Stephen Miran
@SteveMiran
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Nominee for CEA Chair, President Trump 47 WH // Fellow @ManhattanInst // Alumnus @USTreasury #77, @HarvardEcon 🇺🇸
New York
Joined March 2018
I am beyond honored that President Trump has chosen me to lead his Council of Economic Advisers. I look forward to working to help implement the President's policy agenda to create a booming, noninflationary economy that brings prosperity to all Americans!
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Some notes on the missing recession 🧵. I, like others, expected a recession for most of 2022, to occur around the turn of the year. I was pretty consistent with this call, having first made it in March/April. Hasn't happened yet, at least in the data currently available. Why?.
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Vix down AND stocks down today. That means the market has lots of downside put exposure already -- gamma kicked in and increased their delta and folks had to cut exposure, i.e. sell their protection structures, to prevent their exposure from increasing beyond their risk limits
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A USER'S GUIDE TO RESTRUCTURING THE GLOBAL TRADING SYSTEM. As markets look forward to a second Trump Admin, there are lots of bad predictions that tariffs will cause horrible inflation, or the President can't affect the dollar. Both are false. /1
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🚨🚨 New from me, joint with @Nouriel 🚨🚨.ATI: Activist Treasury Issuance and the Tug-of-War over Monetary Policy.How Treasury's issuance policies have stimulated markets and the economy and blocked the Fed's efforts to restrain growth and inflation /1
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Reminder, employers cut back on hours before they cut back on employees. This ain't lookin' great.
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The principal reason is the missing construction layoffs. Mortgage rates shot up from 3% to 7%, making buying a home unaffordable for many folks. Normally, one expects a slowdown in construction activity and layoffs. But, construction employment is at all time highs!
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CONCLUSION: The missing construction layoffs ARE the missing recession. If they come, we'll have a recession. There's a reason for expecting them to come (homes under construction lagging sales), and reasons for expecting them not to (future demand picking up, private & public).
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Some personal news - you may have noticed I’m a lot less active on here the last few weeks. License to grow into the dad bod!
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The amount of coverage on Liz Cheney is staggering. She’s so out of step with her party she’s irrelevant to understanding what Republicans care about or want for the future. Reminds me of Soviet encyclopedias describing California’s significance as “once hosted a Russian colony”.
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Which of these forces wins the race determines whether we have:.-recession, or.-burst of growth, followed by new hiking cycle, followed by recession.
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US economy right now:.-Acceleration and strength in the industrial/building stuff economy, typically thought of as "leading"
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A blanket guarantee for all deposits would be a moral hazard nightmare. Depositors would be incentivized to invest in the riskiest banks offering the juiciest yield for the dumbest assets. Heads they win, tails taxpayers bail them out.
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The Fed tightened over 500 bps in an extremely short period. Add balance sheet operations, and it could effectively be 700 bps. Viewing this historic tightening as having no effect on growth or prices seems to me to be the same error committed in 2021, but the opposite sign.
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🧵🧵🧵. Could we see an unemployment rate of 4.7% by year-end?. Once the labor market chooses a direction, it relentlessly moves forward, unless a huge shock comes along to push it in the other direction. There's mounting evidence it's chosen a direction.
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Student loan repays now in excess of pre-covid covid peak by about $8m/d. No, I don't know why there was such a strong rush to repay student loans in Dec '19 through Feb '20, but am open to hearing why if anyone does
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Got around to looking at the JH speech. The Fed put is back. Powell "does not welcome additional slack in the economy" is the most critical thing there. Core PCE ran 3.3% in 1H, and 2.9% in Q2. If it doesn't really stabilize at 2% and the Fed doesn't welcome additional slack,.
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As @DomWh1te has flagged, we'd expect huge layoffs in the construction sector given this change. Some simple models for me indicate expected layoffs in the neighborhood of 500k to 800k jobs, and with multipliers, this would be 1 to 3 million total losses. That's a real recession.
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Going into CY2023, there's going to be ~$38 billion of Federal spending on construction and other projects kicking in. In CY24, it'll be closer to $54 billion. Assuming some multipliers, these go a long way to offsetting a big chunk of the decline in private structures spending.
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Still, there are some reasons for expecting the layoffs to eventually come. In particular, the huge divergence between the number of homes being sold and the number of homes currently under construction, which will presumably come down as homes are completed.
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In other words, I suspect builders are holding onto employees because the $$$ being spent by Uncle Sam on construction are going to start kicking in this year. Given a historically tight labor market where employees seem to have all the power, they'd rather hold onto the workers.
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The principal reason is the Infrastructure Investment and Jobs Act, passed in 2021. As I pointed out at the time in @WSJopinion , the IIJA is going to further fuel inflation.
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Thus, the missing recession really boils down to the missing construction layoffs. Why haven't these occurred yet?.Some possibilities:.1. They will. (Maybe, but I don't see -any- sign of them in the data. yet.).
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Fiscal dominance thoughts. A number of VERY smart people talking about this as a reason why yields are not just repricing higher but entering a secular bear market the opposite of the last 40y. Think it's important to distinguish b/w fiscal primacy & fiscal dominance.
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Meanwhile, construction activity *did* slow down. Total investment activity in structures is down by about $150 billion since its high in 2021.
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As I've said before, Lael Brainard going to be the chief economic adviser in the White House undermines the notion that the Fed is some politically neutral bunch of technocrats.
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@tribelaw Dozens of people dead, more kidnapped, thousands of rockets shot, children deprived of their parents. You have brought eternal shame on yourself and everyone with whom you associate.
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That means people already OWN lots of downside protection. That means the market is more likely to go down slowly than quickly. That means there's unlikely to be a sudden free-fall in stocks in which the cost of protection surges, which you usually need before a major bottom.
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If you're not paying lots of attention to the debt ceiling dilemma, you're missing the plot. I do not believe there will be a clean debt ceiling raise. D's may think R's will take all the blame for any default or suspension of govt services, BUT.
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permitting myself one political post: anyone who opposes voter id, stricter signature checks, and other measures that attempt to make elections more credible has NO RIGHT to complain if people subsequently question election results. do something to make election results credible.
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There is thus some chance the economy reaccelerates before those layoffs come, and the recession is avoided. However, in that case, the Fed will be goaded into a new hiking cycle, as inflation will pick back up, and the recession will be delayed and not avoided.
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Some thoughts on the CPI-PCE wedge and whether the Fed can declare "mission accomplished" and cut to neutral. Core PCE has been running at the Fed's professed target of 2% for 6 months (maybe 8, we'll see), but core CPI has been running at 3% and higher lately
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2. The extraordinary backlog of homes demand due to pandemic changes in the economy like wfh. This is a possible explanation, but presumably at some point runs out?.
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If SVB hadn't failed last week, I think the market would be pricing terminal rates over 6% now.
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Thus the market is unlikely to look like utter panic in which everything is on sale and positions get swept away and all books reset, which you typically need to mark a major bottom. That's why things that move slowly in markets ultimately move farther than those that move fast.
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3. Labor hoarding by builders, i.e. holding onto employees for fear of being able to replace them if necessary in a tight labor market. I'm generally dismissive of labor hoarding for the economy as a whole, but more sympathetic in the building sector. Why?.
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It's not difficult to imagine a world in which home prices fall by 10% or so, but given strong wages, resilient stocks, and falling mortgage rates, final demand stays robust. Given the historic run up in home prices, builders are still very profitable at those levels.
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*YELLEN: CONCERNED ABOUT 'WHERE WE'RE GOING' WITH US DEFICIT. You're the one driving! Pull the damn car over.
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I argue in Barron's the Fed doesn't need to make adjustment cuts, because Treasury has already provided them! The era of QE (and QT) fuses monetary and fiscal policy, and less duration supplied by Treasury has offset more from the Fed.
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My dissertation advisor, Marty Feldstein, had a paper in this volume. His point here was the interaction of high inflation with the tax code massively distorts your conception of monetary policy, and that in the '70s they tightened much less than they thought. (Sound familiar?)
The contents of this extraordinary book are available as a series of downloadable chapters. It is a definitive “Who’s who” of extraordinary economists and is dog-eared digital print for me. I don’t agree with all, but all great
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It also means we're likely to get large whipsaws back and forth as this option hedging swings like a pendulum. Wouldn't shock me at all to have successive -2%, +2%, -1%, +1% days around the trend.
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Trying to move to the suburbs. Yesterday we bid 12% above ask trying to buy a house. Someone beat us by waving inspections. on a house built in 1928 (!!!!!). The froth hasn't come out of this market, at all. And the Fed thinks it can stop hiking soon. .
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Finally got around to reading @tylercowen interview with Ray Dalio. Some thoughts, as someone with an econ PhD who also has been a macro portfolio manager.
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I profoundly believe the income/wealth effects on labor force supply due to the crypto/memestock phenomena were nontrivial drivers of inflation. If the Fed cuts into this nonsense, they'll re-emerge.
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Watching this sector will give us a clue as to whether we'll see a recession or not. In the meantime, as @darioperkins has pointed out, real incomes are accelerating on lower inflation, and as I've stressed 100x, financial conditions easing ought to induce a pickup in GDP growth.
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Major econ arguments I have made this year:. * Neutral is higher than the Fed thinks.* The Fed is not as tight as the Fed thinks.* Treasury issuance policy is counteracting what Fed restriction there is.* The reduced hiring rate is not indicative of problems with aggregate demand.
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This is a full soft-landing FOMC projection set. They are marking down unemployment expectations without any corresponding worsening of the inflation outlook. They marked up their expectations for policy in '24, but less than the decrease in UE would imply w/ Yellen-Taylor rule
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BN 07/26 18:25 *YELLEN REJECTS ROUBINI CLAIM OF ‘MANIPULATION’ IN TREASURIES.BN 07/26 18:25 *ROUBINI, CO-AUTHOR MIRAN SAY TREASURY EASED FINANCE CONDITIONS.BN 07/26 18:25 *YELLEN COMMENTS ON TREASURY ISSUANCE STRATEGY IN INTERVIEW.*YELLEN: ISSUANCE ISN'T INTENDED TO EASE.
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I don't see why this is complicated. The market moved a huge amount in October, expecting Treasury to dramatically increase coupon issuance in Q1 as it did in 2H of this year. Today we found out there's only $10b more. peanuts in the scheme of the market.
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Merry Christmas, happy Chanukkah to all!! A joyous holiday season to you and your family.
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Afternote: there's a race between the exhaustion of the backlog & the coming construction layoffs, vs. a reacceleration of the economy on easing financial conditions & IIJA boosting construction demand.
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After taking a couple of days to think about the FOMC meeting I can say I think this was 1) the worst communicated policy decision of my lifetime and 2) the biggest policy mistake since 2021. And I think political motivations have a lot to do with it.
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Why lay off your workers now if you expect real difficulty in hiring them back if building starts to pick back up, particularly for nonresidential construction?. 3. Financial conditions have eased significantly since September: stocks, mortgage rates, the dollar.
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I think Chevron being struck down is the best possible outcome for democratic longevity. Congress will have to legislate, which means bipartisan collaboration. That will perforce reduce polarization overtime. The social fabric can mend.
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In Trump's first term, there was no discernible rise in inflation or drag on growth. Why?. The answer lies in what economists call "currency offset.". The dollar moved up by almost the exact amount as the tariffs did. After-tariff USD import prices didn't move. /10
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Here's the thing. Predictions and forecasts are difficult. It's very brave to make them publicly. So you should be kind to people who make them and get them wrong---they took a big risk doing so. Some characters around here seem to exist purely to mock risk takers. Disgraceful.
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Tons of fun to talk with the crypto folks—lots of exciting stuff going on! Thanks for having me on, @timevalueofbtc.
🚨NEW VIDEO🚨.Trump's POTENTIAL Economic and Dollar Playbook REVEALED by Former Treasury Official. @SteveMiran, a PhD economist and senior strategist at Hudson Bay, to uncover the potential economic playbook of the Trump administration and its transformative policies.
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For context. This is the strategy of the KOMODO DRAGON which bites with a small venom that inhibits coagulation. The prey slowly bleeds out and weakens over time. When the prey is sufficiently weak, the dragon ambles up and eats it alive, the prey too weak to resist. Slow kill.
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🧵 A hypothesis explaining Dec-Jan data, and a prediction for a strong number tomorrow for Feb. Maybe. it all comes down to the flu!. Flu season was not only very bad this year, but it was way earlier than normal. Typically spread Jan-Mar, flu was almost all in Dec this year.
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Ok these 30yr bonds are starting to get close to what look like spectacular value. Note current TP is around 0%, I don't think rates will stay at an average of 5.5% for two years hence. Long term TP chart attached for reference
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Everything on this feed is me thinking out loud. I clearly don't have any magic crystal ball to tell me the future. But neither does the Fed! Or the Treasury Secretary! Or anyone else. think for yourselves, folks.
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The Philadelphia Fed regional survey has always been the most important, in my view, of all the regionals. It's never been this low without the US being in a recession. Could be different this time, survey data are flaky particularly around bank crises, etc. and yet.
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Views update:.-US economy is fine under the hood.-Inflation is settling in too-high for the Fed.-Rate cuts should continue to get priced out of the first couple of years of the curve.-Supply will continue to weigh on the long end, drip drip dripping on term premia.-The USD is.
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💥Very pleased to share a policy piece arguing the Fed should ditch its inflation target altogether and return to pursuing price stability💥. We can't precisely measure inflation, and we absolutely can't precisely target what we can't precisely measure.
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I realize some of my views might seem contradictory so let me try to clarify a little:. -I expect very gradual weakening in the labor market and don't think the Fed should cut until it's clear the risk a resurgence of inflation is behind us.-While I think the Fed shouldn't cut, I.
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The weird thing about the fight over premature recession calls and TLT is that TLT isn't a great recession trade. You'd want to be in the front end or a steepener. Front end you'd keep getting stopped out and learn quickly. Long end does the least in a downturn.
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Lots of “team transitory” out there taking victory laps which is absolutely farcical. Where would housing prices be if mortgages had yielded 3% the whole while and stocks took a moonshot? Much higher! And thus, CPI would be way higher as well.
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Other than a couple of months in 2006 (and the GFC in which deflation expectations temporarily soared), 2y TIPS yields (i.e. bond yields adjusted for inflation, real yields) are at all-time-highs around 3%.
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“No landing” (which I have been pushing here for some time now) isn’t a permanent state any more than any other ridiculous “landing” term. No landing just means the Fed’s not done with its tightening cycle, has to hike substantially more, and hard landing later.
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This year's Jackson Hole is titled "Structural Shifts in the Global Economy". My guess: we hear a lot about higher longer-term r* as a way for Powell to manage financial conditions tighter without hiking any more and preserve committee compromise.
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In other words, maybe builders expect a surge of private demand in the near future and are therefore holding onto their employees.
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This is just comically farcical. Most aggressive hiking cycle ever, two years for measured inflation to come to target on a sequential basis, and we are declaring victory?. And the taxpayer subsidizes this burlesque of economics.
Still no recession, but core PCE down to 2.2% on a three-month basis. Team Long Transitory for the win.
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Before you get all excited about 7% yields on t-bills for June 1, note that that's an annualization of one week of yield. You make all of 0.14% on the loan. That's not much of a risk premium. The panic headlines all come down to annualizing small discounts. Talk $-price not yld
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The burden the overvalued dollar places on the U.S. manufacturing sector drives carnage across the industrial base of the country, and places an enormous drag on our export sector. American workers bear the cost for global reserve provision. /7
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Agree with this. It’s drip drip drip on markets in the coming months. But the problem is the forward guidance for no future increases in coupons in coming quarters which is INSANE given the size of deficit and bill issuance. They’re kicking the can down the road till after the.
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Before the weekend, happy to share my piece in @barronsonline on market pricing of Fed cuts. The crux is the Fed has told the market it will tolerate pain, but at every. single. junction. it demonstrates the opposite.
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How did regulators allow Silicon Valley Bank to fail?. A month before SIVB failed, the Financial Stability Oversight Council had its regular meeting. Their top priority?. "Climate-related financial risks." .
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The decision by Treasury to increase the coupon issuance by only $10b in Q1 has led to an enormous short squeeze in bonds, bringing yields down and pushing equities higher. It's still just a short squeeze. as y'all price in the soft landing it will become attractive to fade it.
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Amazing how fast we went from “declining population is deflationary” to “increasing population is deflationary”. Y’all really want lower rates don’t you?.
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For the thousandth time, the basic dilemma in my mind:.-Labor market cooling as expected.-Why should labor market magically stop here and not continue cooling, without a policy shift?.-Fed cannot shift policy to easy because of recent history & inflation risks.
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The race between real wages and and excess savings. One theme I've been hammering is that households have been living beyond their means since the pandemic. Real consumption growth has exceeded real income growth by 5% to 6%. Household spending has been buoyed by dissaving.
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NY Fed President John Williams on the tapes saying the natural rate of interest--r*, as the kids say--hasn't changed much since pre-covid. Good time to remind yourself that confidence bands around these estimates are MASSIVE. 6 p.p. at 70% confidence.
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Based on incoming information, seems like the total fiscal drag will be about 40 bp of rgdp starting in October. This is discretionary quite below my initial expectations plus the student loan payments coming back. Still waiting for more info - student loans cd start earlier.
I told you:.1. Biden would negotiate with GOP over the debt limit (✅).2. That a bipartisan deal to raise the DL would be reached (provisional ✅based on recent headlines - could reverse).3. That deal would contain noticeable but not severe fiscal drags (my estimate was 50-75.
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I think “high interest rates are stimulative” has made me reevaluate my views of MMT. I previously thought they were political hacks looking for any rhetoric that would allow them to engage in their preferred big government policies. But since they now want higher rates to.
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Nuance please, folks.If the Fed hadn't hiked rates and had accommodated runaway inflation, long yields would have soared so much higher. Probably even a worse outcome, then. The real mistake was in letting inflation get out of control in the first place.
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Extremely strong job numbers, with the first material upward revision in months. Wage growth continues its normalization. Unemployment rate stayed a tad higher, but I would continue to ignore that given the noise involved
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Folks, moves like the one in EUR fixed income are why you should be a little cautious here. This is a market that had barely budged in years, and now there was a sudden big move. That means every single risk model has experienced a shock--six sigma or something like it
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so are the 16 nobel laureates gonna write a letter about something economists actually agree is bad policy or nah.
Scoop: Biden WILL announce plan to cap rents at 5% nationwide, sources say. Would strip tax benefit from corporate landlords who dont comply. Plan, which likely requires D control of Congress, comes as Biden emphasizes populist econ ideas after debate. W/ @rachsieg.
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Stop talking about the damn FOMC dots. These are the least important dots since 2020. They have no clue about what the economy looks like 3 months out. This is a time of maximal uncertainty. The dots are worthless. The Fed has no crystal ball on this.
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Budget projections are totally ludicrous if market rates stay at these levels. Federal finances are in enormous danger
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guy who thinks policy is extremely restrictive after many quarters of ngdp growth>5%.
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Summary: changes to Treasury's issuance policies have provided similar economic stimulus as a 1% cut in the Fed Funds rate, usurping core functions of monetary policy and blocking the Fed's efforts to restrain inflation and growth. /2.
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Y'all might be taking victory laps on 2023 GDP but imv we had an unprecedented--and unexpected--doubling of the deficit to $2 trillion and a huge easing in financial conditions delivered by Treasury's reduction in coupon supply. I don't think many people predicted those.
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This has my attention--collapsing inflation expectations in the European CPI swap market
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As we approach the Jan 31 refunding announcement from Treasury, I think it's very important to pay attention to the dangerous erasure of the line between fiscal and monetary policy. Consequential decisions are being made by political, not technocratic actors. Bad precedent.
Check out @SteveMiran's latest on the dangerous blurring of lines between fiscal and monetary policy @CityJournal:
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If the Fed Funds rate is 5.5% we haven't yet "landed" at all. A soft landing requires the Fed to successfully get policy back to neutral without a downturn.
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This is cool. Controls are often not really controls. And (once again) economists should be humble in making claims.
Price theory is essential for causal inference when the subjects participate in markets, from Robert Minton and @caseybmulligan
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Unfortunately a significant chunk of the economics profession is coming up with models in which in an insane policy is good under an absurd set of assumptions and then pretending those results generalize to support your preferred political candidate right now.
The Post-Keynesian crackpot wing of the economics profession is wildly enthused about the Harris grocery price controls scheme. Their endorsement is another reliable heuristic that it's a bad policy.
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