Here's the one number that proves that inflation isn't "really" 10 percent.
British celebrity historian and Harvard professor Niall Ferguson thinks inflation is "really" much higher than its official number. So does celebrity politician and self-styled Austrian economist Ron Paul. And then there's John Williams of Shadow Stats. He too warns of double-digit inflation -- but curiously takes payments for his newsletter in dollars. Even more curiously, he hasn't increased its price in years.
There's just one problem with the inflation monster. It's not real.
The U.S. economy has added 1.9 million jobs over the past 12 months. That number is the best indicator that inflation isn't 10 percent. Here's why.
A country's nominal GDP (NGDP) refers to the total size of its economy. In other words, it's the dollar size of our economy, including both inflation and real growth. Here's why it's interesting: If we work backwards from NGDP and inflation, we can infer how much real GDP grew in the past year. And we can infer from real GDP how many jobs we would expect the economy to add.
The below chart shows much NGDP has grown year-over-year since the Great Recession hit. (Note: 2008 was the first time NGDP hit negative territory since 1960).
In 2011, NGDP grew just a hair under 4 percent. That's not good in normal times, let alone after a deep slump. Trend NGDP growth is around 5 percent, so we would hope to grow substantially faster than that to catch-up to where we should be. It's why the Fed should adopt a more aggressive target now. And it also tells us that inflation is certainly not far higher than its reported figure.
Let's try a thought experiment. If inflation really is 10 percent, that implies that real GDP fell around 6 percent last year. How bad is that? That's roughly where the economy was in the first quarter of 2009. Basically, complete free-fall. And thanks to Okun's Law -- which relates real GDP and unemployment -- we can guesstimate what that would mean for jobs. A back-of-the-envelope estimate says that unemployment should have risen between 3 and 4 percent in that scenario. Instead, we added 1.899 million jobs in the last year.
And no, this wasn't about government hiring distorting things. Government has been the only sector cutting jobs the past year, due to austerity at the state and local level. There's only one logical conclusion. Real GDP was positive, if disappointing, and inflation was in fact low.
The conspiracy theory that inflation is being wildly under-reported doesn't withstand more than 30 seconds of scrutiny. So why the persistent belief that we're reliving the stagflationary nightmare of the 1970s when the deflationary nightmare of the 1930s is much more relevant? It's mostly frequency bias. The things people buy the most often -- gas and groceries -- have gone up the most the past few years. The things people buy the least often -- gadgets and other goods -- have not. It's an understandable mistake. But still a mistake.
Of course, none of this is new. The same fears of increasing prices paralyzed policymakers and the public alike during the 1930s -- despite precipitous falls in prices. British economist Ralph George Hawtrey likened it to "cry[ing] 'Fire! Fire!' in Noah's flood." Ben Bernanke and other central bankers have thankfully managed to prevent outright deflation this time around, but high inflation is still our economic Godot. It's not here, and it's not coming anytime soon.
Update:Ramesh Ponnuru of National Review made very much the same argument in response to Niall Ferguson back in 2011.
The most popular news channel in the Arab world sits uneasily at the center of the Qatar crisis.
Earlier this month, managers at Al Jazeera, the most popular news channel in the Arab world, summoned nervous journalists into a glass-paneled conference room in the network’s headquarters in Doha. A coalition of Arab states led by Saudi Arabia had just imposed an embargo on Qatar, closing its airspace and expelling thousands of Qatari citizens. One of the conditions for lifting the blockade, according to a list leaked on Thursday, was reportedly the closure of Al Jazeera. The network’s leadership wanted to reassure its staff that their jobs were safe. “We’re not planning any changes right now,” journalists were told, according to two participants in the meeting. That left quite a bit unsaid. (I resigned from Al Jazeera English in mid-2013 after working there for nearly four years.)
The president’s policies in office have aligned almost perfectly with Vladimir Putin’s goals.
Fifty-four years ago this month, former President John F. Kennedy delivered the “Strategy of Peace,” a powerful address that captured America’s indispensable leadership at the height of the Cold War. Kennedy knew that our country could not guard against the Soviet Union alone, for he believed that “genuine peace must be the product of many nations, the sum of many acts.”
Incredibly, the man who now leads the United States seems to find himself locked in an alarming and perilous embrace with the Russian government. These ties threaten to weaken a system of alliances that have held Russia—and countless other threats to the international community—at bay since the conclusion of the Second World War.
Mounting evidence that Trump’s election was aided by Russian interference presents a challenge to the American system of government—with lasting consequences for democracy.
Day by day, revelation after revelation, the legitimacy of the Trump presidency is seeping away. The question of what to do about this loss is becoming ever more urgent and frightening.
The already thick cloud of discredit over the Trump presidency thickened deeper Friday, June 23. The Washington Post reported that the CIA told President Obama last year that Vladimir Putin had personally and specifically instructed his intelligence agencies to intervene in the U.S. presidential election to hurt Hillary Clinton and help Donald Trump.
Whether the Trump campaign knowingly coordinated its activities with the Russians remains uncertain. The Trump campaign may have been a wholly passive and unwitting beneficiary. Yes, it’s curious that the Russians allegedly directed their resources to the Rust Belt states also targeted by the Trump campaign. But it’s conceivable they were all just reading the same polls on FiveThirtyEight and RealClearPolitics.
By searching the church's famed family trees, scientists have tracked down a cancer-causing mutation that came west with a pioneer couple—just in time to save the lives of their great-great-great-great grandchildren.
Nobody knew it then, but the genetic mutation came to Utah by wagon with the Hinman family. Lyman Hinman found the Mormon faith in 1840. Amid a surge of religious fervor, he persuaded his wife, Aurelia, and five children to abandon their 21-room Massachusetts house in search of Zion. They went first to Nauvoo, Illinois, where the faith’s prophet and founder, Joseph Smith, was holding forth—until Smith was murdered by a mob and his followers were run out of town. They kept going west and west until there were no towns to be run out of. Food was scarce. They boiled elk horns.The children’s mouths erupted in sores from scurvy. Aurelia lost all her teeth. But they survived. And so did the mutation.
Richard Ben-Veniste on the uncanny parallels between the scandal he investigated and the controversy over the White House’s alleged links to Russia
Watching the national controversy over the White House and Russia unfold, I’m reminded of Karl Marx’s oft-quoted observation: “History repeats itself: first as tragedy, second as farce.” I was a close witness to the national tragedy that was Richard Nixon’s self-inflicted downfall as president, and I’ve recently contemplated whether a repeat of his “Saturday Night Massacre” may already be in the offing. Given how that incident doomed one president, Trump would do well to resist repeating his predecessor’s mistakes—and avoid his presidency’s descent into a quasi-Watergate parody.
The massacre began when Nixon gave the order to fire Watergate Special Prosecutor Archibald Cox, a desperate effort to prevent him from hearing tape-recorded evidence that proved the White House’s involvement in a conspiracy to obstruct the investigation of a break-in at Democratic National Committee headquarters. Nixon’s misuse of executive power backfired, immediately costing him two highly respected members of his administration: Attorney General Elliot Richardson and his deputy William Ruckelshaus, who both resigned rather than follow Nixon’s directive. Third in command at the Justice Department was Solicitor General Robert Bork, who agreed to do the dirty deed and fired Cox.
Gyms and other secular communities are starting to fill spiritual and social needs for many nonreligious people.
“You always know if someone goes to Harvard or if they go to CrossFit—they’ll tell you,” said Casper ter Kuile, a ministry innovation fellow at Harvard Divinity School. “It’s really interesting that evangelical zeal they have. They want to recruit you.”
CrossFit is his favorite example of a trend he has noticed: how, in the midst of the decline of religious affiliation in America, and the rise of isolation and loneliness, many ostensibly non-religious communities are “functioning in ways that look a little bit religious,” he explained on Friday at the Aspen Ideas Festival, which is co-hosted by the Aspen Institute and The Atlantic.
“People’s behavior and practice is really being unbundled from the institutions and identities that would have been homes for it,” ter Kuile says. “[For example], ‘I was raised Catholic but yoga is really the practice where I find my experience of contemplation.’ As institutional affiliation decreases, people have the same age-old desires for connection, relationships, connection to something bigger than themselves.”
Republicans are going to insist otherwise, but that’s simply not the case.
If there was one goal Senate Republicans had set out to achieve in developing their health bill to show they were less “mean” than their colleagues in the House, it was to take away the House Republicans’ green light for insurers to once again discriminate against those with pre-existing health conditions. Senate Republicans were willing to drive up deductibles and co-pays and be more draconian on Medicaid cuts, but on the one issue of pre-existing conditions they were intent on being less “mean,” as President Trump termed the House bill. Now that the text of the bill has been released, it’s clear that they have failed to achieve that.
As they argue for the bill, Republicans are going to claim that it will not allow insurance plans to discriminate against people because they have a pre-existing condition. But that just isn’t the case. The Republican plan may not allow insurers to discriminate against a pre-existing condition through the front door, but they’ve created a backdoor way in.
Most used to work in July and August. Now the vast majority don’t. Are they being lazy, or strategic?
The summer job is considered a rite of passage for the American Teenager. It is a time when tossing newspaper bundles and bussing restaurant tables acts as a rehearsal for weightier adult responsibilities, like bundling investments and bussing dinner-party plates. But in the last few decades, the summer job has been disappearing. In the summer of 1978, 60 percent of teens were working or looking for work. Last summer, just 35 percent were.
Why did American teens stop trying to get summer jobs? One typical answer is: They’re just kids, and kids are getting lazier.
One can rule out that hypothesis pretty quickly. The number of teens in the workforce has collapsed since 2000, as the graph below shows. But the share of NEETs—young people who are “Neither in Education, Employment, or Training”—has been extraordinarily steady. In fact, it has not budged more than 0.1 percentage point since the late 1990s. Just 7 percent of American teens are NEETs, which is lower than France and about the same as the mean of all advanced economies in the OECD. The supposed laziness of American teenagers is unchanging and, literally, average.
As Washington loses patience with the Gulf crisis, the Saudi-led campaign resorts to extreme measures.
Now, Qatar has a list.
On Thursday evening, news reports surfaced of 13 demands from Saudi Arabia, Bahrain, the United Arab Emirates, Egypt, and four other nations that, if fulfilled by Doha, will resolve their ongoing standoff with the tiny Gulf nation. Among the more onerous demands appearing on the list, which may or may not be official, are that Qatar sever all ties with the Muslim Brotherhood and other Islamist movements in the Middle East, downgrade diplomatic relations with Iran, close all Al Jazeera affiliates and severalother Qatar-funded media outlets, pay an unspecified sum in compensation for loss of life and damage caused by Qatari regional policies in recent years, and submit to regular monitoring for up to 12 years to ensure compliance.
She lived with us for 56 years. She raised me and my siblings without pay. I was 11, a typical American kid, before I realized who she was.
The ashes filled a black plastic box about the size of a toaster. It weighed three and a half pounds. I put it in a canvas tote bag and packed it in my suitcase this past July for the transpacific flight to Manila. From there I would travel by car to a rural village. When I arrived, I would hand over all that was left of the woman who had spent 56 years as a slave in my family’s household.