I really like it, @adam_tooze. Esp the deadpan: "The chief priority for economists was to educate and restrain politicians to ensure that inflation remained in check and public debts were sustainable." 1/
Agree too, and completely, about centrality of the logic of discipline: "vincolo esterno, the abstract mechanism of constraint that now stifled all initiative." 2/
Also loved the story you told of the first Yellen hike, but where is arm-twist of Lael Brainard at the time? 3/
I do have a big beef with this piece though. It's an elites-only narrative arc. Populism emerges suddenly as deus ex machina. It didn't come out of nowhere. The reason Obama-era elites didn't see it coming was their insulation from the people you bracketed away: 4/
Finally, agree strongly on this: "if the truly strategic challenge facing progressive politics in the United States as in Europe is to find a new model of inclusive and environmentally sustainable economic growth, then the Biden administration has yet to deliver." 6/6
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"… education is now a sharper differentiator of expected years of life between 25 and 75 than is race, a reversal of the situation in 1990." 1/
"In the early 1980s, median wages of prime-aged (25 to 54) workers with a 4-y degree were 40% higher than those without. This college wage premium had soared to 80% by the late 20-teens…" 20-teens? come on guys. 2/
An illustrated guide to the global financial cycle. 1/ 👇
How can we measure global financial conditions in real time? The strategy pursued by the Chicago Fed in the construction of the National Financial Conditions Index (NFCI) is problematic, as I explained here. policytensor.substack.com/p/how-to-const… 2/
Instead of trying to track the NFCI, we let the covariation with market returns determine the loadings for each of the risk spreads we use to construct our metric. We use the PLS estimator to obtain the linear combination of risk spreads that best tracks the market. 3/
As Prado puts it, informed investors are investors that are more informed than the dealers. This is a hard thing to do. A lot of money must be invested in price discovery. What hedge funds are supposed to do is identify mispricing better than the dealers. 2/
This requires a lot of arbitrage capital — a quantity that is endogenously determined along the lines of Shin & co's 'theory of arbitrage capital'. modul.repo.mercubuana-yogya.ac.id/modul/files/op… 3/
If the term spread predicts looser financial conditions, why did QE work?
Macrofinance thread 👇
1) Had an interesting discussion with @RobinBrooksIIF on the implications of higher yields on financial conditions and economic activity. What prompted my tweet storm was this tweet:
2) A greater term spread is assumed to imply higher cost of borrowing and therefore should dampen financial conditions, as Robin assumed. But this is not the case.