Hello Swamp People, Happy New Year!It feels like 2022 has to be better than last year, but considering Ed’s Notes About the atmosphere in Washington, maybe I said it too soon.

I would like to start my own first note of the new year by sharing the top three questions I care most about and the ones I hope to answer. I welcome readers, and of course you, Ed, to add your own thoughts or lists for 2022 – which will help me focus and report on the next 12 months.

1. What happens when the Fed raises rates?

For years, I thought low interest rates were Benefit big companies far more than the average person.While some quantitative easing was needed after the subprime crisis, most of it was just raised the price stocks and houses, and prevent useful price discovery in the market.This remain There are as many mistakes here as there are political rights.In fact, as I pointed out in my column, the Fed has been artificially lengthening the business cycle for decades due to excessive pressure on both sides of the aisle, preventing a healthy cull Unproductive lending and business that usually occurs every few years.

The problem is when the music stops, there is pain. About two-thirds of the U.S. economy is made up of consumer spending. But people’s spending patterns are not based solely on their income. Our personal consumption also correlates with our wealth expectations for assets such as stocks and bonds. It’s astounding how American wealth is completely dependent on the inflation of these asset prices.

Financial analyst Luke Gromen has calculated that net capital gains on IRAs plus taxable distributions equates to 200% of the year-over-year increase in U.S. personal consumption expenditures.as I write 2020: “It doesn’t necessarily mean that people will take money out of their retirement accounts to buy hand sanitizer, bottled water, and face masks.” But it does mean, as Groman says, “that if asset prices fall, GDP falls value cannot rise mathematically”.

2. Will there be a major market correction or even a recession around the midterm elections?

If so, what does that mean, especially if it looks like the Republicans are going to win anyway? How should we think about inflation in a generational economic transition?I’m fascinated by what the BIS calls the “bullwhip economy”, where Inflation dynamics The world is developing in new and surprising ways. Pundits and pollsters tend to look at the effects of inflation in a very short-term fashion. I don’t want to downplay these – of course, higher gas and food prices can have a huge impact on working people’s monthly budgets.

But a Biden administration is all about rewarding “jobs, not wealth.” That means moving to an economy that better balances production and consumption, redistributes some wealth, invests in public works and human capital, and encourages savings and equity rather than financialized, debt-driven growth. All of this is inflationary in the short term. But in the long run, having more trained workers, stronger infrastructure, and more resilient supply chains would be hugely deflationary.

How can the government find a politically quick and easy way to communicate this to the public? How can we help Americans understand that the shifts we need to make are measured in years, not months or weeks? How can we buffer the short-term effects of inflation for those most affected by it?

3. Is there any benefit to decoupling? What does the post-neoliberal world look like?

We keep hearing about the dangers of deglobalization and how we will end up in the 1930s if we are not careful. It’s a risk, but it’s not politically and economically feasible to go back to the mid-1990s (when we started brewing a global debt bubble that is now about to burst again).

I’ve always thought, like Raghuram Rajan of the University of Chicago Booth School, that we might need a little less globalization to save our global world from being the best it can be. I just finished my next book, The Return: The Road to Prosperity in a Post-Globalized World, (Crown, October 2022), which will outline what a better world might look like and provide some examples of businesses thriving in it. I believe that at a time when energy costs are high (and will likely continue to be as we transition to a green economy), complex supply chains are vulnerable, and China has become a producer and a consumer with its own economic trajectory.

This is not to say that globalization is disappearing.As our colleague Gillian Tett said argue subtly, deglobalization is likely to transform into reglobalization, in which countries other than the United States simply position each other in new ways. But I think the massive geographic disruption caused by the pandemic, pushing money from the US coast to the hinterland, coupled with new decentralized technologies like 3D printing and various virtual work arrangements, will lead to a new mooring of wealth and places to start Bridging some of the gaps between economic globalization and national politics. It’s going to be a slow but welcome process – and positive news to end my first newsletter of 2022.

Recommended reading

• exist my column, I look at what’s real and what’s hyped about Web3.exist this work, as did Tim O’Reilly, who helped popularize the term Web 2.0.

• I found this Peter Hessler feature In The New Yorker, it’s really melancholy about how wealthy Chinese struggle to adjust to success.

• My husband gave me one This book All about wasps (not insects, but traditional American aristocrats) during Christmas, and it’s part of his continued effort to help me understand his people. It’s funny, but sad. Had high hopes and poured too much gin.

Edward Luce responds

Rana, I’d also love to see if inflation eases because of supply chain improvements or if the Fed has to tighten faster than it wants. Obviously, the first one would be infinitely desirable. I’m not sure who to trust on this issue, given the generally poor forecast record of late. It’s refreshing that Paul Krugman admitted this week that he was wrong.

Since you asked what I was looking at, here are three things:

1. Will Putin invade Ukraine? It’s a more vivid geopolitical journey than Taiwan, given Xi Jinping’s visceral focus during his planned re-election year. If Putin calls the West a bluff, we will face the biggest challenge to our credibility since the end of the Cold War. This will be a very dangerous time.

2. Will the Justice Department prosecute Donald Trump? Given Merrick Garland’s innate institutionalism, conventional wisdom says no. I am agnostic. The evidence against Trump continues to mount.

3. Will Covid become endemic? The key to solving this problem lies in the health of the global economic recovery, the fate of the Democratic midterm elections, the recovery of emerging markets, and our ability to provide global public goods. As I’ve argued repeatedly, the best thing Biden can do for America’s standing and his own domestic wealth is to be more aggressive in increasing global vaccine supplies. I’m still baffled and frustrated by his lack of urgency in this regard. Scientists say new post-Omicron variants are likely to emerge unless we take urgent action now to vaccinate Africa and other laggards. Perhaps in 2022, the West will finally grasp the conundrum.

your feedback

Now the words of our swamp people..

respond’Why Americans are shutting down from January 6‘:

“I enjoyed reading your article about our democracy. I don’t believe I’ve responded to an article before, but this one made me think more than usual, especially the second paragraph about our indifference to the matter. I wonder if the answer is it feels like democracy was lost by special interest groups some time ago and it doesn’t feel like there’s more to be taken away. If by democracy you mean I’m involved every two, four, six years At one point when I was choosing between the Democratic and Republican candidates, neither of which was very popular, then I’m not sure if that’s a big loss. I realize that considering some lives around the world Condition, that’s a gross overstatement, but I’ve seen things like organic food labels being vandalized by agricultural lobbyists and Monsanto suing and winning cases against farmers for seeds unknowingly migrating into their fields , the coal industry silences critics by exceeding their spending, critical race theory creeps into the classroom, drug companies oppose legislation against price negotiations that other countries enjoy, PACs that ordinary citizens can’t hope to compete with, Influence by Black Lives Matter, Antifa, Proud Boys, QAnon, George Soros, Koch Brothers, Citizens United, I wonder, what democracy are you referring to? It feels like the ship sailed long before January 6. If anything , you could almost argue that Jan. 6 is the result of the aforementioned roster, just like Donald Trump and his rabid supporters.

I have my own business. Most of my time seems to be evenly divided between running the business or dealing with expensive software issues with IT specialists, or being online for hours negotiating labyrinthine tech support menus. Then there’s the never-ending argument with the banks whose algorithms are inexplicably withholding my deposits for no clear reason other than the law allows them to do so. None of these issues are on the ballot box or resolved in the debate, but they are questions that I and many of my contemporaries have to face every day. So, after processing 10 to 12 hours a day, should I care what Trump and his crazy team of clowns are doing? I see more threats to democracy posed by elite ideologues in the EU who want to open borders to anyone who is not of European descent, despite the obvious reservations of their citizens. The same is true here in the United States on our border. Some elite theoreticians who never have to face the consequences of their actions have more control over this democracy than I do, in fact, if you object to this, you will again be laughed at by the awakened, what is democracy left to me to give up?

I think the actions of Trump et al are despicable and I hope they all end up in jail, but I think doing things within the law deserves more attention than some idiot wearing a bison hat or lugging a podium. I also have a hard time believing that I’m the only one who feels this way. . . . I hope I can give you some insight or another point of view. ” — Frank Hyatt