Coppola Comment

At the Battle of Ideas last Saturday, a panel on "populism" spent an hour and a half discussing everything except economics. Sherelle Jacobs of the Telegraph called for the Tory party to replace what she called a "twisted morality of sacrifice and dependency" with the "Judaeo-Christian" values of thrift and personal responsibility. And when a brave audience member asked "shouldn't we be discussing economics?" Tom Slater of Spiked brushed him off and carried on talking about cultural issues. Economics be damned, populism is all about morality and culture.  But important though morality and culture are, it is economics that really matters. Rudiger Dornbusch's work on macroeconomic populism shows that populism eventually fails because the economics don't work. And when it does, the people who suffer most are those the populists intended to help.  In this study (pdf), Dornbusch and Sebastian Edwards define macroeconomic populism thus: Ma

Gabriel Sterne complains about economists' loose use of mathematical terminology:  Of course, it's not just economists who use "increase" and "accelerate" interchangeably. But economics is a mathematical discipline, and in mathematics, "increase" and "accelerate" mean different things. So is Gabriel's observation true, and if it is, is it a problem? To test Gabriel's hypothesis, I ran a little Twitter test. I asked this question:  This was of course far from rigorous: the sample was self-selecting, there was no way of restricting it to economists (though I did ban finance tweeps from answering), and it all depended who was on Twitter this morning. And the terminology I used was itself confusing - deliberately so, since this is how economists often write.  But the results were nevertheless interesting. Most non-economists got the answer right. Physicists, in particular, understood it straight away. But most economists who answered

Yesterday, someone who had been watching one of my (all too frequent) Twitter arguments about money made this comment:  The "unknown person with few followers" was my protagonist. And the blue tick "classical expert" was me. I am Goliath.  But ten years ago, I was David. Armed only with Blogger and Twitter, and my knowledge of banking and finance, I set out to slay the financial Philistines that rampaged across the internet in the aftermath of the 2008 financial crisis. I published my first Coppola Comment post on 20th February, 2011. It throws slingshots at a media pundit who had written an article about short selling, on which he was far from expert. You can still read it , if you like.  My early posts were rough and ready, and my terminology is at times excruciatingly loose, but I was sure of my subject. I understood British banking and financial markets well, though I had left RBS nearly ten years before. It was evident to me that the 2008 financial crisis in th

 The UK is running a trade surplus. No, really, I am not joking. This is from the ONS's latest trade statistics release : The UK total trade surplus, excluding non-monetary gold and other precious metals, increased £3.8 billion to £7.7 billion in the three months to August 2020, as exports grew by £21.4 billion and imports grew by a lesser £17.5 billion It's the first time the UK has run a trade surplus since the late 1990s:  And if you were thinking this was because of the lockdown, you would be wrong. The UK has been running a trade surplus since the beginning of 2020: Admittedly, the trade surplus widened under lockdown. But the UK economy reopened to some degree from June to August - and yet the trade surplus continues to widen. This is no doubt music to the ears of balance of payments obsessives. Could the UK at last be pivoting away from a consumption-led growth model to an export-led one?  At first sight, it appears so. Exports have increased more than imports. And the s

Below are the slides from my presentation at Beyond Covid on 12th June. The whole webinar can ve viewed here . The pandemic seems to me to resemble the "nuclear disaster" scenarios of my youth: hide in the bunker, then creep out when the immediate danger is over, only to find a world that is still dangerous and has fundamentally changed in unforeseeable ways.  Rabbits hiding from a hawk is perhaps a kinder image, though hawks don't usually leave devastation in their wake. And I like rabbits. So this presentation is illustrated with rabbits, not nuclear bombs.  This is where we were in March/April/May. Hiding in our homes, waiting for the danger to pass: And this is what central banks should have been doing then: To their credit, this is exactly what they did. By supporting sovereign finances and warding off a financial crisis, they enabled fiscal authorities to take the extraordinary measures needed to keep people and businesses alive in their burrows.  Some economists mi

Is the U.S. in recession? If so, when did the recession start, and what caused it?  The usual economic definition of "recession" is two successive quarters of negative GDP growth. But in Q1 2020, growth was positive, though it was apparently slowing sharply (more on this shortly): So using the standard economic definition, the U.S. is not yet in recession. But according to the Business Cycle Dating Committee of the National Bureau for Economic Research (NBER), the U.S. entered recession in February:  The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession.  February? The  New York Fed's nowcasting report  for February showed no sign of recession. The most recent nowcast shows the economy dropping off a cliff at the beginning of April:  Of course, even nowcasts have lagging data. The date of the collapse according to

It's been pretty quiet in Lafferland since the Brexit referendum. All the talk has been of trade and sovereignty, not deregulation and tax cuts. But there's nothing quite like a Tory leadership election to bring supply-siders out of hibernation. So here is Sajid Javid singing an old sweet song to attract the votes of Tory party members: Cutting tax rates could bring in billions of extra revenue, which would mean: More nurses 👩‍⚕️👨‍⚕️ More teachers 👩‍🏫👨‍🏫 More police 👮‍♂️👮‍♀️ "I would cut [top rate] if it brings in more revenue and gives us better public services" - @sajidjavid #TeamSaj pic.twitter.com/MxVUVcI5q2 — TeamSaj (@TeamSaj) June 2, 2019 Cutting taxes for the rich in order to generate more public revenue. The Laffer curve is back. Not that it has been absent for long, really. Seven years ago, to much applause, George Osborne cut the top rate of tax from 50% to 45%. When the cut took effect there was a large increase in tax take.

This piece grew from a number of conversations with people of Austrian economic persuasion, mostly Bitcoiners and goldbugs (which these days seem mysteriously to have converged). I thought of calling this "Monetarism for goldbugs", but decided to preserve the mathematical slant of the previous pieces in this series. But it's monetary arithmetic, of course. And as Austrians tend to obsess about "sound money", it is specifically sound monetary arithmetic . (Note: Someone has pointed out on Twitter that the arithmetic in this piece is considerably more advanced than the equations themselves suggest. If you are bit rusty on the mathematics of change, I suggest reading the first piece in this series, Calculus for Journalists ).  Inflation is complicated As "sound money" seems to mean "no inflation", let's start by defining what we mean by inflation. In mainstream economics, "inflation" usually means a general increase in