A set of largely unconnected comments on recent events. None of them necessitate long form treatment.
- On the macro side, the weaker-than-expected CPI print was obviously the main news. The housing component of the CPI is constructed with a lag, and is one of the perkiest in terms of rising. It will keep core CPI elevated for some time, but since everyone knows about the lag, that will probably be looked through.
- There appear to be pockets of weakness in the economy, including some high profile lay offs. Even if there is a slowdown in growth, that should help the disinflation.
- There was a lot of discussion this week about the Fed statement and press conference. Those discussions tell us what the Fed is thinking now, which does matter. But it is dangerous putting too much weight into the parsing of Fed speakers. They are reacting with a lag to inflation, since they seemed to have given up on whatever modelling work the massive staff at the Fed is doing. If inflation durably turns, so will the Fed.
- The Russian abandonment of Kherson was a significant victory for Ukraine, even though it looks like many Russian troops managed to escape across the river over the past few weeks. Although the Ukrainians will not easily chase them across the Dnipro near Kherson, the Ukrainians can now leave a skeletal force to hold that portion of the front. They will then be able to turn their firepower to the attrition of other Russian units — whose morale is going to be hit by yet another failure. The most likely next phase of the war will be the attrition of the Russian units in the area of Melitopol over the winter months. Although cheerleaders for Russia had been predicting that Russia would win the long war, things might be more awkward for them politically over the winter months.
- The crypto implosion seems to highlight weaknesses of interconnected entities that were running highly questionable if not fraudulent financial practices. This does not matter for the real economy, as the entire “industry” is largely zero sum scams that redistribute money from suckers to insiders. Every year, a lot of people lose money betting on the Super Bowl, but that has no macro effect. Unlike the financial sector in 2008, crypto is not used to finance the real economy. There will be job losses, but they are tiny relative to the labour pool in the developed economies.
- Twitter has been in high speed meltdown mode, which has been fascinating to watch. For now, I remain on there, but may need to retreat to my Substack/blog and publicise links elsewhere.
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