and outbound will make it hard to maintain/expand supply chains going through China.
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A fact that struck me: Russia's GDP (1.4 trillion in dollars) is equal to the sum of Netherlands and Belgium GDP (0.9 and 0.5 trillion respectively)...
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It is hard to understate the importance of the decision of the European Court of Justice to allow the EU to withhold funds to countries that do not respect the rule of law. It is a truly major decision, decisive for the future of the European Union.
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1. The war in Ukraine will to an increase in gas and oil prices. How much will depend on whether either Russia is willing to limit exports or the EU is willing to limit imports. For the moment, the effects are limited. They could get worse.
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Best analysis of costs of sanctions for Russia versus EU I have read so far, and clear policy conclusions. twitter.com/lugaricano/sta…
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1. During World war II, economists working for US military intelligence, and using analytical tools, identified how bombings should be chosen so as to have the maximum impact on production in Germany.
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Why I am pessimistic about inflation, and why I believe the Fed will have to increase rates more than markets think. bit.ly/3q4nua8
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J'ai peur que les économistes de NUPES aient mal compris la signification de multiplicateurs supérieurs a 1. Comme ils ont tendance à me citer, je me sens oblige de corriger. Deux points tout simples (bien sûr, il y a beaucoup de complications potentielles que j’ignore ici):
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2.Les dépenses budgétaires augmentent la demande, mais l’offre ne peut répondre que si l’économie n’est pas au plein emploi. Sinon elles créent de l’inflation.
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Don't blame the oil companies for their high profits. It is not price gouging, just how markets work. But there is nothing wrong with taxing those exceptional profits.
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This chart from @jburnmurdoch is truly worrisome. 2% of the population is already a very large number, and the graph suggests that it will increase further. This is macro significant.
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Two reasons to expect Russia to drastically cut gas supplies.
1. Russia is a gas monopolist facing a very inelastic European demand curve. The only reason not to set a nearly infinite price (and sell epsilon) is to preserve future demand.
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One thought about inflation fighting
1. When inflation comes from overheating, convincing workers that the economy needs to slow down, and that unemployment has to increase to control inflation, is hard but at least the logic can be explained.
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2. When inflation comes from an increase in commodity and energy prices, convincing workers that unemployment has to increase to control inflation, is even harder. “Why should I lose my job because Putin invaded Ukraine ?”
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1. Looking for a research assistant, part time or full time, to help Jean Pisani Ferry (@pisaniferry) and me on research projects.
Location: Paris or DC.
Timing: Starting in the fall
Duration: At least a year.
Required skills:
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1. I thought it useful to gather my thoughts and predictions for the US economy for the rest of the year. The usual caveat applies: there is a lot of uncertainty around them, but these are my best guesses. 1/9
Robert Solow Professor of economics emeritus, MIT
Fred Bergsten Senior Fellow, Peterson Institute for International Economics