Tim Duy
@TimDuy
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Husband, father, Chief U.S. Economist, @sghmacro, @uoregon economist, Tim Duy's Fed Watch, former columnist for @bopinion
Eugene, OR
Joined September 2011
Suspect this sudden pressure to reopen the economy before we control the virus is a reaction to the realization that the economy as structured cannot survive a month and the necessary restructuring will be in the direction of everything the GOP has fought against for decades.
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September 18, 2007
Has the Fed every cut rates with the S&P at an ATH?.
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It’s not a sell-off until Robinhood is offline for “technical difficulties.".
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My first mortgage rate was 7.5%.
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BREAKING: Facebook sees the election leaning toward the Democrats.
BREAKING: Facebook bans QAnon across its platforms.
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At a very basic level, I think the fundamental issue is that we switched from subsidizing supply via state support for higher education to subsidizing demand via easy access to student loans. In the former system, the objective was to keep costs low. Not so in the latter.
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Over time, I have come to believe that the most basic troubling aspect about economics as a profession is that it attracts people who seek to use the supposed amorality of markets as cover to express their own broken morality.
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I don’t think people appreciate the extent to which Amazon puts a wage floor in a community. It’s the first thing employers think about when a new Amazon facility arrives in town.
$AMZN hiring another 125,000 workers, with an average starting wage of $18/hour
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Starting to feel like transitory inflation can have persistent impacts.
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Maybe good economics about on some levels, but bad politics. Dems need to stop letting perfect econ be the enemy of sustainable political objectives. Warnock and Ossoff campaigned on the checks and delivered a win. Reward them. It’s really that simple.
Democrats. Delighted by your win. But please don't go for the 2000 dollars checks. Aim the money better, for those who really need it.
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"If only they hadn’t done any stock buybacks, they would have been just fine” said no one with any common sense.
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Is this parody?.
Just to put things into perspective: The S&P 500 may have hit a new ATH today, but if you put the index in relation to the Fed's balance sheet, it is trading at the same level as in 2008, so equities have traded sideways since 2008, basically counteracting balance sheet expansion
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PPP shaming was wrong.
There was tremendous media outrage over Ruth's Chris Steak House receiving PPP money. The funding was returned. Now workers at Ruth's Chris are being laid off and much of the PPP money has not been spent.
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Trump’s apparent gains with Blacks and Hispanics suggest the Democrats are going to have to revisit their “demographics are destiny” narrative.
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@dandolfa We don’t have any of that set up yet. There are no masks, there is no widespread testing. Yes, if we had those things we could go back to work. But we don’t and won’t for weeks. Even if we did, we still will reveal the weakness of our health care system with even low infections.
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The Millennial experience might be the norm not the exception. We don’t appreciate how lucky the Boomers and Xers had it. My Granda was born in 1910. By the time she was 35, she lived through two World Wars and the Great Depression.
Millennials have been historically screwed by forces beyond their control twice, and the effects will last their whole lives.
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Ban noncompete clauses.
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Imagine running on the story “the economy is awful and we need a socialist overhaul to fix it” with 3.2% unemployment.
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Lol completely misses the biggest rate hike cycle in decades and still declares victory.
Gotta say it: the original Team Transitory proposition was that inflation would subside without the need for a big rise in unemployment. Not looking so wrong now (supercore is core ex used cars and shelter, 6m annualized) 1/
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This is true. Everyone has been so sure that the next crisis will look like the last two, coming out of the financial sector to the real economy. This has been the opposite, a pure exogenous shock to the real economy.
Mnunchin: "This is not like the financial crisis.".
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I am pretty sure the Fed will let crypto burn.
Novogratz is on Bloomberg TV right now saying the Fed should step in. He also recently got a LUNA tattoo.
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I guess the biggest risk to airlines in the long-run is that companies learn that much of the “essential” Tavel was not “essential.".
Yesterday Amazon told employees of its at largest org (worldwide ops) to stop all foreign and ~~domestic~~ travel “until further notice” because of coronavirus, according to emails I saw. Tucked a bit of news into @MikeIsaac’s newsletter
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For those arguing that the Fed has lost control of the bond market, this is what losing control looks like.
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Theory: There are three issues that if adequately addressed would improve the economic fortunes of a vast majority of people. Health care, housing, and education. None of those issues is beyond our capacity to deal with in even the short run.
Rising health care costs are crowding out everything in state and local budgets.
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This might be the most important chart right now. Even if vaccines don’t stop COVID entirely, they are still a game changer.
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Pro tip: Except during the very worst of recessions, employers almost always believe the labor markets are “too tight.” Beige Book doesn’t tell you labor markets are too tight; it tells you that employers think hiring takes a lot of effort.
Jay Powell says labor market is not tight. Beige book disagrees: "Employment was steady to rising modestly in most Districts, while labor markets remained tight throughout the nation.".
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This is a straight up bad take. If you are going to zero, you won’t have (traditional) ammunition left no matter how quickly you get there. Better to go early and go big and err on the side of being ahead of the curve rather than behind.
When you have limited ammunition you have to conserve it. The Fed has limited ammunition with interest rates so low. Interest rates don't cure the #coronovarius and interest rates don't repair supply chains.
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We are on the cutting edge of the pandemic recovery, a massive fiscal stimulus, a demographic shift of the aging Millennial bulge and the fading of the Boomers, technological change in energy and medical care, and a radically different monetary framework. A fed watcher’s dream.
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Yes I am so making the kids drag themselves out of bed for first tracks this morning.
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Thinking that fiscal policy needs to be on the order of $3-4 trillion total over the next three months, roughly split in thirds between SMEs, households, and state and local? That seems to be the numbers consistent with various policy proposals floating around? Too low?.
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I feel a disturbance in the force. It’s as if a million Austrian economists just screamed out in pain.
"It doesn't have implications for inflation.". - Powell on the size of the Fed's balance sheet.
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Again, completely backwards use of the bank analogy. The financial flows are from the rest of the world to the US.
Just another #G7 where other countries expect America will always be their bank. The President made it clear today. No more. (photo by @RegSprecher)
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I understand the framing because of his job, but can’t systemic racism just be wrong? I am really tired of having to have an economic justification for everything we do.
Systemic racism slows down economic growth, @DallasFed chief says
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When I spoke with manufacturers last week, none complained about the Federal Reserve. Many, however, complained about trade wars.
As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!.
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The Fed has already acted differently this time. No way would a prior Fed have sat back while unemployment fell to 4.6% and core inflation rose to 4.6% and not even begun the tightening process.
Good thread. The thing about this crisis is that CBs went into it absolutely desperate to convince us they would behave differently this time. So my question is this: was that just bullshit? We are gonna find out soon enough.
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I find it frustrating that policymakers continue to move the goalposts. There won't be inflation -> inflation is transitory -> not that kind of transitory, the longer kind -> (next up) more inflation this year means less next year -> (finally, maybe?) more inflation is good.
Yellen on inflation: "I believe it’s transitory, but I don’t mean to suggest these pressures will disappear in the next month or two". She was on @CBSNews.
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I suspect this is underrated as a source of tightness in the labor market.
Then there is the loss in immigration, which fell precipitously 2016-2019 and the fell further w/pandemic. This is one of the major reasons labor force growth has slowed to a virtual standstill even as demand for workers surged.
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This impeachment thing is going to suck up all of the oxygen that should obviously be devoted to repo markets.
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I do so enjoy when people use OLS on 13 observations and think they have discovered the secrets of the universe. It’s adorable.
If you think that the Fed does not boost the stock market. You are probably wrong. See below, since October 9, 2019, a 1% increase in the Fed's assets on the balance sheet has coincided with a 0.9% increase in the S&P 500!!
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FOMC is hiking into the slowdown and it knows the consequences.
While monetary policy stance is accommodative, indicating a low recession probability, negative inflation slope points to higher odds of a recession within a year. Aggressive removal of policy accommodation increases recession probability to 60% (3/3)
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The Fed doesn’t see it this way. Assuming 2024 ends at 2% inflation (we are already there), 150bp of rate cuts leaves spot real policy rates at 1.8% compared to the long run real neutral of 0.5%. In the Fed’s world, that is less contractionary, not stimulative.
But what’s priced into the market now is far more than that. It’s a massive easing with no expected weakening of economic conditions (remember stocks are at highs!).
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Lots going on here. If you want more daycare, we need to pay competitive wages. To pay competitive wages, we need parents who can afford higher costs. In particular, you need higher wages for women. Alternative is to subsidize wages for child care workers.
NEW: Daycare workers are quitting for better-paying jobs, sending ripple effects through the economy. -Childcare classrooms are closing.-Daycares now have a harder time hiring than restaurants.-Over 10k daycare workers quit this summer.Median pay $12.24/hr.
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Economist.
Name a job where you can consistently be wrong and still not lose your job?.
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Waller, Powell, Williams all told us repeatedly that the Fed didn’t need lower growth to cut, that inflation alone would do it. People just refused to listen, and still refuse to listen.
When people say this Fed meeting would be judged poorly by history, all they are saying is that they imposed their views as to what the Fed should do. as opposed to paying attention to what Waller said they will do.
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Master’s programs are cash cows for higher ed. I strongly advise my students to be very cautious about taking on additional debt for grad school. For many if not most of these programs, it will never pay off. Many will take anyone. MBA programs are a dime a dozen.
My WSJ investigation w/ the inimitable @anfuller shows master's programs at prestigious private universities often leave grads in worse financial shape than those at for-profit colleges. 1/
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FWIW, I know there is a lot of stress over state and local revenues. One thing to consider is that property values have not collapsed like they did in the last recession.
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I think that in its eagerness to defend against the claim of recession, the policy community has lost the plot. Regardless of a recession, the question is what has been the cost-benefit tradeoff of the last 0.9ppt increase in the unemployment rate. (1/x).
@conorsen The Sahm Rule advocates have history on their side, it must be acknowledged. I don't think it's unreasonable though to wonder if a U3 rise driven primarily by a labor force expansion might have a different implication from one driven primarily by an EPOP fall.
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I don’t know when markets start pricing in a complete mental collapse of the President, but it is something to start thinking about more seriously.
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Article doesn’t mention that the BLS adjusts for these changes when measuring inflation.
NPR has a piece warning about "shrinkflation"
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Nope. Wrong. Wrong. Expansions don’t die of old age. Age of a recession doesn’t predict probability of expansion.
@TheStalwart Recessions have arrived periodically every 8-10 years. 1990-1991, 2000-2001, 2008. We’re overdue for another. Plenty of other charts as well that show things at pre-2007 levels. But above all is feeling that the recovery is in asset prices, is fragile, and is sustained by QE.
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This! Home prices aren’t being supported by exotic financing products like 05-07; they are supported by income gains.
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The market for mid and low tier liberal arts colleges is collapsing. Demographics and costs are finally catching up to them.
Hampshire College is also evaluating whether to admit a freshman class for the fall.
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Haven’t had as much time for woodworking lately. Here though is a box made with some scrap wood to practice my resawing skills to get a good wraparound of the grain.
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Mission accomplished.
Yield curve has pushed into positive territory after being inverted for nearly 5 months
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The net success of NAFTA help convinced the Washington consensus that China's entry to the WTO would be similarly successful. The fact that NAFTA preceded the China shock however left the public connecting the result of the latter to the former. (1/2).
I don't think it was NAFTA that made America's industrial base disappear. Here's total manufacturing employment, with NAFTA and China's entry into the WTO both labeled on the chart.
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My kid, with his first job, just complained about family dinner with “this is my only day off and this isn’t what I want to do.” Cry me a river after the last 17 years.
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That last point about limited or no fiscal stimulus during the next recession is probably correct. I don’t know that left-leaning economists yet realize this.
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Lol. "Staff who were badly losing the election unhappy about being replaced with staff who want to win.".
New: Kamala Harris united Democrats. But her campaign is navigating internal tensions as a team of new senior strategists take hold of an operation largely staffed by people hired when Joe Biden was the Democratic nominee.
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It’s not a choice between a recession or zero rates forever.
Engineering a recession by jacking up interest rates won't make prices of coffee, cars, or gas go down in middle America. But it would leave middle America with less jobs even as many prices remain elevated from global supply/dist constraints.
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No. This is a monthly chart of saving, the flow. The net acculumating of saving is savings, the stock. "This distinction is often misunderstood, and even professional economists and investment professionals will often refer to "saving" as "savings”.” - Wikipedia.
Contrary to what you may have heard elsewhere, there is no longer $5 trillion in excess savings; or even $2.5 trillion. In fact there is almost no excess savings left as consumers have spent most of it.
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Again, this is about financial market functioning. It’s about making sure the engine is still running until we get new wheels.
The Fed is pouring gasoline into a car that doesn't have wheels.
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Sounds cheap.
GOLDMAN SACHS: "We find a national [facemask] mandate could . cut the daily growth rate of confirmed cases by 1.0pp to 0.6% . a face mask mandate could potentially substitute for lockdowns that would otherwise subtract nearly 5% from GDP.".
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I am thinking that finance is more complicated than tech people believe.
Robinhood maxed out credit line last month amid market tumult - Bloomberg.
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The strength of the Fed’s commitment to driving the unemployment rate higher is the key policy issue this year.
"The Fed intends to engineer a higher unemployment rate. I don’t know this will still be true in the second half of the year, but it is definitely true now." -- @TimDuy.
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Yep - still doing QE with inflation not seen in 40 years. Can you say “we don’t care about inflation” any louder than that?.
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Sigh, this is the flow, not the stock. The saving rate (flow) has drifted down, the accumulated savings (stock) has just barely been touched.
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If nominated for a Fed governor position, I pledge to not deliberately invert the yield curve.
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No. No. No. No. The U.S. is not entering a recession.
Interesting: Is the U.S. entering or in a recession right now? Sentiment indicators are pointing that way 👇.
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Adjusted for core inflation, corporate debt rates lower than 0, something that didn’t even happen in the 1970s!
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@s_delhommer @Claudia_Sahm Everyone knows that occupational licensing is bad for all fields except your own.
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What’s that? You said you want 1,700 words on the Fed this morning? Filled policy analysis, economic analysis, and political commentary? Something to make everyone happy and mad? While then, this is for you:.
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So instead of Biden taking a memory test, what I really want to see is Trump riding a bike. Or do I?.
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Waldo Lake. Amazingly clear water because it has no permanent inlet to bring nutrients, so there is very little plant life. My longest open water swim yet (only got a little off course once).
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Core measures less shelter tells us that underlying inflation is running at a pace not seen since the 1980s. Seems like its not just a year ago problem.
And the fact that shelter is basically telling us about the economy a year ago is therefore a problem. Yes, I and others should have realized this last year, when true core was much higher than measured. But that doesn't change the fact that it's a bad guide now 5/.
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Wow - one of these things is definitely different. The combination of high costs and the availability to work from anywhere has blown apart that housing market.
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This implication is what you should be focusing on. The Fed is locking real rates at -2% despite substantial improvement in the economy. The Fed is begging you to buy risk assets.
So the Fed is forecasting 2.0% inflation in 2023 and 4.0% unemployment and also saying rates will stay at 0% that year.
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If the national debt is now a concern again, it’s game over for the economy.
Sen McConnell says no Phase 4 until Senate is fully back in session. No more bills by consent. Cites mounting national debt as "a matter of genuine concern.".
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Shorter Powell: “I want to get people back to work. Don’t talk to me about anything else.".
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Re-reading @Neil_Irwin ‘s The Alchemists with a student. Makes me realize the debt we owe Bernanke. It took him years of tireless effort to design and implement the package of policies that the Powell Fed delivered this week.
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