a thread in which ilx interprets economics and finance, sometimes linen by linen*, and disagrees a lot (probably)

LOL. I once had a boss who brought eggs from his hens to work and, shall we say, gently encouraged employees to buy a few at a nominal price, so he could claim a tax break for his farm as a working farm.

I know this probably makes me an unserious person but I find it endlessly amusing that the AT1 bondholders got zeroed in this CS debacle.

what's great is that every effort was made to tell the bondholders they could get zero'd when they bought the bonds, and they still made a surprised pikachu face when they did in fact get zero'd

I mean, it was not exactly unknown that CS was swirling in the toilet. if I owned AT1 bonds, I might at some point read the docs and make a decision as to whether I still wanted to be holding onto this paper?

LOL. I once had a boss who brought eggs from his hens to work and, shall we say, gently encouraged employees to buy a few at a nominal price, so he could claim a tax break for his farm as a working farm.

― o. nate, Friday, March 24, 2023 12:47 PM (one week ago)

hahahahah! recently there was a study published about IRS enforcement & audits being racist, which generally just reflected the inequity in the US, and how it's easier to program an automated system to flag certain types of discrepancies and fraud, which largely are tax credits for poor people, as opposed to flagging the types of fraud committed by rich people, who tend to be white.

I have clients that ask me about the benefits of having an S-Corporation, and pretty much, in the cases of those who ask, there is no benefit (only extra bureaucracy and fees), so I tell them that the only benefit is that it's easier to commit fraud through an S-Corp vs. as a Schedule C sole proprietor.

amazing

I can finally say it: I settled the bet early with @balajis! Took some time to work out the details but he proceeded in good faith and you can see the receipt of funds on chain in the next tweet. $500k to me (so I get 30% post tax as planned) and 500k to @GiveDirectly

— James Medlock (@jdcmedlock) May 2, 2023

xp so you’re saying I should be looking into a s-corp

I’d forgotten about that ridiculous hyperinflation thing, and lol

https://www.newyorker.com/news/persons-of-interest/what-if-were-thinking-about-inflation-all-wrong

I'm going to read that in a second, but in the meantime can someone (flopson?) explain to me why you would raise interest rates to "fight inflation" in this context: https://www150.statcan.gc.ca/n1/daily-quotidien/230516/t005a-eng.htm

just a weird quirk in how inflation is measured in canada. including mortgage payments in CPI means rate rises mechanically increase inflation. most (all?) other countries don’t do this, and instead measure some concept like owners equivalent rent, where they try to impute what homeowners would be paying in rent would they be renting their house. a general consequence of this is that canadian inflation is somewhat overstated in international comparisons

thank you!

I'm uncertain what to think about Argentina's plan to potentially dollarize the economy. I understand the rationale but not whether it would work or not, or why a currency peg would be a more manageable approach

Ecuador dollarized their economy, but would Greece or Italy be better comparisons? Argentina always seems confusing though, for a country with such high economic potential to be in this kind of position

I guess the problem with a currency peg is that no one would believe that Argentina would stick to it. Even Switzerland, a country with a much better track record for fiscal prudence, broke their peg to the euro when it became inconvenient. Not sure if dollarization would really work for a country of the size of Argentina. Seems logistically tricky.

i don’t think argentina will dollarize. to dollarize you need to back pesos with dollars and they don’t have dollars. so the only way they can do it is to sharply devalue the peso. but the only dollars argentina has are in deposits as bank reserve requirements which can’t be used for any other purpose. china has given them a “swap line” which lets them make payments in yuan but they could pull back on that at any moment. i think it’s more likely we see peso depreciation and some default but no dollarization. the extent of default precipitated by real dollarization would be extreme

I guess if Argentina did dollarize it would be similar to the scenario of countries joining the eurozone. This has happened a few times since the introduction of the euro, but all smaller economies: mostly the Baltics and small countries like Slovenia, Slovakia and Malta. Usually the conversion to the euro happened at a rate at which the converting currency had been pegged for some preliminary period.

Why similar to the countries you mention and not Italy or Greece? Italy's economy being bigger than Argentina's

I guess it is similar to that too. I was thinking of the difference between joining an existing currency and forming a new one. But I guess they are basically the same.

pic.twitter.com/nDH7kOFcPE

— ░MATT░IN░BIO░ (@sabrmattrics) July 30, 2024

Is that related to amazon's shuttered plans for drone-based burrito delivery?

flopson i am reading (and enjoying so far) https://www.goodreads.com/book/show/122773797-economics-in-america. is this man lying to me or is he good?

i haven't read that book. this review (by an economist who has written many goodreads reviews i have enjoyed) only gives it two stars, but isn't scathing. my guess is deaton is not lying, though he has been shooting from the hip in his dotage. he most recently pissed me off by writing the following in an imf blog post:

I used to subscribe to the near consensus among economists that immigration to the US was a good thing, with great benefits to the migrants and little or no cost to domestic low-skilled workers. I no longer think so. Economists’ beliefs are not unanimous on this but are shaped by econometric designs that may be credible but often rest on short-term outcomes. Longer-term analysis over the past century and a half tells a different story. Inequality was high when America was open, was much lower when the borders were closed, and rose again post Hart-Celler (the Immigration and Nationality Act of 1965) as the fraction of foreign-born people rose back to its levels in the Gilded Age. It has also been plausibly argued that the Great Migration of millions of African Americans from the rural South to the factories in the North would not have happened if factory owners had been able to hire the European migrants they preferred.

this is a bizarre read of the evidence. there are so many more compelling explanations for postwar reduction in inequality, and despite deaton's casual empiricism ('inequality go up when immigration go up') the actual research estimating the long-term effects of immigration actually finds very positive effects (the short-run effects are much more controversial)

deaton's career is kind of an odd story. after spending most of his career as a technical microeconometrician developing methods to measure povery and welfare--still very well-regarded work, if a bit niche--he and his wife anne case wrote a series of papers on "deaths of despair" that so insanely oversold their conclusions that they nearly destroyed deaton's academic credibility. the papers were all published in PNAS, an interdisciplinary journal known for having low standards for social science work. andrew gelman and many others meticulously debunked all the overreaches, nearly all of which would have been grounds for rejection in any decent economics or social science journal. it's not that 'deaths of despair' is a lie or fake news per se, but they tried to sweep things together into a narrative (basically a close relative of the 2015-era "economic anxiety" theory of trumpism) that completely fell apart upon closer scrutiny. my main takeaways from reading the various back and forths with critics is (1) it's almost entirely about opiods, (2) once you adjust for age the increase in mortality is modest or even flat (and only looks striking in international comparisons with europe where age-adjusted mortality was declining), (3) the early results that showed it was a white working class phenomenon was purely due to unaccounted-for selection bias

thank you! that review seems fair. I heard about him via their book on deaths of despair, which I never got around to, but the specific de tocqueville / https://en.wikipedia.org/wiki/Letter_from_America aspect of this book appealed to me (as someone who also migrated here via academia) so i picked it up.

as that review says it has a kind of slapdash and written to a deadline quality because of the source material, but it works for me because he has a nice voice (I'm listening to the audiobook, which he reads himself), and its at the right level of detail of my level of interest.

the best chapters so far have been the one on healthcare (it's deranged) and the one about why no one likes economists. almost every chapter mentions how bad the sacklers are even when it's not really relevant.

BREAKING: Fed announces that Jerome Powell received the light of Islam and unhesitatingly recited the Shahada. He has embraced Islamic Banking and the Fed Funds Rate is now 0%. Truly there is no god but Allah, and Mohammad is his prophet!

— Maia (@maiamindel) September 17, 2024

always appreciate a good reference to https://en.wikipedia.org/wiki/Islamic_banking_and_finance