Macro

This means that the dollar tends to be structurally overvalued on a trade balance basis. It trades based on all of the normal fundamentals that other currencies do, but then also has this extra layer of demand at all times, for all these various purposes. Most currencies are primarily used by the country that issues them, whereas the dollar is used... See more

The dollar is different. It’s the main currency that entities around the world do hold for long periods of time. Since the dollar is used for those four previously-described purposes internationally, it means there is excess demand for the dollar by entities around the world above and beyond simply interacting with the American economy or financial... See more

Everyone was happy to buy 18-24-36 months ago, when the horizon was cloudless and asset prices were sky-high. Now, with heretofore unimaginable risks on the table and priced in, it’s appropriate to sniff around for bargains: the babies that are being thrown out with the bath water. We’re on the case.

The hoped-for results might materialize, or the negative consequences might be felt, or some combination of the two. It must be borne in mind, however, that whereas the negative ramifications from tariffs will probably be felt almost immediately, any gains are likely to come only in the long run, following a multi-year period of adjustment.

Japan exploited its advantages in producing autos, and the U.S. moved on to things in which it could achieve an advantage of its own. Isn’t that exactly the way things should work in a dynamic global economy?

As I asked in a memo in September, is it a good idea for governments to try to override the laws of economics in an effort to cause their eco... See more

In the 1980s, people like [Trump’s counselor for trade and manufacturing] Peter Navarro decided that Japan pulling ahead of the US in autos threatened the future of the U.S.

Japan did indeed pull ahead and never looked back.

The U.S. economy has more than doubled in size relative to Japan since then. It has doubled even after allowing for population ... See more

If only it were that easy. The problem is that in the real world, and especially in economics, there are second- and third-order consequences that must be considered. If there weren’t, economics would be dependable like the physical sciences, as in “if you do A, then B happens.” As theoretical physicist Richard Feynman said, “imagine how much harde... See more

There was nothing anyone could say they “knew,” and that included me. I was limited to gaming out my conclusions, which were as follows:

• we can’t confidently predict the end of the world,


• we’d have no idea what to do if we knew the world would end,


• the things we’d do to gird for the end of the world would be disastrous if it didn’t end, and


• most of the

... See more