Sorry, I was busy day-trading NYC restaurant reservations, I hope those gains are going to be subject to Biden's proposed 44.6% capital gains tax rate. A mostly boring day for equities with META beating after hours but trading much lower anyway. Yields rose a few bps as stocks fell slightly ahead of today's GDP release, the first of two 'major' economic releases for the week. Yesterday's strong durable goods data did little for stocks but seemed to support higher yields with the 5Y Note Auction being relatively poorly received.
As expected both the Tik Tok and non-compete bans are being challenged.
On the day ahead it's GDP, jobless claims, home sales and the infamous 7Y Note Auction.
XTOD: Huh. The Macro Musebot (https://ai.macromusings.org) had some strong views about its favorite macro theory: "What is your favorite macroeconomic theory? Is it (1) New Keynesian, (2) Monetarist, (3) Fiscal Theory of the Price Level, or (4) MMT? @JohnHCochrane
My favorite macroeconomic theory is the Fiscal Theory of the Price Level (FTPL). While the New Keynesian, Monetarist, and MMT frameworks all offer valuable insights, the FTPL provides the most coherent and compelling explanation for the determination of the price level in my view.
The key strength of the FTPL, as articulated by John Cochrane, is that it directly addresses the fundamental question of why money has value. The FTPL argues that money is valuable because the government accepts it for tax payments - the "state theory of money." This is a more satisfying explanation than the ad hoc assumptions underlying the quantity theory of money or the vagueness of MMT. Additionally, as Jesus Fernandez-Villaverde and Eric Leeper have discussed, the FTPL highlights the inherent linkages between fiscal and monetary policy. The government's intertemporal budget constraint means that the central bank cannot fully control inflation without considering the actions of the fiscal authority. This nuanced view of policy coordination is more realistic than the strict separation of monetary and fiscal policy in New Keynesian models.
That said, I don't dismiss the other theories entirely. As Scott Sumner and Robert Hetzel have noted, monetarism and New Keynesianism have been useful frameworks at different points in history, depending on the prevailing economic conditions. And Nathan Tankus has rightly pointed out that MMT has pushed the profession to think more carefully about the consolidated government balance sheet. Ultimately, I believe the FTPL provides the most coherent and comprehensive theory of the price level, one that incorporates the insights of other approaches while addressing their shortcomings. By focusing on the government's intertemporal budget constraint, the FTPL offers a powerful lens through which to understand historical episodes of inflation and deflation, as well as guide policymakers in the present day.
XTOD: "We think any company that has an economist, you know, certainly, has one employee too many." - Warren Buffett
XTOD: "In 2025, we get either Bidenomics 2.0 or Trump 2.0: in either case we are going to see more huge fiscal deficits, protectionism, and industrial policy, but in the latter case, perhaps on steroids." - Rabobank
XTOD: "We now get more news in a single day than most people ever saw in their lifetimes a few short centuries ago. Our brains aren’t hardwired to have this much information thrown at them. And so much of the information we see is negative."
https://x.com/DavidBeckworth/status/1782888156024496130
https://x.com/mastersinvest/status/1783009066312495202
https://x.com/zerohedge/status/1783153980610142454
https://x.com/Ritholtz/status/1783093392127164508
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