In this episode, we're joined by Joey Politano to discuss the state of the global economy, what happened in 1971, his blog Aprictas Economics and a whole lot more.
Transcript:
William Jarvis 0:05
Hey folks, welcome to narratives. narratives is a podcast exploring the ways in which the world is better than in the past, the ways that is worse in the past towards a better, more definite vision of the future. I'm your host, William Jarvis. And I want to thank you for taking the time out of your day to listen to this episode. I hope you enjoy it. You can find show notes, transcripts and videos at narratives podcast.com.
Unknown Speaker 0:41
Joey, how you doing this afternoon?
Joey 0:42
Hey, I'm doing great happy to be on.
Will Jarvis 0:46
Absolutely. Thanks so much for taking the time to come on the show. Do you mind giving us a brief bio and some of the big ideas you're interested in?
Joey 0:53
Sure. My name is Joseph Positano. I'm a self employed self described economics expert and data analyst I write a newsletter called the prick atoss on on substack. That's my full time job. And it has been my full time job for a whole two months now. So I've had been writing for about a year and a half, and very recently took the leap to make this my my full time gig. And most of what I focus about focus on online is trying to do data analysis of the macro economy with like a special focus on labor markets and the Federal Reserve. Very, very nerdy way to say, I do charts about macro, and try to keep that as fun as possible.
Will Jarvis 1:43
I love it. I love it. Well, I want to get kicked off and ask you this. And I hate to I like my episodes to kind of be timeless and stay in test time. But I am curious about the current moment. What is going on with labor markets right now? It seems like we had a strong jobs report again, despite you know, Jay Powell doing everything in his power to jack up rates, what is going on with employment markets at the moment?
Joey 2:06
A lot, I think it is has genuinely been one of the craziest times for global labor markets, and especially labor markets in the US. The way I tried to have tried to conceptualize things in sort of a backwards looking fashion is that most high income nations, there are some exceptions, most high income nations had some combination of like a furlough program, or they were really good at blocking the spread of COVID. The US has either of those things. So in the UK, where you know, there's a lot of COVID spread, there was less unemployment, because of these furlough schemes or keeping people attached to jobs. In the US there was a lot of people who were let go at the onset of COVID don't have that strong player protections didn't have this furlough scheme that just was something that was not in federal government's capacity, period. So you had this big dispersion of cash to households, especially to households in need, at the start of the pandemic. And you had the sort of low rate environment Oh, which was necessary to get like employment levels and labor income, I'm big fan of like looking at total labor income as a big economic indicator to get that back on trend. What that meant is you had a big downward push on growth. And just to get back to trend you needed like a big upward push on growth. So over the last couple years, we're sitting here now in March of 2022, we've seen really massive upward push. And by basically started this year, sort of 2022. The strength of that economic momentum that was necessary to bring the labor market back also caused a lot of inflation. And so the story of 2020 2001 was fighting like the downturn sort of 2022 is definitely all about inflation fighting. And you have this very interesting, interesting dynamic in my mind where the Fed has been tightening monetary policy since the start of this year. That's definitely manifested in like, worse financial conditions, but maybe less bad than people expected. And the worst financial conditions have not really manifested as unemployment. You've seen slowdowns in employment growth. I don't want to like understate say there was no impact you've definitely seen big slowdowns in in employment growth and a little slowdown in wage growth, especially at the top lower end of the wage distribution. But no rise in unemployment yet. So the big question that we're sitting at now is like, okay, is is employment going to hold up? Is it just a lagging indicator from the rate hikes that have already happened with the chance of like, a recession in 2023. And we're sitting actually, like, if you're looking at some of the big sectors that like truck transportation, which is usually an early, early sign, because a lot of these are small operations, that's been like stagnant, like warehousing has been saying that a lot of the consumer goods employment has been stagnant, but a lot of other stuff has held up really well. So it's a crazy moment to say the least.
Will Jarvis 5:51
Where do you think we go from here? Do you think recession is likely in 2023?
Joey 5:56
I will, I will defer to the like nerdy metaphor casters who say yes, I haven't checked in like a week. But the last time I checked the, like, metaphor cast was something like 60 70% chance of a recession 2023. And like 80% chance of sometime before 2024. Those are not fun numbers. I think, so far part of the reason, you know, we have seen we've seen like the slowdown manifest less as drops in employment, just because there's been so much demand, so much like latent demand for labor. And I think, really, the chance of a recession, and if a recession happens, the depth of it is going to depend on like, do we see a rise in unemployment. And the other thing I'll say is like, I'm a big, don't fight the Fed kind of guy. You know, if the Federal Reserve is saying they want something, they are going to get it most of the time. They right now say that they want like a 1% increase in unemployment, right. And their forecasts, it's not like, it's one of the things we're like, we're not saying we want this, but the median forecast is that the unemployment rate should be 1%. Higher under optimal monetary policy next year, that's functionally recession. You know, you've never seen that, that rise in unemployment rate without a recession. So that's, that's the worry. I think. Like I said, think people look at people look at, understandably, you see a 60% chance of a recession next year, people are like, Oh, that's horrible, which it very much is, I don't want to understate that. But that also means there's a 40% chance and it doesn't happen. Right. So like I said, crazy moment right now.
Will Jarvis 7:57
still viable, still sizable, you know, if a layperson is listening to this podcast, and you tell them something like, okay, like, the Federal Reserve wants the unemployment rate to go up. It also sounds like a, you know, like, it's a, you know, if I told us that someone on the street, they'd be like, What the heck are these technocrats? You know, they're trying to make my life worse, try and make more like, like, can you like, just walk through? Like, why you know that that's a good thing? It's a little?
Joey 8:25
I wouldn't I don't know if I would say, it's a good thing. And if I'm taking off my own personal hat, if I'm saying what, what would someone at Federal Reserve say? What they would say is that inflation is really high. The only way to get inflation down in the short term, is to induce like real economic pain. So you're saying there's some level of real growth, you have to reduce that or get it a little bit negative in order for inflation to come down. And, you know, a period of lower negative economic growth is going to induce an increase in the unemployment rate. If there's a variance between people who view this as like incidental, you know, on the Fed, some people will say, We're raising rates to slow the economy, and that will create unemployment. And there's no other side that says we're raising rates to create unemployment, which will lower inflation, it's like, is it incidental to the target or is it like causal to what you're trying to accomplish? There's not as I wouldn't say there's a steady 100% agreement on that within the Fed. But there's pretty close agreement that like I said, there's going to have to be some increase in the unemployment rate. And the bill from like, what Jerome Powell would say is that the only way you can have a stable, long run growth in the labor market is to get rid of inflation in the short term. If you just kind of keep pushing the problem off. It's growing required. Yeah, it's like you get take the small medicine now or you take the big medicine later. Like I I'm not 100% on board with that right now, especially because if you think about it from a purely from looking at the unemployment rate, right, the unemployment rate was like three and a half percent in 2019. And I don't know if you are around for 2018. But everybody's freaking out, because the Fed was raising rates and people were worried about a recession then. And inflation was low, relatively speaking. So I don't think that, you know, four and a half percent is necessarily going to, or like, I don't think three and a half percent unemployment right now is more inflationary than it was in 2019. I think what they worry about, principally is like growth in income and spending, which was really high in 2021. And it's like slowing down now. That's what they're kind of focused on.
Will Jarvis 11:04
Gotcha. Gotcha. Makes sense. How would you rate the Feds response to the pandemic, all things considered?
Joey 11:11
I think it's obvious, especially in hindsight, that like, they waited too long to raise rates. I think it's difficult, like ex ante to look at things, you know, and say, how much would they have shifted? If I was in charge, instead of time, I would have made the same mistakes. Right, I probably actually would have done even worse than that. And I think part of it was just like, there has been a lot of chaos. And I think, coming off the back of the 2008 recession, which was consistently worse than people had forecasts and the forecasts forecasts were bad as it were happening. The Mo was like, we just can't, you know, can't let this repeat no matter what. Yeah. And I think it would have been really difficult. So in like, August of 2021, unemployment rate is still elevated, you know, most people haven't been vaccinated to say, Okay, now we start raising rates, even though that probably would have been about the right out the right time to do it. Yeah, I think it's also just that things have moved so fast. Normally, the Fed, you know, they have this opportunity where they can they raise rates a little bit, they watch how the market reacts, they watch how the economy reacts, they could say, this was a little too much too little. And then they, you know, bounce back and forth from there. 2019 as a counter example, you know, they raised rates too much. I think if you asked Jerome Powell, he would agree with you on that sentiment, they that's why they backed off in 2019 and started cutting rates again, they were like, Okay, there's too much. But the point was that they had two years there, where there was they raise rates in 2019, they hit a point where they're like, Oh, it's too much. And then they reversed in late 2019. Up until early 2020. There was no real, it was no grand punishment for that, like Mr. Wright, compared to the missteps in 2020 2021.
Will Jarvis 13:24
That makes sense. That makes sense. I'm curious, you know, how do you feel about nominal GDP targeting?
Joey 13:29
I in fact, yeah, I am generally a fan, I think, um, I wouldn't call myself a zealot. So nominal, maximum, right, not a Maxi. But a fan. So nominal GDP targeting for people who don't know is his dad, like, okay, that's gross domestic product is the sum of all output in the economy, basically taking total number of dollars spent. And what you should really be looking at is like, a growth rate in dollar spent, not a growth rate in prices. Because, you know, if you have 4%, it usually targets like four or 5%. If you have 4% growth in nominal GDP, you think like 2% of that is inflation. 2% of that is productivity. And in a situation where like, the inflation goes up to 4%. And your NGO, you're still on Ngdp target, you're like, Oh, we're fine. It's just, you know, we just had a real economic shock. And in the converse sense, where like inflation dips below target, you're saying, oh, NTP is fine. We just had like a productivity boom, or you know, oil prices went down or whatever. I think my disagreements come maybe a little more technically, with like, how you do this in real time, because the GDP data is like it's not the most robust data set as it comes out. Just because there's so many things that go into it, you know. And so Skanda Amarnath, who's a great friend of mine, he works in employee America, he worked out this framework for looking at gross labor income. So he's saying, Okay, we believe that Ngdp total spending, total income in the economy is what really matters, what the Fed really controls what they really target, what they really should target. But wages and labor income are the greatest share of that GDP, you know, it's like 60% or so. And it's the most robust share, compared to profits, imports, exports, government spending, which is all can get really messy really quick. So that's what we should focus on. And I think it's very funny, because if you were on an Ngdp framework, right, you would have said, raise rates in August of 2021. If you were in a gross labor income framework, you would have said, what the Feds doing? Basically correct, maybe slightly too loose. You know, so gross labor income, basically, just back on trend, you're saying like, it's 1% above trend, maybe 2% of uptrend, depending on what measure you use, which is pretty crazy. I have like a percent inflation. But you know, I It's the viewpoint is is the core thing you should be targeting like NGP, or should do go even narrower and target labor income. And I think the other argument for labor income stuff is just that, like, if you think about hysteresis, so this idea that you can have a short term damage to the economy that becomes a permanent scar. So someone gets unemployed. And because they're unemployed, they don't, you know, learn on the job, because they don't learn on the job, now, you've permanently reduced their wages. Gotcha. Those, you know, hysteresis components, they show up in labor, mostly, and they show up a little bit in like investment, but they're really not going to show up in like government spending or like, corporate profits. You know, gotcha. So that's, that's my disagreement is more technical than it is conceptual, if that makes sense.
Will Jarvis 17:13
Makes sense. Makes a lot of sense. Can you talk a little bit about hysteresis. And this term be thrown around a lot, which I have not been super familiar with, which is gross labor income? I really liked this term. Can you just talk about what it is and why it's important? For sure.
Joey 17:26
So I'll start with gross labor income, because I think it's the easier one. So the the base, it's really basic, nominal Gross Domestic Product is saying, take all the spending in an economy and just add it together. Nominal gross labor income is just saying take all the wages and salaries in an economy, add them together? You know, what's the growth rate there? So you're looking at, really, what's the growth rate in employment? And what's the growth rate in wages. And, like I said, the conceptual idea of why this is a little more robust is because you think the Fed has more direct control over that, like core demand aspect. And you think that core demand aspect has more influence over consumer prices, most people who are, you know, most people who are workers are spending a lion's share of their income. So if their income goes up, their spending goes up, their income goes down, their spending will go down. And that's almost like a rule of nature in the way that it isn't for other sectors of the economy. And just like I said, in real time, you can look at how wages and salaries are evolving how employment is evolving much faster than you can how GDP is evolving. So the idea of hysteresis is like kind of interesting. economic concepts begets success, right? Success begets success, and failure begets failure. And so if you're thinking about, like, let's think about 2008, with the auto industry, right? So you have a downturn, you have all these car companies go bankrupt, they get rescued by by the federal government, you have this bailout package boba, but fundamentally, like demand for cars had just crashed because the economy crashed. Right? Because demand for cars crashed, you didn't get any investment in like, new car plants in the United States, because you didn't get new car plants. You didn't get people trained in, you know, manufacturing assembly. For cars in the US, you didn't get more engineers, you didn't get all this stuff. And now, you know, 10 years later, if you look at a chart of like us, auto manufacturing, but there's like, it's not just that there's a clear drop, is that there's like a permanent level shift downwards. Got it. And that's what hysteresis is. Some people will talk about this also in the reverse, like success begets success thing, which is like maybe solar would maybe be a good example. like you think the these, you pumped all this investment into like, especially in Germany, you pumped all this investment to renewables into like, green energy and solar and that, you know, you push down the experience curve, so the costs get cheaper, so you hire more people because it becomes more profitable. So the costs get cheaper again. So your market bills, people become more enamored with your product, and you've got this, like big positive snowball rule rolling, right. I think that's rarer in the sense people talk about it less. But it's, it's, I think, in my opinion, just as important.
Will Jarvis 20:36
Gotcha. Gotcha. So you really want to avoid things where you, you know, if you have a, there can be problems, we get these bad downward spirals where you can permanently damage a and you want to avoid that kind of permanent damage, especially in the labor market where, you know, people were talking about, and they have permanent shocks that there's a study, I read a while back about, you know, people who graduate during a recession to kind of like have these permanent kind of income, like, shifts downward just because they have a harder time finding a job initially.
Joey 21:03
Yes, exactly. That's, that's hysteresis. That's like the best example you can get.
Will Jarvis 21:08
Very cool. Very cool. I want to move on a little bit now and talking about interest rates. So we recently had on Paul smelting from Yale. Do you know, Paul?
Joey 21:17
I don't think I do, unfortunately. So
Will Jarvis 21:20
he's an economic historian wrote this really interesting paper I really enjoyed it's called the Super secular decline of interest.
Joey 21:27
Okay. Yes, I do know his paper. Yeah, absolutely. Absolutely.
Will Jarvis 21:32
Do you buy this notion that we're just experiencing this kind of wall run 800 year trend and decline of interest rates? With, you know, variation, right. So it's noisy, so it's going up right now? But do you think we like we just face you know, permanent kind of lower permanent lower interest rate environment, where, you know, squirrels perhaps always have to pay someone to, you know, hold their knots or something like that you can't just it's like the national state is not, you know, positive interest rates.
Joey 22:00
i. So i This is definitely an area where my thinking is mushir, this is like, where I am more open to debate. I am not the biggest fan of this idea that we have like a PERT like 800 year decline, secular decline in interest rates, I do by the, like, 50 year secular decline in interest rates 50 year long and a decline in interest. Based off the idea that just one, you have lower productivity growth in most high income nations nowadays, to the like, lower and middle income nations that you had, especially in like the 70s 80s, that had pretty substantial growth, also petering out, three of the global population growth is lower. So if you think about like, the very raw idea of like, more people require more homes and cars and oil, whatever. And that is investment requires capacity investments that put upward strain on on real interest rates. So lower populations should ameliorate that. And that you will especially have older populations, and longer lifespan. So you have this big stretch of time, where lots of people in high income countries are retired for 20 years, or 30 years. And they have a big pile of savings that they are drawing down very slowly and conservatively. And all of that puts downward pressure on interest rates. So if you look at like, it's, it's actually kind of funny in the long term sense that everybody's panicking about the Fed causing a recession. And like the five year real interest rate is like 1.8%. That's not a lot by historical standards. Right. But the panicking is not again, I'm not trying to not trying to like disgrace, the panicking, the panicking is little justified, I'm saying that a 1.8% real interest rate can wreck a modern economy just because that's, you know, secularly interest rates are pretty low. I will say I think the lesson of the pandemic has been, you know, when there's like the market monetarist insight where you're talking about if interest rates are high, usually it means that they were too low in the near past. You know, you have high inflation now you're trying to fix it. And that's like the environment, especially the United States is in right now. Interest rates are high, primarily because inflation is high primarily because interest rates are too low in you know, 2021 2020 maybe Do the opposite of like the 2009 2010 thing where interest rates were low because they were too high previously. So we just learned the inverse lesson each time. But I think if you're looking at like, you know, people some perspective is you look at like the Austrian century bond. So Austria issues a 100 year bond, which, by the way, greatest deal of all time, they issued that at like 1%, interest rates are less negative, but it's like trade. I think, if I looked at right now, it's trading at like, 2% right now. So in the euro area, people expect short term interest rates to be under 2%, cumulatively, for like the next 90 years, that's really low. And those are nominal rates. So you're thinking the real rate should be somewhere basically, at zero or lower. There are some people who think so this is like the good heart thesis, there's this idea that like, Okay, people were getting older, which was, you know, lowering interest rates, but that was mostly because of population decline. And mostly because people have you fewer kids. So think about dependency ratios. So the ratio of like workers to non workers, the dependency ratio was going down, just because there was much less children. Now, there will be going up, because there will be much more, you know, older retired people, that's going to be a positive. That's going to put positive upward pressure on real interest rates, you know, so right now we're in the downward phase, but in like, 2030 2040, we'll be in the upward phase. That's like the only kind of decent counterpoint I've seen to this idea. I'm not I don't think I buy it, both. Because I think like lifespans are getting longer. And because I think just in general, we're losing, like, the productivity growth of places like China, as they get reached like high income nation status. And I'm not at a core level, I'm not sure I buy the thesis. But like, that's the interesting counter thesis. I've heard. It is something where I'm like, not 100%, in my thinking on.
Will Jarvis 27:19
I love it. I love it. Do you have any ideas? What happened to TFP growth? In 1971? Like, what what the heck happened? And why did it happen? Do you have any any faults there?
Joey 27:31
Should negative like small questions? So tip total factor productivity growth, kind of fake.
Unknown Speaker 27:42
Love this, I love this. I love talking about this.
Joey 27:44
So the idea is like, Okay, you have an input of labor and input of capital, and you get an output, you know, you want to be able to use units of labor and capital more efficiently to generate units of output. Total factor productivity is really hard to measure in like an optimistic sense. And conceptually, it's like, conceptually, it's rough. Because of the kind of stuff that you're thinking about, like the Cambridge capital controversy, if you know this, where you're like, okay, the Cambridge capital costs, controversy. introversion is, is capital like a thing that you can measure? Or is it just a byproduct of like future? I see, it's just a byproduct of future output of consumption. Right? So is the factory valuable as like, measured in terms of inputs and steel and concrete? Or is it just valuable as a sense that it can produce factory goods that you can then sell and you're estimating the future value of factory goods? I come down on the factory good side, right. So you're saying capital is valuable? And really, you're measuring its value based on what it can do? Not what it's made of. And as a result, when you try to do this, like, what's it made of calculation, you end up with a lot of wonky results. So if you look at labor productivity, right, so you're saying just ignore capital, pretend it doesn't exist? Pretend it's fake. And say, for an hour of work, what does the average person create? That in the United States went up about two and a half percent a year consistently, through, you know, long run through recessions, through inflation, through a lot of chaos, from like the start of the post war period 1950 to 2008. So like, that's a story that doesn't stop in 1971. So if you look at labor productivity growth, it's still you know, increasing at basically the same rate as if you really wouldn't even notice the gap in 1971, except for the recessions that happened in the 1970s. And then you hit 2008. And then it's like drops one and a 1% dish. It's like brutal drop. So that's where I think like the the, this continuity is it's like post pre 2008 posted 1000 I not pre 1971, post 1971. And that's I also think where the more meaningful distinction is in terms of like the global economy where people, I don't think people in the 1990s were like, wow, what happened to total factor productivity? That's not my interpretation of how people felt in the 90s. That is my interpretation of how people felt in like, the 2010. Sort of, like, Why does everything Why does everything feel bad? You know, can't articulate fully why, like, you know, it's very people in high income nations who are saying, my life is worse than my parents, or it's worse than I expected. That's something that everything really is a post 2008 story, not a post 1971 story.
Will Jarvis 30:56
Oh, that's fascinating. This is really bad. So I'm curious. What do you think changed post 2008? Was it it wasn't just like, you know, populations is getting older, or is it something like what do you think's going on there?
Joey 31:05
Um, I think the post 2008 story is really like a history story. Like on the scale.
Will Jarvis 31:14
It is it's just like, so it's all the Feds fault if they had fallen Scott summer and like loose a bit, you know, what I mean, or something? Well, they don't like targeted nominal GDP, we'd be fine.
Joey 31:24
I think. I think if you could have gotten so nominal GDP growth back on trend, you would feel a lot better about the state of economy. I think people I think the Scott Sumner like the counterpoint to this Scott Sumner thing. And this is like the great like, market monetarist versus like bond trader kind of debate like Finn twit bond trader kind of debate is like, yes. Okay. Fed controls all these nominal variables. Okay. I agree. But the, the, the bond trader side is like, are they it's like intermediated by banks. And by credit, and when, you know, the banking system collapse into US aid, like, they had to fix the banking system. That was the problem, not what interest rates were. And the other side is odos. It was interest rate. I think we're like, I lean more towards the like, Finto bond trader side, I need to come up with a better representative will say the shadow banking side, so I lean more towards the shadow banking side? Partially just because this was this was like a global phenomenon. It'd be really weird if everyone suddenly messed up in the exact same way. Exactly. Yes, yes. Very, usually, there's a reason why that happens. I think part of the reason exacerbated by some of the bad decisions from an industry point of view was just like the credit side was totally messed up. Like, if you were to drag that productivity chain out further, you know, look, at pre war United States. You see that same kind of productivity dip that doesn't recover in like the 1930s. You know, it during the Great Depression is me. Gotcha. And both of those stories are, in my mind, partially about your credit systems failing, and also partially about monetary policy being too tight and wrecking the economy. Because of that partially exacerbated by the credit partially exacerbated by the interest rate side. It's very funny to look back at, like, especially in Europe, like 2011 When tree che at the European Central Bank was like, let's raise interest rates here, like the unemployment rates 10%. What did you do at that, but that was like, the logic inside a lot of central banks. That's that's how they felt about the economy in 2008 or two, there's any throw like, oh, we'll be at zero for like three years, then we'll be fine. They like that was a big underestimation on that part.
Will Jarvis 34:08
Kind of kind of kind of missed that. I want to ask more about 1971. Sorry, to harp on this. It's interesting. Okay, cool. I find this infinitely fascinating. And it's part of this brace for this, this podcast actually, when I got started on the on the journey, so if TFP growth is, is fake, I want you to testify to productivity, like as a as a measure is fake. If we buy that, what about like the prices of essential goods that seem to have skyrocketed since the 70s? Like so I think of like health care, education. And, you know, housing, is it just some kind of bubble effect thing where, you know, there's just like, we've reached some hard limits on on productivity in certain sectors, where it's just really hard to kind of automate the string quartet. You know, in person you just see it, or is it something else going and on.
Joey 35:02
So, just to walk back a little bit the tip thing. Like I said, I don't want to mean that it's literally fake. I just want to mean that it's like the good measure. It's not the most robust measure. And I think it leads some misleading conclusions. Gotcha. But I think it just like an interesting debate, both because you can pinpoint a lot of changes that did happen in the real economy, especially around housing and healthcare, to the 1970s. And also that like, it's not like countries with significantly better systems for administering these things aren't also struggling. You know, there's, I do think a lot of this is fundamentally like, like you said, in as an economy gets wealthier, people buy more services that buy less goods as a share of total consumption. And what that means is like, you know, wages are the core input to services, if the productivity and manufacturing is going up so much, you know, you end up having to pay a lot more to pull workers away. Or in a broader sense, you just get this specialized post industrial economy where most people consume services that work in the services sector, the price of services goes up, because the big, you know, input to the price of services is wages. And that's still like a story where, you know, real output is going up. I think it's kind of funny when people are like, yeah, there really hasn't been like, oh, has healthcare gotten better in the US since the 1970s? Like, yes. Yes, in a lot of ways very much. Yes. And I don't want to like overdo it on that. Sorry. Because I think especially in healthcare, this, there's a lot of technological. There's a lot of technological advancement that will show up in higher productivity, better outcomes and the way people you know, want it to be. But fundamentally, there's a certain limit where you're like, okay, like long term care requires a certain number of people per patient. And the price of long term care will go up, as wages go up, and wages go up in the long term. So the price of long term care just do can't go down. Right, and you'd expect it to occupy a larger share of people's budgets, even to the extent that they're able to afford more of it. You know, makes sense. And I think the land you know, the housing story is very obviously, like peak US housing output was in the 70s. And it was getting annoyingly bad by like, 2008. And then it got catastrophically bad after 2008. That's definitely story we could talk about, like legal creep about nimbyism about like the post racial integration efforts to constrain housing production as a method to enforce segregation, all which makes the housing stuff worse. But also, you know, fundamentally, if wages are going up, there's a limited amount of land. I wonder what what's going to happen to the price of land? And so I do think it's one of those things where it's like, to some extent, a natural byproduct of how economies are structured, exacerbated by policy decisions in the US.
Will Jarvis 38:41
I see. So that's kind of the essence of the story. Yeah. Gotcha. Well, you know, going off of that,
William Jarvis 38:47
what is, you know,
Will Jarvis 38:49
if we zoom out, what does the next century look like? Do you think for America, it seems like America is well well positioned on the world stage. We have decent fertility, decent demographics, compared to a lot of other developed nations. What's your thought on the long run outlook for America?
Joey 39:06
Yeah, I think I'm still bullish America, I think you know, not to get all like, hoity toity about it. But it's like if you go abroad and talk to people who live, you know, in the vast majority of places, will talk happily about how much they like the United States, how much they admire, like the US institutions, how much they want to move to the United States, how much they view it as like the place to be. And I think like, with the exception of maybe Canada, and Australia, which are functionally just too small, to be global players, sorry. It is still where you It is still like the hedge, Amman. And I don't see things that I don't see a situation that challenges that right now. I think the big question mark is still China. I think it has been a series of big ELLs for like people who are bullish on Russia over the last like 10 years. Unfortunately, for people in Russia, I think people who were worried about China, which I think is a worry if you care a lot about global democratic freedom, and rule of law and democracy and all that good stuff. Also, especially over the last year, two years has been a pretty bad situation. Right? So it's like, if you're, if you're looking at the world, as it is, now, the US is still the least bad option. And there's that quote somewhere where it's like, but I think it's funny, because I'm in like, the finance world, where especially like, when, when the Russian invasion happened, and the US government froze the Russian Central Bank assets. And you had all this drama about sanctions stuff people were talking about, like, our country is going to move away from the US dollar. And it's been really fun a year for that thesis, because everyone, every major country on planet Earth has been panicking about not having enough dollars, since February of 2020. That has been the dominant theme of like, worrying about your exchange rate compared to the dollar worried about how your economy versus dollar raising interest rates. So you catch up with the Federal Reserve has been like the number one theme, and people were are much less concerned about, you know, the, with the rise of China means for this, and that, I think is also, you know, maybe like the 2015 2016 era of like peak. International PR for China, where you look at, like the Belton road investments are down a ton or like, Chinese foreign investment it down a ton. And just general people global opinion of China is down a ton. So yeah, if like I said the least, you know, comparatively is bad option. I am, like bullish India, in the sense that I'm like optimistic about the long run trends in growth there. By pure factor population, you know, but probably going to pass the US in GDP sometime. But I think that's still still a long ways away. And, you know, India's much more free, much more democratic country, although, you know, I'm not the biggest fan of like the regression towards authoritarianism over the last few years. Like what you know, compared to most countries on planet Earth, is right, free democratic. So I don't really worry about it, except in the sense in the same sense that our worry about like the United States is political institutions being subject to failure and undemocratic. And things like that. Make sense?
Will Jarvis 43:29
It makes a lot of sense. Joy. I have one last big question here. How did you originally get interested in in blogging about macro macro economics? And, you know, how did you first get started?
Joey 43:43
Well, it was like, I think the first thing I wrote was June of 2021. So this was like peak pandemic, boredom. So for me before, before the pandemic, I was a Peace Corps volunteer, so it's working Nice. Working abroad, in Uganda, then I got bounced back to the US. And I think there was a lot of people, you know, you're unemployed, I didn't have a place to live at that time. So you're like, Okay, I gotta get all my ducks in order, you gotta get a job yet to get, you know, a place to live. You know, at that point, I had, I had all the ducks in order. And there were an order for like, six months. And so now I was boarded was setting it. And I was like, realizing, Oh, I have, you know, things I'd like to say things I'd like to share about the economy. And so that's when I started, you know, publicly trying to share those things. And I think writing and blogging is great as like an iterative process. You know, you're writing people are commenting or criticizing and you're updating what you write or you're, you know, getting better at how you communicate things like that. And shifting the things that you're interested in and all that good stuff. So over time, I just tried to keep myself, you know, at first, like once a week that I eventually started doing like more more frequent stuff. And then it hit a point where I was like, Okay, I have a lot to say, I don't have unlimited time to say it, especially when I'm working a full time job. And I had the great privilege of like having people who who truly care and were willing to listen, and were interested in the same kind of random nonsense that I'm interested in. So I was like, Okay, this is the time to do it. If you if I was just thinking like, Okay, if I don't do it, now, there's going to be all these things, I want to say that I'm never going to get the chance to say all I gotta at least try it. And I've been very humbled by the response, you know, since I started doing this full time, and I'm very happy now to be able to put out more interesting stuff to do like the kind of really in depth research that I couldn't do what my time budget was 10 hours a week, right. And I'm really enjoying, you know, just opportunities to be able to speak with people, things like this, where you get to have an interesting, back and forth.
Will Jarvis 46:13
I love it. I love it. Well, joy, what's the next 10 years look like for you? Have you thought about it much? Oh, boy.
Joey 46:20
It's funny, because the personal forecasting record is zero to 10. never gotten anything, right. So if you would like if you go back, at any point in the last like, five years and tell me, where do you see yourself in two years, I would have gotten it wrong. Yeah. So I am trying to take things one day at a time. I think the benefit of the benefit of like writing is you have a community of people who care about the same kind of things that you do. And so, you know, I'm planning to take the writing stuff as as far as I can go with it. But I'm also aware that there might be a time and a place where I want to do something else interesting. And I have the very great privilege of having this platform that I can use in that pursuit. But right now, I'm just writing.
Will Jarvis 47:19
That's great. It's great. It's a real thrill superpower to have a community like that. Well, joy, thanks so much. For coming on the show. Where can people find you? Where should we send them?
Joey 47:29
So I am on Twitter, most of the time, it's just at Joseph pollo. Tanto or Joey politan. Oh is the actual username. I write a newsletter. It's a prick. atoss.io is the name of my substack. It's a K sound, but it's a C letter. Because that's how Latin works. So it's APR, i see i t a s.io. Good deal. That's where all my writing is. You can also follow me on LinkedIn. I don't know.
Will Jarvis 47:58
I love it. And I highly recommend the blog. It's really excellent. Thanks so much joy.
Joey 48:03
Yeah, happy to be on. Thanks for having me. Definitely.
William Jarvis 48:09
Thanks for listening. We'll be back next week with a new episode of narratives.
Transcribed by https://otter.ai
132: Joey Politano - Apricitas Economics