This is my second post on the recent troubles with Sterling. In the first, I discussed vibes, mood, and animal spirits. I do think that is the best way to think about what’s going on, but I promised to write as an economist typically do (not as we all our in this case).

The basic facts are that Chancellor Kwasi Kwarteng announced a mini-budget revision including elimination of the 45% income tax bracket. Oddly many financiers who would directly benefit were alarmed. The Pound depreciated to under $1.04 (before recovering) and the 10 year Gilt rate increased by over 1% (before recovering).

There are two economic questions. The first is why a very large policy shift had such a sudden rather huge effect. The second is why the pound depreciated.

I really have to write about macroeconomics given the drama across the Channel in the UK. The story so far is that New Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng have managed to spook money managers by threatening to cut their taxes

. Kwarteng proposed a mini budget cutting the top marginal tax rate (etc). The Pound depreciated not quite reaching parity with the dollar (fell bellow 104 cents though) and the 10 year Gilt (UK treasury) rate briefly shot up over 5% (on Wednesday).

This is a fairly dramatic effect of a tax cut which will cost his majesty’s Treasury about 45 billion pounds next year. Compared to GDP that is about like $ 400 billion in the USA. No doubt a large sum, but dwarfed by US stimulus bills

Neofascist Giorgia Meloni will be the next Italian Prime minister. I feel I have to write about this being in Rome, but I am clueless as to how it happened (I wasn’t optimistic a year ago – I was expecting authoritarian xenophobe demagogue Matteo Salvini to be the next Italian prime minister — I guess the photo of him wearing a Vladimir Putin T-shirt when on Red Square might have cost him the authoritarian but not that authoritarian vote).

A much more pleasant topic and amazing coincidence is that I have just seen 2 translated versions of the Italian anti fascist anthem “Bella Ciao” on Twitter.

One sung in Ukrainian by Ukrainian soldiers in a trench

Two Ukrainian Resistance Fighters singing Bella Ciao in their trenches. Down with the

I have two thoughts. The first is that major party presidential candidates would be wise to stop participating in big dollar fundraising events. The second is that we can identify the effect of money on political success, but usually assume that correlation is causation.

I think that three major party candidates have seriously hurt themselves while raising money from rich donors. Barack Obama wishes he hadn’t said “clinging”, Mitt Romney wishes he hadn’t said 47% and Hillary Clinton sure deplores the day she said “deplorables”. Each gaffe had a non-negligible effect on the campaigns. Each was said to big dollar donors.

I think it is easy to understand why. At fund raisers, the candidates feel that they are among friends and are less

As usual it is best to just click and read as the column is well crafted and I can’t summarize or explain well.

The topic?

“On Monday, President Biden announced that Dr. Renee Wegrzyn, a biotech executive who previously worked at the Defense Advanced Research Projects Agency, better known as Darpa, would be the first director of the Advanced Research Projects Agency-Health, ARPA-H.”

Klein is very enthusiastic. I know something about the topic and have some thoughts.

To try to summarize. ARPA-H is an attempt to build on two (or three) great successes. FIrst DARPA is one of the key engines of economic growth responsible for, among other things, the internet. Second operation Warp Speed actually contributed to the extremely rapid

On April 1 2022 I wrote

“I score Robert 4 Pentagon 0.

I currently oppose the F-35 procurement program.

No score yet.”

I didn’t know that 4 days earlier on March 28 2022 Valerie Insinna had published “F-35 cuts, F-15 boost, and E-3 replacement: Air Force’s $170B budget makes big moves in FY23“

“the biggest and most controversial moves are found in the department’s $29.3 billion procurement account — including $1.7 billion to buy an unspecified number of B-21 bombers and the Air Force’s decision to decrease the number of Lockheed Martin-made F-35s procured this year in favor of buying more F-15EXs from Boeing.

In total, the service will request 33 F-35As for $4.5 billion — a total of 15 fewer joint strike fighters when compared to

First the US poverty gap is on the order of $180 billion per year. That is the sum over all households with income under the poverty line of the amount that household’s income is below the poverty line. That is a small amount of money compared to US GDP or even US Federal Government spending.

This uses the official poverty line which is very low (and the official pretax cash income which leaves out the earned income tax credit and SNAP (the program formerly known as foodstamps). What is the problem (please don’t ruin my punchline by shouting “Joe Manchin”).

First just bringing income up to the poverty line would imply all people who are currently poor would face a 100% tax rate — more market income implies a one for one cut in benefits and

I am going to give a hostage to fortune. I am going to guess that the preferred policy supported by a majority of US respondents on questions about redistribution of income is that which would directly serve the narrow short term economic interests of a (probably different but overlapping) majority of US respondents.

I am guessing that the majority view is that view which would be the majority view if everyone were selfish (and out and proud selfish when polled).

Before checking, I can think of one arguable exception — there is majority support for a higher minimum wage even though only tiny minority now receive the minimum wage and a small minority receive a wages lower than the proposed new minimum. Here I think I can appeal to “directly”,

As always, I must start by saying I have no expertise and there is no reason anyone should be particularly interested in my thoughts.

The question is how will the war in Ukraine end. I guess I have a guess, but it implies it will last a long time.

I can think of 3 possibilities, Russian victory, Ukrainian victory or a negotiated peace.

First, I think it won’t end with Russian victory. Given recent Ukrainian battlefield victories, this sounds obvious. I think also that even if the Russian army were to defeat the Ukrainian army (as I and many others expected at the time of the invasion) the war would not end, but rather shift to a guerrilla war of resistance. It is clear that even a battlefield victory would require Russian mobilization

A tweet sent me to this column Ezra Klein wrote long, long ago in a city far away. In the heady day of April 8 2021, Klein discussed Joseph Biden’s radicalism and contrasted it with Barack Obama’s caution. I remember. Biden had just signed the American Rescue plan and was proposing what would be called the infrastructure bill and the Inflation Reduction Act (ne’ Build Back Better).

“I covered him in the Senate, in the Obama White House, in the Democratic Party’s post-Trump reckoning. Biden was rarely, if ever, the voice calling for transformational change or go-it-alone ambition.

But you’d never know it from his presidency. “

Since then, the sausage has been Machine-made and it seems long. long ago. However, Klein is smart enough that his

First warnings — as usual I am writing on a topic discussed by many experts and I am not an expert. It is very often debated whether social welfare programs should be means tested (available only to people with low income or to people with low income and low wealth). An alternative is universal programs which are provided also to high income people (Medicare, Social Security old age and survivor pensions, K-12 public school, police protection, fire department putting out fires — most programs)

In particular, the topic of the week is Biden’s student debt forgiveness plan, which forgives $10,000 of student debt only if income is less than $125,000 per year. I do not want to focus on this particular program (because it has been discussed a lot and

I was provoked to write the post immediately below by this shocking article which suggests possible fraud.

I feel the need to comment on this passage

“Yet Aβ still dominates research and drug development. NIH spent about $1.6 billion on projects that mention amyloids in this fiscal year, about half its overall Alzheimer’s funding. Scientists who advance other potential Alzheimer’s causes, such as immune dysfunction or inflammation, complain they have been sidelined by the “amyloid mafia.” “

WTF ? It is not one or the other. Amyloid beta oligomers bind to tole-like pattern receptors on microglia causing them to release inflammatory peptides (including TNF alpa). TNF alpha stimulates the production of amyloid beta. It isn’t amyloid beta *or*

Sorry I will not provide links.

Tumor Necrosis Factor Alpha (TNF alpha) is an inflamatory peptide hormone. A soluble protein which is based on part of the receptor for TNF alpha is used to treat arthritis. It has been noted from health insurance records that this treatment is associated with a much reduced risk of Alzheimer’s disease.

One important aspect of Alzheimer’s is the formation of placques (clumps) of a peptide called amyloid beta. Amyloid beta oligimers (like about 50 of them stuck to each other) induce cells in the brain called microglia to release, among other things, TNF alpha. TNF alpha causes neurons to synthesize amyloid beta precursor and 2 proteases which process the precursor to amyloid beta.

This suggests that

The Eurozone is not an optimum currency area. The Euro as such was a bad idea to begin with. Notably, this was the standard view of US economists. The North American argument (originating in Canada) was that a currency should be used in an area within which people are willing to move to get a job. The original argument was that the US dollar zone and Canadian dollar zone were not optimal areas and that Western Canada should have the same currency as the US Pacific coast and Eastern Canada as the US Atlantic coast and great lakes region. The argument made over in the USA was that the current Eurozone was nothing of the kind, since people spoke many different languages in it (also food and culture and not really liking each other all that much),

To

I have discovered that there are still people who think that adopting the Euro was a good idea, or at least not a bad idea, or at least not a catastrophe.

They seem to have decided that the Greek fiscal tragedy is a minor issue. I will leave it out of the discussion.

My view is that the Euro *and* the Stability and Growth Pact have worked together to endanger the project of European integration. There are strange developments of far right, far left, and weird hair political movements replacing the centrists and social democrats who dominated Europe until it adopted the Euro. They all have something in common — hostility to the European Commission, Eurocrats, and elite technicians (who do not have a clue about technique).

European Populism

“Peatlands cover only a small fraction of the Earth’s surface (3%), yet store more than 15%–30% of terrestrial carbon (C) stocks”

One of the terrible tipping points is oxidation of Peat due to warming (another is release of methane from melting tundra). But one key question is why didn’t the carbon in peat turn to methane?

I think the reason is that methanogens can’t handle low pH and that a combination of waste and acid promotes takeover by Spagnum moss which is one of the worlds leading carbon sinks.

Links. Ph, Sphagnum, preventing bovine flatulence, For Pete’s Sake.

Tags: Carbon sinks, Methane Control, oxidation of Peat

The silver standard, one hundred and Thirty pieces of Silver’s thought

“In evaluating fundraising for congressional candidates, the model now places more emphasis on contributions received within the candidate’s state. Fundraising is a highly nationalized activity these days; Democrats in California and New York regularly contribute to Senate campaigns like that of Democrat Jaime Harrison of South Carolina, who raised a record amount of money in 2020 but nonetheless lost to Republican Sen. Lindsey Graham by 10 percentage points. As such, our analysis finds that a dollar received from within a candidate’s state is about five times as valuable as a dollar received outside of it in predicting the eventual election outcome.5 That’s why the model now

I think that with “Stealth” I indulged my inclination to try to figure things out more than I should have.The practical point is my claim that stealth technology is obsolete. I think this is well known and yet not allowed to effect the US Federal Budget.

I cite the Wikipedia

“Low-frequency radar[edit]

Shaping offers far fewer stealth advantages against low-frequency radar. If the radar wavelength is roughly twice the size of the target, a half-wave resonance effect can still generate a significant return. However, low-frequency radar is limited by lack of available frequencies (many are heavily used by other systems), by lack of accuracy of the diffraction-limited systems given their long wavelengths, and by the radar’s size, making it

Taiwan says new Harpoon missiles will help it crush half of Chinese invasion fleet

Taiwan says US$2.37 billion worth of Harpoon missiles would enable it to obliterate half of Chinese invasion armada

“TAIPEI (Taiwan News) — Taiwan’s military on Oct. 27 [2020] stated that the potential sale of US$2.37 billion worth of Harpoon anti-ship missiles will within five years help enable its defenders to wipe out “half of any” People’s Liberation Army (PLA) invasion force.

On Oct. 26, the U.S. Defense Security Cooperation Agency (DSCA) issued a press release announcing that the U.S. State Department has given the green light to the sale of 100 Harpoon Coastal Defense Systems (HCDS) and associated equipment for approximately US$2.37 billion.

First the usual warning – I am both ignorant and intellectually arrogant.  It should be assumed that I don’t know what I am talking about.

Stealth technology hides airplanes, drones, and cruise missiles from radar which uses high frequency radio waves.  It does not hide them from radar which uses radio waves of wavelength a meter or more – the thickness of the stealthy covering would have to be similar to that wavelength.  This means that an F-35 would show up on radar used during World War II.

It has been argued that this doesn’t matter, because radar does not show the location of an airplane unless the diameter of the radar dish is many times the wavelength so an otherwise standard but anti-stealth radar would need a dish 90 feet across.

Yesterday Emmanuel Macron was re-elected president of France solidly defeating Marine LePen by about 16%. This is a relief. I think a striking aspect of the election was the absence of Gaullist or Socialist candidate in the runoff. Instead there is a centrist vs a far rightist. This pattern is not confined to France and also not universal.

One important point is that LePen made the runoff by defeating leftist Jean-Luc Melenchon by 1.5% in the first round. The runoff could have been a centrist vs a leftist, and most commentary would have been totally different. To me the key news is the collapse of the old center left and old center right (now replaced by the new center center). I think this shows widespread anger with the establishment, which

The current situation is that Russia has abandoned the effort to capture Kiev. Russian forces have been withdrawn from North Central Ukraine and are now operating on an arc from Kharkiv (North East) to Kherson (South Central). So far, Ukraine has won amazing victories and Russia has suffered astonishing defeats. The extreme surprise suggests that we can learn a lot from the war so far.

What have we learned ? I will include things that we really knew already or should have known.

1.It is very unwise to rely on the kindness, mercy or even sanity of dictators. It was generally assumed that Putin wouldn’t actually order an invasion (I assumed this at least up until a couple of weeks before the invasion). It is wise to prepare for the worst.

I am interested in inflation expectations (acting like a macroeconomist for a change). In particular I am thinking about something Brad DeLong just tweeted. He says his subjective probability of sustained inflation due to expected inflation causing current inflation is still just 40%

Why “.only a 40% chance …? Because bond markets expect the Fed to get inflation down to 2% not in the short run of next year but in the medium run of three years from now and after. Workers and bosses won’t raise their prices anticipatorily unless they expect… 6/118 Brad DeLong @delong·Apr 9…inflation to continue. And I do not see how workers and bosses can expect inflation to continue while bond traders remain un-spooked. Bond traders are more sensitive to

I am thinking about computers taking over the world. Given my age, for me, the classic reference is “Terminator” in which “SkyNet” becomes self aware and takes over the world. As made movie sense at the time SkyNet was a US Department of Defence project as was the ARPAnet mother of the mother of the mother of the World Wide Web. Frankly, I find that implausible now. If it were a DOD project, Congress would have appropriated funds to start it, then cut the budget so it never actually delivered self awareness. The internet was started by DARPA but has long since gone viral.

To me a more plausible origin story for the AI which rules the world is that, like natural conciousness and will to power, artificial conciousness is an emergent property.

This might be a very long confused post or might be a series of confused posts. I am trying to think about what to do about Putin (assuming he isn’t overthrown in a palace coup).

My first thought was that this is not time for increased military spending . The Russian military turns out to be much less capable than we thought. There is no reason to guess that the Chinese, North Korean, Iranian, or other potential trouble maker militaries are more capable than we thought. I think a reasonable assessment of overall world wide military threats has declined dramatically. I also think that NATO military spending was higher than optimal given information available in 2021.

I had a rather painful Twitter debate with Noah Smith on this topic. I

In this post, I criticize current US weapons policy. I have been doing this for over 40 years. I have been saying the same things for those 40 years. This means I can check on the hostages I have given to fortune and mark my beliefs to market.

My thoughts again

1) I think that the US should buy smart munitions to be fired from many cheap platforms (that is I take one side in a decades long debate).

2) I think there has been a pattern of planning to spend really huge amounts of money on a weapons system, followed by compromise leading to high spending to acquire a small number of weapons which do not satisfy the original perceived need at all.

3) I think that there has been much to little focus on shoulder fired munitions (roughly

I plan to write a series of posts on which and how many weapons the US should buy. I start with two important disclaimers. First, obviously, I have no expertise and probably don’t know what I am talking about. Second, I firmly believe that the US Federal Government intertemporal budget constraint is currently satisfied with slack, so spending can be increased without ever increasing taxes or cutting otehr spending. To argue that wasteful spending is suboptimal, I have to argue that there is a political limit on deficits (which there is) while discussing what I guess is optimal policy (ignoring politics).

The military procurement budget which I will discuss is $ 245.6 Billion for Fiscal Year 2022 out of a Defence Department budget of $778

Recently we have learned that the Russian military is vastly less capable than anyone imagined. Also in three whole weeks Ukrainians have markedly reduced the capabilities of the Russian military. Therefore, naturally many governments (including the German government) have decided they must spend more on their militaries to face the Russian threat. This makes no sense.

To deal with Russian Germany needs liquified natural gas terminals and heat pumps. It will gain little by buying F35s (based on the general principal that buying F35s is stupid). With the same money they can tell people “if you replace your gas furnace with a heat pump, we will pay for the heat pump and the electricity to run it.” This is a much more effective strategy.

Russia has just attacked Ukraine. US policymakers seem to agree that we should impose severe economic sanctions (but definitely have no US boots on Ukrainian ground). What can the US do without firing a shot ? I think the US can impose extreme costs on Russia (hurting Russians other than Putin who are not to blame and will be innocent victims — tough luck). In general sanctions have not achieved– well much except the defunct Iranian JCPOA. However, Russia has a lot to lose, because (in spite of a default) it’s debt and currency are taken seriously.

The US Treasury can issue unlimited amounts of Ruble denominated bonds. This isn’t even counterfeiting — they would say “payable by the US Treasury”. I think this could make the ruble roughly

Reading the first few paragraphs of Last War Brain by Noah Smith, I thought I would strongly disagree with his post and decided to write an attempted rebutal. I find that I agree almost 100% and can mainly complain about what I assert is a bit of bait and switch. As always I advise readers to just click the link. Noah is a much better writer than I am (low bar) so my effort to summarize and explain might best be skipped (skip to ***)

Noah argues that liberals have overlearned two lessons of the naughties and teens: The lessons are don’t invade Iraq, and don’t impose austerity when the economy is depressed. Now he argues that some people are incorrectly assuming that Russia v Ukraine is like Bush V Saddam and that the macroeconomic policy