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Greg Ip

@greg_ip

20 Jan

@WSJ

1/ The S&P rose 14% between election day and inauguration, the strongest transition rally on record (H/T @WSJ market data group). It rose 6% during Trump's transition, which leads me to reconsider ...

2/ .. importance of taxes (& regulation) in market returns. A lot of Trump rally, I thought, was due to lower expected corporate rate. Now, corporate rate is expected to be flat to higher (since D's won the GA senate) but market up even more ... so this is risk-on and ...

3/ shows that macro outlook (rates + fiscal + growth & of course, vaccines) is way more important than micro outlook for rates, regulation. (S&P transition return below)

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Greg Ip

@greg_ip

20 Dec 20

@SenToomey

1/ Sen. @SenToomey's office wanted to curb Fed emergency lending to “preserve Fed independence and prevent Democrats from hijacking these programs for political and social policy purposes.” Yet Toomey also voted to confirm Judy Shelton to the Fed ... wsj.com/articles/congr…

2/ ... who called for Fed monetary policy to support Trump's tax, trade and regulatory agenda, & has down played Fed's independence, saying Fed should "pursue a more coordinated relationship with both Congress and the president." wsj.com/articles/the-f… ...

3/ Toomey has been consistent on some issues e.g. opposing Trump on trade, but on Fed, he seems much less worried about central bank independence under a Republican than a Democratic president.

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Greg Ip

@greg_ip

24 Aug 20

1/ Lockdowns were a blunt & indiscriminate tool that slowed infections, but with no clear strategy for what came afterwards. We know enough now about how to bring down infections at a much lower cost to the economy. My latest.

2/ We had never used lockdowns before, not even during the 1918 flu. Pre-Covid, they were seen as too draconian and difficult to enforce and thus weren't part of the epidemiological toolkit.

3/ The U.S. missed its chance to emulate HK, Taiwan & SK using testing, tracing & quarantine to stop the pandemic without Covid. But nor did it make a clear choice between simply flattening the curve and allowing infections to continue, as Sweden did ....

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Greg Ip

@greg_ip

23 Apr 20

@budgethawks

1/5: Should we worry about the debt? With $484B more stimulus, deficit will hit a post-war high & debt by 2022 will match post-war record. McConnell frets. Should he? My column answers: wsj.com/articles/the-d… Thanks to @budgethawks for figures and @asincopado for charts.

@csm_research

2/5: Long-and short-term interest rates have plunged to between 0% and 1% since pandemic began, and will likely stay low for years more. (Thanks to @csm_research for rate forecast). That completely offsets effect of higher debt on debt service. Ergo, sustainability unaffected.

3/5: I’m not saying this much debt is necessary or being used optimally; that's a topic for a different column. But debt does harm by crowding out private investment and that hasn’t been happening for years, and looks unlikely for years more.

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Greg Ip

@greg_ip

3 Mar 20

1/ One of the consequences of a president who judges all policy actions by the stock market is a tendency of everyone to judge the efficacy of policies by whether they help the market. This is a "looking in the mirror" problem.

2/ The market, like the public, is looking to policy makers to, first, deal rationally and effectively with the virus. That means listening to the scientists, doctors and epidemiologists. Second, the market and the public expect policy makers to mitigate the economic spillovers..

3/ ... as best they can with the tools they have. What should policy makers' response to the market be? Something like: once we have done our job of protecting Americans' physical and economic safety and security, the market will take care of itself.

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Greg Ip

@greg_ip

26 Feb 20

1/x Could coronavirus cause a recession? At some level I feel it's the wrong question. I think of a recessions as more than just a decline in output over x months; it's an endogenous process of declining profits, employment, demand, feeding on itself.

2/ an epidemic like a natural disaster is an exogenous event that acts on supply first and then demand, and while severity and duration vary, it is not a self-sustaining economic process. Once over, both supply and demand recover ...

3/ to pre-event levels. Think of a snowstorm that closes the schools, offices & stores for a day. The GDP drop from the previous day is horrendous. But this does not mean pre-snowstorm GDP was unsustainable or unbalanced and tells us nothing about the future path of GDP...

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