Studying these global balances helps understand and predict where the stresses of financial systems build.
To this end, Brad’s re-opening post from November 2022 is a foundational read.
The short summary – deficits are back to pre-GFC highs, have concentrated in autocratic regime countries but with none of the historic reserve growth.
Prescient conclusion – “By implication, private financial intermediaries somewhere around the world will need to absorb Treasury bonds. Just as financial intermediaries globally had to absorb U.S. “subprime” (household) risk prior to the global crisis, now they have to absorb U.S. interest rate risk.”
Interesting use case of GPT3 – to model economic agents – as was done in this paper.
“These models can be used the same way economists use homo economicus: they can be given endowments, put in scenarios and then their behavior can be explored—though in the case of homo silicus, through computational simulation, not a mathematical deduction“
The Cleveland Fed has been maintaining a survey of consumers for their views on how they are responding to COVID-19.
“Consumers continue to see a long road ahead, with nearly two-thirds expecting that the coronavirus outbreak will last either one or two years …
However, we are starting to see some changes in behavior, as fewer consumers report storing more food supplies than had been the case earlier …
And the impact of the coronavirus on GDP over the next twelve months looks to be decreasing in size, from -20% in late March to -10% in late April and -5% in late May.”
Interesting data from Foursquare regarding foot traffic (up to 27th March) in the US.
As expected Airports -66%, Hotels -61%, Bars -60%, Gyms -64%, Malls -61%, Clothing Stores -72%, Movie Theatres -75%, Restaurants -73%.
There are some interesting observations though.
Despite restaurant traffic being down 73%, fast food is only -17% – likely due to take away.
Interestingly after the initial stocking spike traffic to supply stores, grocery stores (pictured) and liquor stores is now well down from the peak (but still up overall).
Drug stores on the other hand are seeing a +28% and hardware stores continue to see strong traffic (+27%).
Gas station traffic initially ticked up but are now seeing -7-8% decline.
Outdoors is booming with visits to trails +34% and parks +10%.
It really gets to the crux of the country’s success.
In 1993 they ran a $20bn deficit and now that is a surplus of over $200bn (inflation adjusted).
Worth a read for any economist and puts into perspective the trade-war going on right now.
“The takeaway — from this whole 6,000 word essay — is that Germany has done insanely well for itself since the creation and adoption of the Euro and the European Single Market by pursuing a strategy of Export-driven Industrial production that is considered impossible in any other developed, high-GDP, high-population, high-wage-paying nation.“
