economics

What’s Happening Today?

Taken about 8:45 AM EST in the pre-market. In short, this is the PPI coming out hot. 2.9% annual inflation versus and expected 2.6%. For the market this is as bad as, if not worse than, the CPI coming in hot. If the CPI comes in above estimates, that just means rates might rise. But if the PPI comes in hot, and the CPI doesn’t, it means margins get squeezed. It means that for a $100 of revenue, it means less profit. If both CPI and PPI were going up, that’s not good, but businesses are able to hold their margins. As happened earlier in the inflation burst, CPI went up faster than PPI in some cases, and margins expanded.

That explains some of the impact. The other part of it is the idea that AI isn’t playing out the way people hoped it would. We are seeing a concerted push by companies to adopt AI and (despite the protestations of $XYZ – Block), we have yet to see significant changes in productivity. There may be reasons for this that have nothing to do with AI. First and foremost, it’s a new technology. The “recipe” for mixing it into an organization to boost productivity and reduce costs may need to evolve. With a lot of churn, it’s hard to know if chat bots, RAG (retrieval assisted generation), or some yet undiscovered pattern will produce the best outcome. One that doesn’t give away free stuff from vending machines or cite non-existent cases in court filings. (So, how much do you want to trust an LLM to correctly categorize a major business expense that could cost you in interest an penalties?) But until we do it looks like NVidia may be the only winner as they sell more GPUs to companies that may not have the electrical grid power to turn them on?

But let’s get back to macro. Long rates are dropping, but the 2-year is kind of holding in a range. These are bond price futures, meaning when they go down, interest rates go up. (The price of a bond is the inverse of the rate). The bottom two are 10 and 30 year bonds, respectively. Businesses are generally sensitive to the 10 year rate. Prices were falling on the 10 and 30 up to February, ,while the 2 year stayed in its trading range. (I kind of compressed the 2 year graph to give a better sense of how little movement there was in the 2-year, given a similar $3 range in the 10 year). The fact that long bond prices were going down, while shorter term maturities were stuck, meant that long rates were coming down while short rates were holding. (The shorter you go the closer you track the Fed Funds rate).

A normal yield curve has the lowest rates for the shortest maturity debt. Everything beyond that carries more risk. These risks may be interest rate risks (the interest rate falls and so the price of your bond falls), or re-investment risk (the rates go down and you can’t re-invest at the same rate). There’s almost no risk at 30 days to 90 days. At thirty years, there’s almost a certainty things will be different and you might be underwater in your bonds or unable to secure a similar rate when the principal redeemed. The price of the bond is a negotiation between buyers and sellers about future interest rate risks.

When the price of long bonds start going up, it means that people are betting future rates are going to be lower. This is because they expect lower demand for capital in the future – likely because the economy is slowing. A rate inversion, when the rate on the long bond falls below the short rates, is a sign investors expect the economy to be in recession so rates will be reduced to stimulate the economy. That’s why we get yield inversions, and why they tend to be at the start of, or just in front of a recession. Also, in most cases, the short term rates go up because the Fed has been slowing the economy. This last inversion period was both large in scope and did not result in a recession, so far1. (And there won’t be as much borrowing to invest in new businesses). What you want to see is the entire yield curve (the interest rates at various maturities) move down together. Lower rates plus strong future expectations.

Which brings me to this graph, the balance of payments (trade deficit). If you eye-ball a line across the graph, between -60,000 and -80,000, you probably have close to the average trade deficit. Then you have “Liberation Day” in April and a huge spike. What’s that about? Those are businesses bringing in inventory prior to the tariffs taking effect. That inventory was spent down in the next few months, as businesses imported less because their inputs were sitting in warehouses. At some point they are going to have to bring in more product, and that’s why I think we’ll be back to roughly the same (maybe a hair smaller) trade deficit. We’ll have to see how it plays out, but the last reading was in line with the historical average.

That suggests that businesses are continuing to import final goods and inputs for their manufacturing at nearly the same rate as before the tariffs. Some businesses elected to eat the tariffs (note it is businesses that pay tariffs, not governments) rather than pass those costs onto consumers. They were assuming the tariffs would get rolled back and it’s better not to piss off your customers. They might even get refunds. But given the number of businesses that sold the refund rights to Lutnick’s kids at 20 cents on the dollar (yes the same one working for the president as the secretary of commerce), I don’t think they held out high hopes. We’ll have the lovely spectacle of the commerce secretary’s kids suing the federal government for refunds of illegal tariffs imposed by the administration, which they scooped up at bargain basement prices. Ain’t corruption grand?

If businesses are importing as much, and they are paying higher prices, and they have spent down their inventory, we might FINALLY start seeing the consumer level inflation impacts of tariffs. But we’ll first see it at the business level. Businesses have eaten the tariffs, for now, but will either suffer lower margin or start passing on those costs. That means businesses will start cutting costs to deal with tariffs and the easiest way to cut costs is to reduce head-count. When people no-work they no-spend. Block’s hope is the reduction in headcount (maybe over-hiring a few years ago), will result in better margins as costs fall, even if revenue falls. But, like I said earlier, there is no clear indication we’ve figured out how to incorporate AI into businesses or operate an AI provider profitably. It’s all subsidized by giant pools of investor money.

If you expect a softer economy (not radically expecting recession tomorrow), you want to hedge your risk (equity) exposure by buying bonds. Foreign companies have become a lot more wary of buying bonds, except there is no other currency with the depth of the dollar. And therefore US debt is still attractive. (TINA – there is no alternative right now). If short rates hold up because inflation actually starts making its way into the consumer market (not in one quick burst but trickling in as business after business has to raise prices), and the Federal Reserve can’t cut without resuming inflation, you should expect the economy to slow. By how much? I don’t know, but I would not expect long rates to stay where they are. I expect them to come down, or there is an increase that the Federal Reserve would need to step in by shoving liquidity into the system.

The two year has been betting the interest rates will stay about the same. Until February, the long rates were making similar bets (or maybe a little AI optimistic combined with nervousness about the Fed forced to cut rates combined with dollar de-risking). They were holding or going up slightly. Now they’re falling, compressing the yield curve. At the same time business costs may be going up. With a Fed that can’t immediately inject liquidity until the economy gets a lot worse. What a lovely little shit-show we’ve built.

This is not investing or investment advice to you, or anyone. It’s is provided for your entertainment purposes only. And if you are investing, contact a professional before making any decisions. Buying and selling stocks, futures, or any investment is a risky activity and can cause you to lose money, including the principal which you invest.

  1. It may be the ONE TIME that the Fed slowed the economy but didn’t throw it into recession. The so-called soft-landing. Something I did not think could be done and therefore missed out on some returns (albeit at a higher risk). ↩︎

A Not So Quick Note on Jobs Report

The fun thing about the jobs report is re-interpreting it to better suit your political leanings. “Yes, but they’re not good jobs.” Estimates were in the 70k ballpark and the number came in at 130k. There was also slight wage inflation. This makes a rate cut less likely in the next few months, Warsh or no Warsh. The bulk of the jobs came in health care and education, with the government losing jobs. We’ve been assuming that the interest rates have been a drag on the jobs market but the economy may have adjusted to having any number other than zero as an interest rate. In fact, there’s a case for an interest rate increase in the coming year.

  1. The last mile on inflation is sticky, which may mean rates are not high enough.
  2. If the economy is expanding and pushing up wages at 3.5% funds rate, the neutral rate may be higher.
  3. Inflation may accelerate if GDP continues at its current clip and wage pressure continues to rise.
  4. Aggressive spending (like a 45% increase in the DoD budget) may fuel more inflation.

But here’s the thing. Don’t read too much into one report. Next month could surprise down by 50k. Who knows why – there are some long-standing data collection issues. The numbers will bounce around, especially as they get revised. There’s the table of year end revisions to the 2025 reports and it’s illuminating.

We created (revised) 181k jobs net last year. Maybe the yardstick of over 100k per month for a growing economy doesn’t make sense in a country that may start to experience population declines (as we shut off the immigration flows). That’s been the number I’ve used to evaluate jobs reports, but net migration to the US (by policy) is intended to be zero. We’re not fucking enough to make enough new kids. In fact, if the population isn’t growing, and it’s just aging. Wouldn’t slight job losses, but more jobs concentrated in healthcare, be a good jobs report? Maybe the yardstick should be net zero jobs near full employment? And only shrinking and growing during recession or post-recession recovery?

As I think about this, I start to think about the elasticity of wages with respect to growth. Once we push up against full employment, wages need to rise to get more workers into the job market. How much do wages need to rise once we get more workers into the job market? If we go from 4.3% unemployment to 4% unemployment (very low, historically), do we see wages shoot up enough to drive inflation? But if we get not much more slack than 4.5%, do we see wages falling? That would suggest wages are inelastic with respect to employment near full employment. I suspect the same isn’t true in a recession, if unemployment spikes to 7% or 8%, and much smaller (if any) increase in wages are needed to bring down unemployment. We go from having a Philips curve to a Philips hockey-stick.

It also has some implications on growth. A shrinking population suggests that growth that’s slightly too fast results in inflation. With a growing population, part of growth simply goes to absorbing new workers. You need to grow, otherwise you quickly accumulate large masses of unemployed people. And I suspect it favors younger, less experienced workers, as you can hire more of them to replace older workers. They are cheaper and plenty of them. But what if a shrinking population size makes you risk averse, preferring to stay with proven workers rather than bringing in new, lower return, unproven workers from a smaller (and therefore not much cheaper) pool? Maybe that’s why Europe has had a persistent youth unemployment problem?

Hear me out on this brain fart. In a fixed population (or shrinking population), you basically trade one worker for another. When Bob retires, Alice steps in. You knew what to expect with Bob. Bob was very well trained. In Bob’s cohort, unemployment is like 2%. To balance that, in Alice’s cohort, unemployment needs to be higher, say 10%, so on average, we have that magic non-inflationary level of unemployment. But Bob is old and Alice is young. Alice would be much cheaper, if we had a larger pool of Alices than Bobs.

But there aren’t a ton of Alices sitting at home, vaping and playing Call of Duty. Alice is a risk. You could bring in Alice, train Alice, and then lose Alice as she’s offered a better job by your competitor. In addition to the fact you need (say) 1.5 Alices to equal one Bob until Alice gets a few years of experience. Whereas they are not likely to poach Bob, and Bob would probably not get a better deal if he moved. You have an incentive to hold on to Bob and only hire Alice, if Bob leaves. And if one Bob leaves, a slightly younger Bob would be preferable.

Once Alice’s cohort comes into jobs, their unemployment also drops to some low number. But in order for that to work, the unemployment among new workers has to stay fairly high. Maybe I just made a realization labor economists have known for years. In any case, I think we’re going to have to get used to flat jobs reports and more of our workforce moving into healthcare. Otherwise you wind up with inflation pressure and Boomers dying on the side of the road.

How to Weaponize Your Own Mess

What links the working class elements of Brexit and anti-globalist American right is a belief the world order has exploited them. The messaging and thinking isn’t precise, because these are not informed opinions. David Ricardo has been right for the last 211 years, from 1815 to today. Trade makes both countries wealthier. What Ricardo didn’t say is how that wealth would be distributed (although I think he assumed it would be a broad lift in living standards). Also implicit in the reasoning around trades is that other aspects like environmental or human rights protections would be respected. In the ideal view, one country doesn’t become the efficient supplier of a good because it’s willing to work enslaved people to death in toxic conditions.

There’s an old economics joke. Stick your head in a 400 degree oven and your feet in liquid hydrogen. On average, you’re fine. A lot of inequality is elided away in mass averages. It comes to light when we break these statistics into quintiles, quartiles, or the top/bottom X percent. There are are so some synthetic measures, like the Gini co-efficient for the US is 41 while 29 for Germany, while the GDP per capital in the US is about 90,000 while Germany 57,000. On a per-capita basis it’s better to be an American. But the likelihood that you share in that wealth is lower. It’s kind of like people wax poetic about medieval times but forget that in all likelihood they were a peasant working as a near slave for the feudal lord.

What has happened in the UK and the US is that the distribution of benefits from trade have not been distributed evenly. There was a belief that the system would work it out in the end. You lose your job in the industrial North of the UK or the rust-belt of the US but something else comes along. Like you leave the assembly line and start designing AI accelerator chips or turn to writing software. In fact, what was needed, was a re-distribution of wealth by the state so the benefits of globalization were more evenly distributed. By the way, the Gini coefficient for the UK is about 35.

The benefits of trade were delivered unequally, benefiting capital more than labor. That capital also became militant about not raising taxes or wealth redistribution. After all, are you advocating for class warfare by asking billionaires to pay a reasonable tax rate? Why do you want to tear society apart this way? Go back to your squalid little pens and rejoice in the social order, you troglodytes. Oh, and breed more little troglodytes because we’re running out of consumers.

It cost Bezos a mere 75 million to produce the Melania movie as a not-so-under-the-covers bribe to the Trumps. That money was found when Jeff turned his couch over and collected what fell out. That’s how much money he has. He has been a principal beneficiary of freeing trade and intends to keep every red cent he’s ever earned from it. For Microsoft or Apple to put up money for vanity projects like the destruction of the East Wing of the White House to make way for a gaudy ballroom, it is not a sacrifice. These are companies that don’t worry about millions of dollars. That is a rounding error in their day to day change in capitalization, and the personal wealth of their founders and leaders.

But… But… But… Look at the tariffs! Those are anti-trade. True, but you also need to look how they’ve been turned into a patronage system (by offering individual companies a way out in exchange for obsequiousness or out-and-out bribes), and the loopholes and exemptions lower the effective tariff rate. But for the Trump backers, it means they will pay a lot less money in taxes. If a Harris presidency might mean an extra 50 million in taxes, spending 5 million on PACs is a reasonable investment. Which is how the rich view politicians. As investments. In fact, they got a boon with Trump.

Those same people who benefited from trade. Who were the main beneficiaries of the 2008 bailout, and seemed to wind up with the lion’s share of the COVID stimulus, have weaponized far right parties to prevent any attempt at redistribution. Making people so angry they put the party of the oligarchs and plutocrats in power is a master-stroke of genius. And all the while absolutely castrating the opposition, who is just as needful of their patronage. They are like the clever player that starts the NPCs combating with one another while they watch and plunder the resulting treasure. Exploiting the lack of social cohesion, and the politicians desperate for money, keeps them in effective power and keeps their money safe.

Before you start reaching for the revolutionary pitch-forks, keep in mind that a bulk of these folks seem to survive each revolution. They are the cockroaches during upheavals. Whether it was the Russian revolution, or the French revolution, or the American revolution, a lot of these folks wind up on top. Our best bet is not revolution. It’s putting aside our emotions, our clever memes and slogans, and our sense of “team” to actually look around. Using our clear-eyed view of the world around us to vote for change. I don’t expect a lot from Mamdani, but he is the result of the ‘establishment’ left foisting an unpopular candidate that preserves the status quo. People gave the establishment left the great, big, stanky middle finger rather than support a sex pest.

Take in the world with a fresh eye. Look at the fact Amazon and many other companies benefit handsomely from trade, that trade will bring in wealth, but maybe that wealth shouldn’t be concentrated into so few hands. Look at the private equity players who purchase companies with debt, load those companies with more debt, sell them, bank their proceeds as capital gains or income, to do it all over as those companies declare bankruptcy. Minting their income through debt, massively reducing their tax burden, but in the process devastating the lives of millions of individuals. And realize they’re the ones priming the coffers of groups like the Heritage foundation.

At the end of the day, nothing changes until we change. We continue to be the NPCs screaming at each other about this or that issue, while the players sit on the sideline and laugh. Red team versus Blue team, while the green players reap the rewards. If you want any better evidence, in the first Obama administration, the democrats had both congress and the White House could have easily fixed the loophole that allows private equity partners to earn their money at a top rate of 15%. They did not. Because the private equity partners are the people the phone banks staffed by your congress person call to raise money. Now those same groups have decided their future money interests are better served in an autocracy, and they’re using the misery of millions of Americans to do that. A misery they created in the first place.

The Weirdness in Unemployment Claims

Here are the first time unemployment claims from 2000 to 2008. Although the first time claims rate accelerates before the 2001 recession, that doesn’t happen in every recession, with the first time claims generally being a trailing indicator. The lowest point on the chart, touched briefly at the peak of dotcom boomery, is about 260k.

Here is the last couple of years of first time claims. Its highest point is about 260, which it touches during spikes. Although it looks more variable than the chart above, it’s not. It might be even slightly less variable. It’s low points are at 190,000. If I were to look at this, I would assume the jobs number would be substantially higher. We’ve created about 150,000 jobs over the last six months. To absorb new entrants into the labor market, that should have been 600,000. To grow, that should have been closer to 800,000.

There is a degree to which we could be job hugging. No one is convinced they can hire a decent replacement. No one is convinced they can find a better job. People aren’t getting fired and they aren’t quitting. And there aren’t enough new jobs to absorb new entrants. What we should see in the JOLTS data are low separations, low hires, and low openings. But that’s not what we’re seeing. Which actually further confuses the situation.

Separations and hires are still historical norms. Openings are still high. This leads me to be even more convinced, every passing week, that we’re measuring the wrong thing. That’s dangerous because we can be optimizing the wrong numbers. Maybe the Fed is too worried about the job market. Maybe it’s doing better than anticipated. I’m more convinced the job market is structurally different than it was even 10 years ago. That means comparing even 2006 numbers with 2026 numbers could be misleading. Is the gig economy, ranging from Uber to Only Fans the new “go to” when you get fired? Should we be measuring the number of gig workers? The BLS understands the need. But the current statistics are too spotty and hard to compare (also because of the lack of history).

If this seems like splitting a hair, let’s take a look at some policy choices. The first is to leave short term rates where they are. This is likely having a depressing impact on the labor market. If we depress the labor market too much, we go into recession. (Although our latest Keynesian experiment may offset that). If we cut rates slowly, we relieve pressure on the labor market, but does that cause more competition for labor to the point where we get inflation? Or does it ease the pressure to relieve the risk of recession? Finally, there is aggressively cutting rates, which what the economics illiterate Cheeto wants. That could drive a freight train of inflation through the economy and tank the dollar. But from the labor market data, it’s hard to say which is right.

All the options seem logical. If you look at the monthly jobs number, it looks like recession is right around the corner. If you look at people losing their jobs and filing unemployment, we have a perfectly fine labor market. If you look at the JOLTS data, the labor market is dangerously tight, with many more openings than workers. Or is the JOLTS data signalling weakness as we drop below the 5,000 level? I’m more partial to the jobs number and its erratic cousin, the ADP report.

The Quantum Job Market

We have 3 numbers in fairly short order: JOLTS, first time claims, and the monthly jobs number. What do we have so far? The first time claims continue to come in well below ‘recession’ levels. From that number, the labor market looks tight. The JOLTS data, covered earlier, indicates a functioning labor market and not a great disconnect between people leaving jobs and people getting hired. And today we have the non-farm payrolls number. Let’s also add in the ADP number (which I do not think is as reliable as the payroll data). Both the payroll and the ADP number show a struggling labor market, according to historical metrics. Not a bad labor market, but a struggling labor market. Like most economic statistics, we care more about trends than the absolute number, but a non-farm payroll number indicative of a very healthy labor market would be above 150,000. Although it’s possible to get the occasional blip below 100,000.

Note the left hand side is the crazy period when the job market went nuts after COVID.

So far we’ve had about 160,000 jobs created over the last six months. That’s well below the number we need to absorb new entrants into the economy. The less reliable ADP number confirms the payroll data. The JOLTS data indicates a reasonable labor market and the first time climes show little job loss. This is where I think the first time claims may be under-reporting. If you lose your job, you might make slightly more money driving an Uber than collecting unemployment. I suspect other factors are depressing the actual number of people who would seek unemployment assistance. That’s not necessarily a bad thing, if you can make more money driving an Uber than collecting unemployment. You would be better off, even if you are grossly under-employed.

The red line represents initial unemployment claims, while the blue line is a survey of people looking for full time work.

This is why there is no magic single number, and no magic single sample of that number, that gives you a picture of the US economy. From the numbers, the labor market looks slack but not recessionary. It seems to back up the anecdotes of job hugging (where employers and employees may want to part ways but decide it’s better not to part ways right now), and new entrants having a difficult time finding a job. If it’s true that 70 million Americans engage in some kind of “gig” work, that’s nearly half the labor force (about 160 million participants). And maybe a weak jobs number isn’t as bad as it sounds if people can enter the gig economy instead of a “regular” job, and those people are under-counted. (Setting aside issues of job security, benefits, and the impact of under-employment). Is the labor market indicating recession?

There is something we need to acknowledge. Deficit spending is stimulative. At the end of the 2008 recession, there was a push-back on yet another democrat taxing and spending. And the stimulative policies were tempered by the resistance from republicans. (Although at levels that now seem quaint). That drew out the recovery period because fiscal policy was not injected into the problem. Spending more money than the amount removed through taxation stimulates activity and we may have ratcheted that up with the latest budget. We won’t know the final numbers until 2027. It will depend on actual receipts and actual outlays. There is some evidence the outlays will be higher than anticipated, with the DOGE effort showing an actual increase in government spending. If income tax receipts are weaker than offsets from tariffs, it could easily come in above estimates.

The current CBO estimates put the 2026 estimated deficit at 5.5% of GDP. The percentage of GDP is useful because it allows us to gauge what the real impact of the deficit, given the size of the economy. After all, a billion dollar deficit is a much bigger issue if the economy is only 10 billion dollars in size. The 2026 number may be above (likely) or below (unlikely) estimates given factors we won’t know until later. We won’t know until we actually see the impact of the new tax law, along with actual real spending.

The deficit coming down slows the economy in kind of a natural way, as activity boosts tax revenues and broader employment lowers spending on programs like SNAP and unemployment insurance. This natural brake pulls money out of the economy in higher tax revenues and lower spending, reducing the risk of the expansion becoming inflationary. However, we are doing two things that are expansionary for 2026, which are reducing tax rates and pushing the Fed to lower rates. In the face of already expansionary fiscal policy, this may push inflation for 2026. Unfortunately, it’s almost impossible to know the actual impact on inflation because we don’t know how the economy will react. The consumer in the lower 50% of income is in shambles. Most of the consumption is done by the top 20%, with half concentrated in the top 10%. There may not be the purchasing power for broad inflation, even if high end goods may see a level of inflation.

In addition, lower imports from tariffs boosts GDP, even if it means people are consuming less stuff. Could we be in a world where stagnation is masked as the GDP “increases” due to fewer imports? It’s mathematically possible. You could have patchy inflation depending on what goods you are measuring along with an improving GDP due to fewer imports. (You aren’t better off, you just don’t buy that sweater or bottle of wine, because it’s a little pricey). Combine this with jobs numbers being a less reliable measure of economic health (because workers don’t leverage unemployment insurance and transition to gig work), and you could have a stagnant economy, even if the numbers don’t look bad. You have low unemployment because of gig work and GDP growth from lower imports, even though you are under employed and just can’t afford things you used to buy.

Note that numbers are negative, so sloping up and right means the lower imports.

At the end of the day, the purpose of economics is to understand how these voluntary and sometimes emergent systems of interaction between people create well-being. The purpose of 2% inflation or a target of 4.5% unemployment isn’t because the number is important, but because the well-being of many people seems to change at around those inflection points. If inflation drops below 2%, that is usually because economic activity is slowing and over time we will be worse off. If it goes above 2%, that’s a level people feel it erodes their buying power and they are less well off. If unemployment is too low, there is inflation as wages are bid up, while if it is too high, people are out of work and can’t find jobs. The goal of the specific metric should be to indicate when a change in policy is necessary because people feel their well-being is falling.

But it feels like we’re too focused on the numbers, rather than what they mean. I can’t count how many times it feels like the number itself is the target or the policy is being gamed to meet the target number. This includes “patching up” numbers like the CPI so they under report inflation. (There is mixed evidence on this. But we would expect the CPI goods basket to change as the basket of goods and services from 1976 is less applicable in 2026). When the economy changes, the old metrics used to gauge the health of the economy no longer make sense. Following unemployment claims or number of jobs created, if people are shifting to gig work that isn’t reported through these numbers, may no longer provide a meaningful metric. And yet, we don’t have a widely accepted substitute. Like a quantum system isn’t in one state or another until it’s observed, our economy is both good and bad at the same time, because we lack the metrics to observe it.

It Feels a Little Like a Lie

As Q3 GDP arrives, it’s above expectations. I hate anecdotal accounts as a basis for inferring trends, but we have had report after report of worsening conditions for individuals. Whether it’s visits to food banks or layoffs, or retailers pointing to weaker consumers, it feels like Q3 GDP should not have come in at 4.3%. I’m certainly not saying anything ridiculous, like the number is a fabrication or it should have been something negative. I live in the real world (or at lest do my best to discern the real world around me). Somewhere in the 3.5 to 2.5% range felt reasonable.

I’m still digging through the explanations, but one thing that sticks in the back of my mind is feeling like a 4 year economics degree was a joke. All the discussions about stability, or rule of law, or predictability as good soil for economic growth, are out the window. Apparently, you can run the economy like a drunken loon and it doesn’t matter. Or the government stepping in to buy stakes in companies is now a good thing (remember when the evil government stepped in to buy a stake in the big three)? Nosebleed deficits are now okay. Absolutely bonkers ideas from those responsible for our economy, like replacing income taxes with tariffs, is now calmly, if not happily, digested by the markets.

But the biggest shock is the degree to which tariffs don’t matter. It’s part of a larger narrative, where the lower income folks that make the stuff get the shaft and higher income investors and managers are doing better and better. (The managers and shareholders do well as profits, bonuses, and stock awards roll in for moving production overseas, while local workers lose their jobs. While the remuneration is tax efficient, at lower rates for capital gains, the unemployed eventually see their benefits cut because they’re ‘lazy’). We make life better and easier for the top earners while fucking the bottom quartile half three-quarters. Any discussion of taking the surplus from trade and using it to offset the negative impact as jobs shift overseas or are eliminated entirely is sidelined as socialism.

But I digress. We have had chaotic, possibly illegal, and arbitrary tariffs and restraints of trade (like who the fuck thought the government should get a ‘cut’ of GPU sales). And it doesn’t matter. Push for inflationary rate cuts. It doesn’t matter. Heck, I could be wrong, we might not get inflation. Make enforcement a function of bribes to a would-be monarch. No problem, apparently rule of law was not important as long as a bribe gets you what you want. Need to merge? Don’t look for clear guidance to support M&A, just give the grifter in chief and his cronies their vig. Policy clarity can be defined as knowing where and who to bribe.

Am I angry that GDP came in at 4.3%? It surprised me, but I’m not angry. I am frustrated that all the talk about the care and feeding of the economy, the hard choices we need to make to keep it running well, or the degree to which we need the best people running seems like a joke. All the ivy league, PhD, novella-sized CV people apparently were just tooting their own class horns. You took an economics at a community college and think we should return to the gold standard? Who the fuck knows at this point, maybe it will work. You’re a welder who thinks we should stop importing things from Turkey to boost GDP? Sure, why not. Think there’s a trillion dollars of spending that can seriously be cut? Sure, no problem, fuck the math.

Admittedly, this was a rant. Maybe we’re floating on a bubble that may pop badly. And then we might see the effects of stupid policies through the lens of a spiraling economy. And we’ll rediscover we need intelligent, skill people in charge. Or maybe not. Maybe Baumol and Blinder is as much a work of careful fiction as a theology textbook.

But that’s not something I want for me, my family, or my neighbors. Maybe we’ll see the government wade further into business by back-stopping any collapse with “free money” of cheap interest rates, loan guarantees, and buying even more equity in private companies. I remember when that kind of socialism was something Republicans vehemently opposed. Against all the good principles of being careful stewards of the pillars that hold up prosperity. Manipulating rates, funny money deficits, state owned companies, and corrupt officials were something we pointed to as markers of guaranteed economic suffering under tin-pot dictators. I never could have imagined it would be our future.

Kreskin Not Needed

We don’t need a great fortune teller to explain what’s going to happen. We have been letting high income people and large companies avoid paying their share of taxes. Do they pay taxes? Yes. But it’s not unusual for a high income earner to pay at a 15 to 20% rate. Their employees might be paying at the 25-35% rate.

We recently had an anti-trust ruling on Google that, while they were a monopolist who caused a lot of market damage, stifled competition, and hurt their customers, nothing will happen to them. The same “nothing’ happened to Microsoft decades earlier. Nothing happened to Wall Street executives after the mortgage markets imploded due to their fraud. Nothing is likely to happen to Apple in its anti-trust case. Meta’s AI chat bots have lewd conversation with children, while admitting to basically stealing their training data from authors. Nothing will happen to them. Unusual options trades on thinly traded companies just before major announcements feel like they’re happening on an almost daily basis. No one is being picked up for insider trading.

What happens at the end of this, when we let major companies and the rich skirt on their tax burden, when we’ve destroyed the competitive business landscape to help make them a little more money, when we’ve gone into debt over and over again, in administration after administration, to cut their taxes or drive away burdensome regulations? What’s going to happen is that the people in the bottom 95% will be left to bear the burden of cleaning up after a party that they didn’t attend. They will own nothing, because anything worth owning will be held by the rich, who have super-charged the rate they accumulate wealth. They will use those piles of cash to buy anything worth having, from housing, to farm land, to water rights, to pristine wilderness.

The wealth gap between the top 1% and the bottom of the top 10% is becoming stupidly large. Never mind the middle 50% of Americans. And this is happening all over the world. A little faster in some countries, and a little slower in others. But at the end of the day, the super-rich will walk away just fine, but it will be rank and file citizens that will have to pay back the debt. At some point the acceleration of debt will be so unsustainable that either brutal austerity or massive inflation will follow.

And who owns that debt? Who do we need to pay back? It is the super-rich, the large investors, and the large corporations.