Excellent writing piece. I don’t think you give yourself enough credit. Your understanding of economics and overall knowledge is impressive. I’m 22, and your economic insights are so much more engaging and informative than the certified economist who get to speak on yahoo finance. The main reason being, your perspective of the U.S. lack of human sympathy extremely resonates w me.
Yeah the whole notion of hoping for a recession to get ahead says a lot more about our world, that we can only achieve success through the destruction of others. This is especially head scratching when one considers the nightmare scenario of us entering Stagflation (something that a few Econ YouTubers have already ring the alarm bells for). Something along these lines would hurt even the most prepared millennials and gen zers who have a treasure chest of cash just waiting for a crash.
As for a possible solution to help combat corporate greed / the wealthy from taking advantage of an economic downturn, I believe a vocal ESG watchdog to be key. Yes, we have already seen corporations use “greenwashing” to give themselves a gold stars without taking actual measures to achieve ESG goals. Still, I believe a independent ESG watchdog can do wonders in holding corporations, and private equity firms, accountable from taking advantage of a housing crisis or other similar opportunities
*in the UK the word ‘sicko’ means like incredibly talented at something in some contexts. Not sure if that translates well overseas, wanted to make that clear in case of miscommunication.
Ms Kyla: what a fine work on economics and also, very readable. I pay my respect and admiration to you. As a emeritus professor in economics and finance, I was once in your turf but look: it is rather dialectic, arguments in pro and contra all the time and then, we finish neutral at the best if not confuse. I find problematic this kind of analysis. I am a deserter of the field and now I follow a quantitative approach, I am doing better that way. I am starting following you today. Regards. @lasfinanzas
I absolutely love your insights, and I think your writing style definitely helps communicate that the issues you talk about may be highly technical at face value, but they are still human in nature. I also think you are making such an important and refreshing point here, which you seem to be reluctant about, as that is the general sentiment coming from economists and politicians alike: the economy is quite literally just a bunch of humans going about their day, and our macro policy should reflect this. It is truly bizarre to me that we talk about tanking the economy in such abstract ways, especially after engineering the greatest economic recovery in history. The thing I fear the most is the implication that if we want to alleviate inequality, it seems to be virtually impossible to do redistribution in fear of inflation, not just from economists (cause you already had anti-minimum-wage voices for example), but also from ordinary people too. I'd be curious to read/hear your thoughts on what the outlook for redistribution is in the future, as it is basically the reason many households have stayed afloat during this crisis, but also now blamed by many (ahem Elon) as the singular cause of inflation.
Financial news nature is to discourage people to invest in stock market (fear sells better). Stock market is the main hedge against inflation. Current inflation (actually not as severe as people picturing it) is the gotcha moment for people who didn’t invest these years affected by fin news.
So the people got deceived by journalists.
Now these journalists blame FED (again). FED isn’t the oracle, they are doing their jobs watching macro indicators, that’s it.
Correct approach is to ignore individual news (ie what Elon Mask said) or specific field stats (poor retail corp earnings are making so much noise because retail corp is the worst performing field currently) and look at the whole economy stats. They are boring and brief: unemployment rate, real income, real spendings, real earnings.
I’m impressed you’re so young and made correct points despite all that noisy info flying around.
Kyla, I am just catching up on your last few pieces. In a somewhat simplistic way, I think the first step to lessening -not Solving/Fixing structural problems like wealth inequality- but sufficiently lessening the problems, perhaps the opposite of death by a thousand cuts, (health by a thousand bandaids?) begins with a correction in some imprecise, sloppy form. This is not advocating for a recession per se but advocating for letting a recession -if it occurs- happen, bleed through the system, cause some grief, balance out some inventories and supply chains and let 'nature'. (as in the raw nature of the economic cycle) take the course it does, over-correcting as it does and finding equilibrium....temporarily...heh.
That is because so much of the mess of conflicting and unclear factors has been triggered by governments' attempts to smooth things over and going about it the wrong way. Though there was no way to know it at the time. At least for the huge events like COVID or the GFR, as they snowballed.
There is lots of specific cases of excessive or even illegal corporate greed of course but I think the bigger more basic issue is layering on the wrong expectation/philosophy around capitalism in the first place. In its purest form, capitalism works very well-as long there is wide spread participation on an equal -or equalish- playing field. (AND as long as there is actual consequence for bad decisions, illegal activity etc)
Propping up a failing company or artificially lowering interest rates or privatizing profits while democratizing losses may bandage over a problem temporarily but most of the time it creates more problems over time because it's incentivizing myopic/selfish/foolish behaviour. This applies to everything from buying a new truck simply because financing was so cheap to decrying globalization at the same time you complain about prices rising to taking on too much debt to expand your business too quickly.
However, as someone said, everything feels bigger when you are in the middle of it. The list of uncertainties we face is, in perspective, about the same amount as the uncertainties we have always faced as a species. It just feels bigger because its OUR current uncertainties and we are able to talk to so many more people about it.
I stumbled onto this piece and I know it's from a while ago, but jeez it is ignorant. Don't worry, even in early June I would have said the same thing. You don't have a fundamental understand of economics. There is a supply and demand problem right now, supply chains are screwed, while improving, still 2 STDEVs from normal according to the Fed's GSCPI. This is due to commodity bottlenecks, energy crisis in Europe, Russia-Ukraine, pandemic lags, 0-covid in China, and several other factors. These supply-side factors cannot be addressed currently, so demand is high and prices are going up, this is made worse by the fact that consumer balance sheets are strong and consumers can keep paying more, so companies raise prices. This is why inflation is at 9%+. Since supply cannot be addressed (in reasonable time), how will you stop the war, fix the supply-chain, get energy to Germany? We have to address demand, by destroying it! This is done by QT and Fed Funds hikes. Making borrowing more expensive and reducing the demand and thus value of risk assets will help decrease demand. If that is not addressed, we will have runaway inflation, wage price spirals, and stagflation. Want to wait now until inflation gets worse and entrenched? Want to experience the 70s again? When Volcker had to raise Fed Funds to 20%? No, so let's stop this now, cause a minor recession, (I don't think we are in one now since employment is still strong, we added 1mil jobs in H1 and unemployment is at 3.6% but it doesn't matter anyways). We need to increase unemployment to reduce inflation. I don't believe in sacrifice ratios like Summers but there has to be a give and take. You are ignorant about how the economy operates, naive and wishful. Maybe take a look at history. A recession isn't the end of the world, 5-6% unemployment and a few more quarters of negative GDP aren't that bad, 5-6% unemployment historically is not bad at all, not everyone can have a job, the economy doesn't operate at 0% unemployment and 2% inflation, even when it's doing great I hate to tell you.
hey Andrew I think she likely understands most of your list of basic stats and conventional, obvious facts. It felt to me like her article was using these known and widely accepted current situational points you are being a bit redundant about and using that as a springboard to examine things a bit more deeply and consider the less obvious ramifications, down to a personal level. And balancing the simple hard reality of dry macroeconomic terms with awareness of how that affects people in a sort of bottom-up analysis. I see her approach as sort of 'next level' to what you are talking about. I think if you read it again you will get a better sense of the additional levels of consideration she is chewing over.
thank you for writing this! kinda confused about the air pocket problem. didn’t the fed create that money during QE and now it is naturally collapsing into 0, like a commercial bank loan that’s complete? why does it create an airpocket (scarcity in the money supply)?
Thank you. I was able to follow most of what you wrote here. You make an honest effort to take a balanced view. I think its safe to say now that the monitary and fiscal stimulus benefited the affluent most (aka PPP, leverage, low borrowing cost). Now they (the poor and lower middle class) are most likely priced out of home ownership. Now I hear that it's their jobs that a non-soft-landing Fed recession will negatively affect. The damage has already been done by ultra low borrowing costs. I know people who identified the unintended consequences of over stimulation. The FED has done more damage that helped because the tools at the FED don't live and work in the real economy. History says that inflation may give way to hyperinflation if majority of our politicos don't get serious about inflation. They need to stop printing more fiat I'm most concerned about the vulnerable in society.
they actually have stopped "printing" by implementing QT. I really don't think we are anywhere near hyperinflation. the fed can't fix supply chains or make boats go faster - we just need to rebuild and reshore and try to engage in stronger trade. it's a really difficult conversation.
Hey Kyla!
Excellent writing piece. I don’t think you give yourself enough credit. Your understanding of economics and overall knowledge is impressive. I’m 22, and your economic insights are so much more engaging and informative than the certified economist who get to speak on yahoo finance. The main reason being, your perspective of the U.S. lack of human sympathy extremely resonates w me.
Yeah the whole notion of hoping for a recession to get ahead says a lot more about our world, that we can only achieve success through the destruction of others. This is especially head scratching when one considers the nightmare scenario of us entering Stagflation (something that a few Econ YouTubers have already ring the alarm bells for). Something along these lines would hurt even the most prepared millennials and gen zers who have a treasure chest of cash just waiting for a crash.
As for a possible solution to help combat corporate greed / the wealthy from taking advantage of an economic downturn, I believe a vocal ESG watchdog to be key. Yes, we have already seen corporations use “greenwashing” to give themselves a gold stars without taking actual measures to achieve ESG goals. Still, I believe a independent ESG watchdog can do wonders in holding corporations, and private equity firms, accountable from taking advantage of a housing crisis or other similar opportunities
You are a sicko, how do you write so well, so often 😭. Keep it up Kyla, you rock.
*in the UK the word ‘sicko’ means like incredibly talented at something in some contexts. Not sure if that translates well overseas, wanted to make that clear in case of miscommunication.
hahaha i figured with the second half of the sentence :) thanks conor!
Love this thread around the disconnect between the narrative “good for economy” and oh actually that sucks for peoples lives
thank you paul!
What a powerhouse
Ms Kyla: what a fine work on economics and also, very readable. I pay my respect and admiration to you. As a emeritus professor in economics and finance, I was once in your turf but look: it is rather dialectic, arguments in pro and contra all the time and then, we finish neutral at the best if not confuse. I find problematic this kind of analysis. I am a deserter of the field and now I follow a quantitative approach, I am doing better that way. I am starting following you today. Regards. @lasfinanzas
thank you for calling out the human in the equation. making things worse or rooting for things to get worse is not optimum.
Do you do your own doodles? Teach me!
I absolutely love your insights, and I think your writing style definitely helps communicate that the issues you talk about may be highly technical at face value, but they are still human in nature. I also think you are making such an important and refreshing point here, which you seem to be reluctant about, as that is the general sentiment coming from economists and politicians alike: the economy is quite literally just a bunch of humans going about their day, and our macro policy should reflect this. It is truly bizarre to me that we talk about tanking the economy in such abstract ways, especially after engineering the greatest economic recovery in history. The thing I fear the most is the implication that if we want to alleviate inequality, it seems to be virtually impossible to do redistribution in fear of inflation, not just from economists (cause you already had anti-minimum-wage voices for example), but also from ordinary people too. I'd be curious to read/hear your thoughts on what the outlook for redistribution is in the future, as it is basically the reason many households have stayed afloat during this crisis, but also now blamed by many (ahem Elon) as the singular cause of inflation.
Financial news nature is to discourage people to invest in stock market (fear sells better). Stock market is the main hedge against inflation. Current inflation (actually not as severe as people picturing it) is the gotcha moment for people who didn’t invest these years affected by fin news.
So the people got deceived by journalists.
Now these journalists blame FED (again). FED isn’t the oracle, they are doing their jobs watching macro indicators, that’s it.
Correct approach is to ignore individual news (ie what Elon Mask said) or specific field stats (poor retail corp earnings are making so much noise because retail corp is the worst performing field currently) and look at the whole economy stats. They are boring and brief: unemployment rate, real income, real spendings, real earnings.
I’m impressed you’re so young and made correct points despite all that noisy info flying around.
Great stuff as always!
Dude if you start your own hedge fund or something, count me in. Amazing writing, content, and perspective. Keep it up
thank you!
Kyla, I am just catching up on your last few pieces. In a somewhat simplistic way, I think the first step to lessening -not Solving/Fixing structural problems like wealth inequality- but sufficiently lessening the problems, perhaps the opposite of death by a thousand cuts, (health by a thousand bandaids?) begins with a correction in some imprecise, sloppy form. This is not advocating for a recession per se but advocating for letting a recession -if it occurs- happen, bleed through the system, cause some grief, balance out some inventories and supply chains and let 'nature'. (as in the raw nature of the economic cycle) take the course it does, over-correcting as it does and finding equilibrium....temporarily...heh.
That is because so much of the mess of conflicting and unclear factors has been triggered by governments' attempts to smooth things over and going about it the wrong way. Though there was no way to know it at the time. At least for the huge events like COVID or the GFR, as they snowballed.
There is lots of specific cases of excessive or even illegal corporate greed of course but I think the bigger more basic issue is layering on the wrong expectation/philosophy around capitalism in the first place. In its purest form, capitalism works very well-as long there is wide spread participation on an equal -or equalish- playing field. (AND as long as there is actual consequence for bad decisions, illegal activity etc)
Propping up a failing company or artificially lowering interest rates or privatizing profits while democratizing losses may bandage over a problem temporarily but most of the time it creates more problems over time because it's incentivizing myopic/selfish/foolish behaviour. This applies to everything from buying a new truck simply because financing was so cheap to decrying globalization at the same time you complain about prices rising to taking on too much debt to expand your business too quickly.
However, as someone said, everything feels bigger when you are in the middle of it. The list of uncertainties we face is, in perspective, about the same amount as the uncertainties we have always faced as a species. It just feels bigger because its OUR current uncertainties and we are able to talk to so many more people about it.
I stumbled onto this piece and I know it's from a while ago, but jeez it is ignorant. Don't worry, even in early June I would have said the same thing. You don't have a fundamental understand of economics. There is a supply and demand problem right now, supply chains are screwed, while improving, still 2 STDEVs from normal according to the Fed's GSCPI. This is due to commodity bottlenecks, energy crisis in Europe, Russia-Ukraine, pandemic lags, 0-covid in China, and several other factors. These supply-side factors cannot be addressed currently, so demand is high and prices are going up, this is made worse by the fact that consumer balance sheets are strong and consumers can keep paying more, so companies raise prices. This is why inflation is at 9%+. Since supply cannot be addressed (in reasonable time), how will you stop the war, fix the supply-chain, get energy to Germany? We have to address demand, by destroying it! This is done by QT and Fed Funds hikes. Making borrowing more expensive and reducing the demand and thus value of risk assets will help decrease demand. If that is not addressed, we will have runaway inflation, wage price spirals, and stagflation. Want to wait now until inflation gets worse and entrenched? Want to experience the 70s again? When Volcker had to raise Fed Funds to 20%? No, so let's stop this now, cause a minor recession, (I don't think we are in one now since employment is still strong, we added 1mil jobs in H1 and unemployment is at 3.6% but it doesn't matter anyways). We need to increase unemployment to reduce inflation. I don't believe in sacrifice ratios like Summers but there has to be a give and take. You are ignorant about how the economy operates, naive and wishful. Maybe take a look at history. A recession isn't the end of the world, 5-6% unemployment and a few more quarters of negative GDP aren't that bad, 5-6% unemployment historically is not bad at all, not everyone can have a job, the economy doesn't operate at 0% unemployment and 2% inflation, even when it's doing great I hate to tell you.
Hi Andrew! You should consider writing your own substack on the topic, you clearly have a strong point of view. Have a wonderful day.
I'm curious to see how you would reply substantively to my response?
Hey Andrew! I make content almost everyday, I am sure I addressed some of your points. Thanks!
hey Andrew I think she likely understands most of your list of basic stats and conventional, obvious facts. It felt to me like her article was using these known and widely accepted current situational points you are being a bit redundant about and using that as a springboard to examine things a bit more deeply and consider the less obvious ramifications, down to a personal level. And balancing the simple hard reality of dry macroeconomic terms with awareness of how that affects people in a sort of bottom-up analysis. I see her approach as sort of 'next level' to what you are talking about. I think if you read it again you will get a better sense of the additional levels of consideration she is chewing over.
Do you do your own doodles? Teach me!
thank you for writing this! kinda confused about the air pocket problem. didn’t the fed create that money during QE and now it is naturally collapsing into 0, like a commercial bank loan that’s complete? why does it create an airpocket (scarcity in the money supply)?
Thank you. I was able to follow most of what you wrote here. You make an honest effort to take a balanced view. I think its safe to say now that the monitary and fiscal stimulus benefited the affluent most (aka PPP, leverage, low borrowing cost). Now they (the poor and lower middle class) are most likely priced out of home ownership. Now I hear that it's their jobs that a non-soft-landing Fed recession will negatively affect. The damage has already been done by ultra low borrowing costs. I know people who identified the unintended consequences of over stimulation. The FED has done more damage that helped because the tools at the FED don't live and work in the real economy. History says that inflation may give way to hyperinflation if majority of our politicos don't get serious about inflation. They need to stop printing more fiat I'm most concerned about the vulnerable in society.
they actually have stopped "printing" by implementing QT. I really don't think we are anywhere near hyperinflation. the fed can't fix supply chains or make boats go faster - we just need to rebuild and reshore and try to engage in stronger trade. it's a really difficult conversation.
I look forward to reading your future newsletter posts!