They go up, they go down. It doesn't sound confusing. But it is. Even for economists. Just ask James Bullard, the president of the St. Louis Federal Reserve.
Let's step back for a moment. What does the Federal Reserve do exactly? The story you usually hear is all about interest rates. The Fed raises rates when the economy is too hot, and lowers them when it's too cool. But there's a problem. The Fed can't cut short-term interest rates now. They've been stuck at zero since 2008. But longer-term interest rates aren't. So the Fed has tried to push those longer rates down to spur stronger growth.
The big question now is whether the Fed should do more. This shouldn't be a big question if the Fed believes its own economic projections -- which show inflation staying too low and unemployment too high for years to come. So why did the Fed basically sit pat at its latest meeting? For one, Ben Bernanke wants to see more data confirming a slowdown before doing more. For another, James Bullard -- and some other FOMC members -- don't think the Fed needs to do more.
Bullard thinks Europe is doing the Fed's job for it. Or something. Here's what Bullard had to say recently about why he doesn't think further easing is called for:
Treasury yields have gone to extraordinarily low levels. That took some
of the pressure off the FOMC since a lot of our policy actions would be
trying to get exactly that result.
In other words, the Fed doesn't need to push down long-term interest rates because long-term interest rates have already been pushed down by investors looking for a financial safe haven. This would be right if the point of Fed policy was lower interest rates. But the point of Fed policy isn't lower interest rates.
The point is more growth. Lower interest rates only matter insofar as they promote more growth. Lower interest rates do not matter unto themselves. Think about it this way. Interest rates might fall for good or bad reasons. The Fed buying bonds is a good reason. Investors buying bonds due to fears of eurogeddon is a bad reason. They are not equivalent.
Don't take my word for it. Ask the markets. The chart below from Bloomberg gives us a sense of how much inflation markets have expected in five years time.
So-called breakevens just take the borrowing costs on normal Treasury bonds and subtract the borrowing costs from inflation-protected Treasury bonds. That difference should be a decent proxy of expected inflation. That's not always the case because inflation-protected Treasury bonds are traded so little that they're prone to fairly violent swings.
But why do we care about inflation? Well, when the Fed pushes up growth, it also pushes up inflation. Breakevens have jumped dramatically whenever the Fed has eased -- whether that was QE2 in late 2010, Operation Twist in late 2011, or extended guidance in early 2012. But breakevens are falling dramatically now. In other words, markets expect less growth and less inflation right now. That's a weeee bit different than what happens when the Fed eases.
And that brings us to the paradox of interest rates. (Feel free to skip to the next paragraph for the big reveal, if your'e so inclined.) Take a look at the breakeven chart again. Whenever the Fed eases, it says that it's trying to reduce long-term borrowing costs. For breakevens to rise while Treasury yields fall, inflation-protected Treasuries would have to fall even more. Now, that's happened a bit. But not enough to explain the rise in breakevens.
In other words, Treasury yields rise when the Fed eases. Huh? Isn't the whole point to lower interest rates? Technically, yes. But if the Fed succeeds in reducing borrowing costs, that increases inflation. And when inflation increases, investors demand higher yields on Treasuries. So if the Fed succeeds, we'd expect interest rates to rise. If the Fed fails, we'd expect interest rates to fall. It's an upside down world.
There's no big mystery why our economic recovery hasn't felt like much of one. The Fed has run far too tight a policy for far too long. The worst part is that too many Fed officials don't seem to understand that. They think policy has been loose. That's a shame.
Maybe it's time for them to start doing the opposite.
Corporate goliaths are taking over the U.S. economy. Yet small breweries are thriving. Why?
The monopolies are coming. In almost every economic sector, including television, books, music, groceries, pharmacies, and advertising, a handful of companies control a prodigious share of the market.
The beer industry has been one of the worst offenders. The refreshing simplicity of Blue Moon, the vanilla smoothness of Boddingtons, the classic brightness of a Pilsner Urquell, and the bourbon-barrel stouts of Goose Island—all are owned by two companies: Anheuser-Busch InBev and MillerCoors. As recently as 2012, this duopoly controlled nearly 90 percent of beer production.
This sort of industry consolidation troubles economists. Research has found that the existence of corporate behemoths stamps out innovation and hurts workers. Indeed, between 2002 and 2007, employment at breweries actually declined in the midst of an economic expansion.
Advocates are tracking new developments in neonatal research and technology—and transforming one of America's most contentious debates.
The first time Ashley McGuire had a baby, she and her husband had to wait 20 weeks to learn its sex. By her third, they found out at 10 weeks with a blood test. Technology has defined her pregnancies, she told me, from the apps that track weekly development to the ultrasounds that show the growing child. “My generation has grown up under an entirely different world of science and technology than the Roe generation,” she said. “We’re in a culture that is science-obsessed.”
Activists like McGuire believe it makes perfect sense to be pro-science and pro-life. While she opposes abortion on moral grounds, she believes studies of fetal development, improved medical techniques, and other advances anchor the movement’s arguments in scientific fact. “The pro-life message has been, for the last 40-something years, that the fetus … is a life, and it is a human life worthy of all the rights the rest of us have,” she said. “That’s been more of an abstract concept until the last decade or so.” But, she added, “when you’re seeing a baby sucking its thumb at 18 weeks, smiling, clapping,” it becomes “harder to square the idea that that 20-week-old, that unborn baby or fetus, is discardable.”
The stability of American society depends on conservatives finding a way forward from the Trump dead end.
Election 2016 looked on paper like the most sweeping Republican victory since the Jazz Age. Yet there was a hollowness to the Trump Republicans’ seeming ascendancy over the federal government and in so many of the states. The Republicans of the 1920s had drawn their strength from the country’s most economically and culturally dynamic places. In 1924, Calvin Coolidge won almost 56 percent of the vote in cosmopolitan New York State, 65 percent in mighty industrial Pennsylvania, 75 percent in Michigan, the hub of the new automotive economy.
Not so in 2016. Where technologies were invented and where styles were set, where diseases cured and innovations launched, where songs were composed and patents registered—there the GOP was weakest. Donald Trump won vast swathes of the nation’s landmass. Hillary Clinton won the counties that produced 64 percent of the nation’s wealth. Even in Trump states, Clinton won the knowledge centers, places like the Research Triangle of North Carolina.
A tanker that sank off the Chinese coast was carrying “condensate,” a mix of molecules with radically different properties than crude.
Over the last two weeks, the maritime world has watched with horror as a tragedy has unfolded in the East China Sea. A massive Iranian tanker, the Sanchi, collided with a Chinese freighter carrying grain. Damaged and adrift, the tanker caught on fire, burned for more than a week, and sank. All 32 crew members are presumed dead.
Meanwhile, Chinese authorities and environmental groups have been trying to understandthe environmental threat posed by the million barrels of hydrocarbons that the tanker was carrying. Because the Sanchi was not carrying crude oil, but rather condensate, a liquid by-product of natural gas and some kinds of oil production. According to Alex Hunt, a technical manager at the London-based International Tanker Owners Pollution Federation, which assists with oil spills across the world, there has never been a condensate spill like this.
Allegations against the comedian are proof that women are angry, temporarily powerful—and very, very dangerous.
Sexual mores in the West have changed so rapidly over the past 100 years that by the time you reach 50, intimate accounts of commonplace sexual events of the young seem like science fiction: You understand the vocabulary and the sentence structure, but all of the events take place in outer space. You’re just too old.
This was my experience reading the account of one young woman’s alleged sexual encounter with Aziz Ansari, published by the website Babe this weekend. The world in which it constituted an episode of sexual assault was so far from my own two experiences of near date rape (which took place, respectively, during the Carter and Reagan administrations, roughly between the kidnapping of the Iran hostages and the start of the Falklands War) that I just couldn’t pick up the tune. But, like the recent New Yorker story “Cat Person”—about a soulless and disappointing hookup between two people who mostly knew each other through texts—the account has proved deeply resonant and meaningful to a great number of young women, who have responded in large numbers on social media, saying that it is frighteningly and infuriatingly similar to crushing experiences of their own. It is therefore worth reading and, in its way, is an important contribution to the present conversation.
The national-security adviser is one of the biggest hawks in the Trump administration.
In the increasingly urgent, dramatic debate about the North Korean nuclear threat, National Security Adviser H.R. McMaster stands out in the Trump administration as the strongest advocate of a hawkish position. But where do H.R. McMaster’s views on North Korea really come from? Why, to pose a question The Atlantic’s Uri Friedman recently did, is he so worried about North Korea? Notwithstanding the suggestion, in Friedman’s piece and elsewhere, that McMaster’s views represent some kind of heresy of nuclear deterrence, his worries must be seen in light of how he views Kim’s motives. Indeed, those motives mean the possibility of military action against North Korea could be understood not as a “good thing,” but as the “least bad.”
Senator Jeff Flake explains his speech on the Senate floor in defense of the press—and talks about what he’s planning next.
Jeff Flake seems intent on finishing his Senate career without any friends left in Washington.
Ever since announcing his impending retirement last year with a blistering speech that called out President Trump’s “reckless, outrageous, and undignified behavior,” the generally genial Arizona Republican has repeatedly made himself a target of condemnation on both sides of the aisle. His decision to endorse Democrat Doug Jones in the Alabama Special Election enraged conservatives who viewed it as a brazen partisan betrayal. His vote for the GOP tax bill, meanwhile, convinced Democrats that he was all talk and no action.
Flake took fire from both sides this week when he took to the Senate floor to denounce Trump’s vilification of the free press and his “sustained attack on the truth.” The speech—delivered hours before the president unveiled his “Fake News Awards”—drew heat from Republicans for its invocation of Joseph Stalin, and derision from Democrats, who accused him of performative moral preening without any substance behind it.
Stories of gray areas are exactly what more men need to hear.
The story of Aziz Ansari and “Grace” is playing out as a sort of Rorschach test.
One night in the lives of two young people with vintage cameras is crystallizing debate over an entire movement. Depending on how readers were primed to see the ink blot, it can be taken as evidence that the ongoing cultural audit is exactly on track—getting more granular in challenging unhealthy sex-related power dynamics—or that it has gone off the rails, and innocent men are now suffering, and we are collectively on the brink of a sex panic.
Since the story’s publication on Saturday (on the website Babe, without comment from Ansari, and attributed to a single anonymous source), some readers have seen justice in Ansari’s humiliation. Some said they would no longer support his work. They saw in this story yet another case of a man who persisted despite literal and implied cues that sex was not what a woman wanted.Some saw further proof that the problems are systemic, permeating even “normal” encounters.
Years after his daughter reiterated her allegation that the director sexually abused her, more actors are voicing their regret for collaborating with him.
Woody Allen won an Academy Award, the fourth of his career, just six years ago for writing Midnight in Paris. He was nominated again two years later for Blue Jasmine, a film that won Cate Blanchett a Best Actress Oscar. The last year that Allen didn’t release a movie in theaters that he wrote and directed was 1981. Despite the controversy that has dogged him since the early 1990s—when he was revealed to be having an affair with his girlfriend’s daughter and was subsequently accused of molesting his adopted daughter Dylan Farrow—Allen has continued to make movies with the same once-a-year regularity as always, and usually with major stars. He has long denied that he abused his daughter.
But the film industry’s willingness to turn a blind eye to the allegations against Allen seems to be coming to an end. More and more actors who have worked with him in the past are announcing that they regret the collaboration, and it appears the sheen of Oscar-winning prestige he has relied on to attract big names to his projects is fading. Allen, who released Wonder Wheel last month and is set to come out with A Rainy Day in New York this year, may try to helm more movies. But with Hollywood finally beginning to grapple with his enduring presence as an artist, could that be enough to destroy his career?
Republicans cobbled together the votes for a funding bill ahead of a Friday-night deadline, but it may be doomed in the Senate.
Updated on January 18 at 10:02 p.m. ET
The House on Thursday evening narrowly passed a bill that would keep the federal government open for nearly another month amid an impasse over immigration. But the proposal may be doomed in the Senate, where Democrats and a small contingent of Republicans could block the bill and send the government into a shutdown beginning at midnight Friday.
After an anxious day of arm-twisting and negotiations, Republican leaders were able to persuade enough of their members to go along with a stopgap bill many in the party plainly despised. Rather than fund the government for the rest of the fiscal year, it merely kicks the budget debate forward another month. In a largely futile bid for Democratic support, the bill reauthorizes the Children’s Health Insurance Program for six years. But it lacks several other Democratic priorities, most notably a permanent legal status for young immigrants who face the threat of deportation once President Trump ends the Deferred Action for Childhood Arrivals program in early March. A group of Democrats voted for the measure, known as a continuing resolution, only after it was clear that Republicans were going to be able to pass it on their own. The bill passed, 230 to 197, with 11 Republicans voting against it and six Democrats voting for it.