Connecting the Dots, August 2020

Will America Accept the Worst?

July 21, 2020

Even in normal times, the news describes murders, accidents, wars, natural disasters, and the passing of once-famous celebrities.

Help the Economy by Going Outside

July 7, 2020

COVID-19 cases are growing fast in large parts of the US. The same folks who said the virus would just go away now say not to worry because fewer people are dying.

Travel Virus Strikes Economy

June 30, 2020

We’ve escaped the frying pan and found the fire. COVID-19 cases are now growing faster than they were when the first US lockdowns occurred last March.

The Corona Depression Is Here

June 23, 2020

The US economy entered recession at the end of February, according to the economists who officially define such things. But will it get even worse?

To Stay Informed, Watch Less TV

June 9, 2020

Pop math quiz: What is 1918 + 1932 + 1968?

Your calculator may say 5,818, but the real answer is 2020. This year has turned into a combination of those three historic years. In the US, we have

To Help the Economy, Wear a Mask

May 26, 2020

“You can lead a horse to water but you can’t make him drink,” says an old saying.

Reopening Isn’t About Class Warfare

May 19, 2020

In theory, outside threats should make people set aside differences. The novel coronavirus seems to be doing the opposite.

The Great Reopening Gamble

May 12, 2020

We knew the April US jobs data would be ugly. Speaking on ABC’s “This Week” program last Sunday, Minneapolis Federal Reserve Bank President Neel Kashkari predicted “the worst is yet to come.”

The Giant Presumption behind Re-Opening America

May 5, 2020

Newly “liberated” Americans are flocking to beaches, parks, and restaurants, eager to prove the novel coronavirus doesn’t scare them.

No, the Economy Isn’t Re-Opening Soon

April 28, 2020

“America will be open for business very soon,” said President Trump on March 23, just a week after local authorities began issuing stay-at-home orders.

We Don’t Have Markets Anymore

April 21, 2020

The novel coronavirus is destroying human lives: almost 170,000 worldwide as I write this, including 40,000+ in the United States.

Why the Coronavirus Could Raise Wages

April 14, 2020

US unemployment shot higher in the last month, thanks to coronavirus closures. Some 17 million people filed new jobless benefit claims.

Coronavirus Socialism

April 7, 2020

When (hopefully soon) we all get out of coronavirus lockdown and try to resume normal life, we will probably find a different “normal.”

Coronavirus Is Trade War on Steroids

March 31, 2020

“The new coronavirus is changing everything,” say many pundits.

Coronavirus Stimulus Is an Investment in Life

March 24, 2020

Following the coronavirus news from home? Good for you. Home is where we should all be, except for medical, food, public safety, and other essential workers.

Coronavirus Clarifies Priorities

March 17, 2020

Bought any groceries lately? You probably weren’t alone. Nor were you surrounded by crazy people. The store mobs are perfectly rational, given recent events.

Lockdown Risk and Viral Attitudes

March 10, 2020

Financial professionals talk about all kinds of risk: credit risk, interest rate risk, political risk, inflation risk… the list goes on. Now, we have a new one.

How COVID-19 Leads to 2008-Style Bank Crisis

March 3, 2020

The COVID-19 virus is pushing an economy that was already approaching a cliff. Will it go over the edge?

US Capitalism Not Helping Itself

February 25, 2020

 “A specter is haunting American capitalists—the specter of Bernie Sanders.”

The Fed Wants Americans to Suffer

February 18, 2020

Last week, the Senate Banking Committee held a confirmation hearing for Judy Shelton, whom President Trump has nominated to the Federal Reserve Board.

Two Issues Will Drive Election and Economy

February 11, 2020

Allegedly smart people say the economy depends on the election and the election depends on the economy.

The Political Tail Risk No One Sees Coming

February 4, 2020

Many 2020 market forecasts say politics will be a key factor this year. The US is starkly divided between parties with radically different policy agendas. 

Socialism Is Coming but Not the Way You Think

January 28, 2020

Jamie Dimon, CEO of JP Morgan Chase (JPM), which just marked the most profitable year any US bank has ever had, spoke on CNBC from Davos last week.

Seven Reasons Phase 1 Is a Terrible Trade Deal

January 21, 2020

The “Phase 1” US-China deal is signed, sealed, and delivered. Phase 2 is in the works but won’t happen any time soon. Investors celebrated anyway.

Inflation Kills Wage Growth

January 7, 2020

January is here, which means prediction time. What will the year bring?

Potemkin China Trade Deal Designed to Deceive

December 17, 2019

We have a trade deal! Should we pop the champagne corks?

Where the World Is Going

December 10, 2019

We all want to know the future. Unfortunately, the future isn’t talking. It’s just coming, like it or not.

About That College Debt Thing

November 26, 2019

Many young Americans struggle just to stay afloat. The difference between sinking and swimming often comes down to education. 

How to Stop Elizabeth Warren’s Wealth Tax

November 19, 2019

Wealthy Republicans—and even some Democrats—are worried about Elizabeth Warren. Specifically, they fear her wealth tax idea.

Inflation Is No Problem Unless You’re Poor

November 12, 2019

Every month, the government publishes inflation data. And with every report for the last decade, we’ve marveled at how low it is.

How Impeachment Could End The Trade War

November 5, 2019

The House appears likely to impeach President Trump. The Senate will then decide if he stays in office.

US Prepares to Monetize Its Debt

October 29, 2019

The US government spent almost a trillion dollars more than it received fiscal 2019. And that’s just the official, on-budget deficit. Fair accounting would look even worse.

New Trade War Weapons Could Kill Your Stocks

October 15, 2019

Yay, we have a trade deal! Tough negotiations worked!

Well, maybe. It depends who you ask.

The Dumbest Tax Cut Ever

October 8, 2019

No one really likes paying taxes. At best, we wish we got more for our money.

A tax system should raise the necessary revenue fairly and with minimal economic distortion. Things go off the rails when governments use tax policy to reward (or punish) certain behaviors.

Confidence Matters and Trump’s Trade War Is Killing It

September 24, 2019

Economic growth isn’t random. It comes from individual decisions to buy, sell, or do nothing. We all make dozens every day.

Corporate CEOs and CFOs make bigger decisions, like whether thousands of people get hired or a factory gets built.

To Fix the Economy, Fix Healthcare

September 17, 2019

If you are American and you have health insurance, you probably get it from either your employer or some kind of government program. Or possibly both, if the government is your employer.

War Gaming the Trade War

September 10, 2019

People respond to incentives. So do national governments. This is foundational to both economics and geopolitics.

Globalization Hits a Brick Wall Named Trump

August 27, 2019

Until about 50 years ago, people paid attention to the area where they lived. They read local papers, shopped at local merchants, and socialized at local events.

Tariff Carnival Ride

August 20, 2019

“Donald Trump Saves Christmas,” said the Gizmodo headline last week.

Trump’s Trade War Is Over and Nobody Won

August 13, 2019

“You break it, you own it.”

Then-Secretary of State Colin Powell cited this Pottery Barn rule back in 2002. He was advising President George W. Bush of the consequences should an Iraq invasion go badly.

Trump’s Trade War Is Paralyzing Business

August 6, 2019

The way you feel about yourself affects your behavior... and the economy.

Financial Success Formula Failure

July 30, 2019

The US economy grew at a 2.1% annualized pace in the second quarter, according to data released last week. That was better than economists expected but hardly impressive.

RIP Economic Cooperation, 1944–2019

July 23, 2019

Last month, world leaders observed the 75th anniversary of D-Day, when Allied troops stormed the beaches of Normandy, France. It was a critical day in world history.

Free-Trade Republicans Will Surrender to Trump

July 16, 2019

Imagine an alternate history in which Donald Trump lost the 2016 election.

The Left-Behind Economy

July 9, 2019

Remember “No Child Left Behind,” George W. Bush’s education reform plan? Congress passed it in 2001.

Trump, ZIRP, and the Fed

July 2, 2019

Investors are in a buying mood despite many economic warning signs. Why?
For some, it’s because they expect the Federal Reserve to cut interest rates and otherwise “stimulate” the economy. They believe (correctly) it would drive stock and real estate prices higher. 

Freight Slowdown Is a Terrible Sign for the Economy

June 25, 2019

Just as an army moves on its stomach, an economy moves on ships, trucks, and planes. They carry the goods whose purchase adds up to growth.

Trump’s Trade War Is Paralyzing Business

June 18, 2019

The way you feel about yourself affects your behavior... and the economy.

Trade War Will Trigger Inflation, Then Recession

June 4, 2019

The logic of Donald Trump’s multi-front trade war, if there is any, is increasingly obscure. The tangled mix of policies isn’t accomplishing its stated goals and seems unlikely to ever do so. Meanwhile, it hurts the Americans it should supposedly help.

Trade War and Real War

May 28, 2019

To wrap up Memorial Day weekend, here’s a column I wrote last December. Recent trade war developments make it still highly relevant.

Men’s Room Job Automation

May 21, 2019

People are worried robots will take their jobs. That’s a legitimate fear sometimes, but it’s not new. It is just another step in a process that started long ago.

Corporate Scandals and Economic Lubricants

May 7, 2019

The yield curve isn’t the only sign recession is coming. Rising corporate hubris says the same thing.

Trade War Widening, Not Ending

April 30, 2019

Almost every day brings comforting news on the trade front. They’re talking! Someone went to Beijing! Someone else is optimistic!

The Economy’s Blood Pressure Is Falling

April 16, 2019

It’s not a good sign for your health if your blood pressure drops too low. It can cause dizziness and fainting and, in severe cases, can even be life-threatening.

Trump May Regret His Fed Takeover Attempt

April 9, 2019

Some things are too important to leave to politicians. One such thing: the money supply. That’s why the Federal Reserve Board is (at least in theory) an independent agency.

Trump’s Trade War Is Nowhere Near Over

April 2, 2019

If you follow daily market action—something I don’t usually recommend—it’s pretty clear investors don’t like tariffs or other trade restrictions.

Your Economy May Be Fine, But It’s Not Just You

March 26, 2019

Looking at the official unemployment rate, American workers should be pretty happy. Almost everyone who wants a job has one.

Reality That’s More Than Virtual

March 19, 2019

Technology and the economy are like an ouroboros, one of those snake-eating-its-tail symbols. You don’t know where one ends and the other begins.

The Worst Parts of MMT Are Already Here

March 5, 2019

Many Americans are worried about “modern monetary theory.” They fear a future Congress will use it to justify sharply higher spending and enlarge the national debt to unsustainable levels.

Hedging the Ultimate Tail Risk: Breakup USA

February 26, 2019

Some things are so horrible, you don’t want to think about them.

Fake Capitalism Is a Bigger Threat Than Socialism

February 19, 2019

Many people are worried socialism will take over the US. They’re sure it will be awful.

Trade Power Goes with Military Power

February 12, 2019

Five years ago this month, Ukraine’s “Euromaidan” Revolution led to Russian forces occupying the Crimean peninsula and parts of Eastern Ukraine. The US and Europe imposed economic sanctions in response. Pundits like me proclaimed a new Cold War.

Finally, a China Strategy That Might Work

February 5, 2019

The US and China are racing to craft some kind of trade agreement before March 2, or else President Trump says he will impose stiff new tariffs.

Science Says Protectionism Won’t Work

January 29, 2019

The simmering trade war is still... well, simmering. Markets rise and fall with each new rumor.

Business Confidence Is Starting to Crack

January 22, 2019

Actions speak louder than words. That’s why surveys asking people what they think about the economy aren’t always useful. Their actions might not match what they tell pollsters.

The Wealthy Should Prepare to Be Soaked

January 15, 2019

Much of the US government remains in shutdown as I write this, including the IRS.

Wages Are Still the Key

January 8, 2019

Here we are in 2019, our last chance to make the Twenty-Teens a decade that worked. Whether you think it worked depends partly on whether you worked… and how well you were paid for it.

Lonely Boomers Are an Economic Opportunity

December 18, 2018

Baby Boomers get blamed for all kinds of problems. Much of the blame is unfair, but there is no doubt the first postwar generation brought a lot of changes—culturally, economically, and otherwise.

Trade War and Real War

December 11, 2018

We have a temporary truce in the trade war. No one is quite sure if it will last, especially financial markets, which after a short-lived rally saw little to celebrate in the latest Trump-Xi meeting. 

How to Kill American Jobs

December 4, 2018

Here’s a question whose answer is rarely pleasant: “What could go wrong?”

Economic Sugar High Will End with a Crash

November 27, 2018

By most measures, the US economy is performing okay. New data tomorrow will likely show real GDP growth still near 3.5%. Unemployment is below 4%. Inflation is up a bit but still historically low.

Technology, Tariffs, and Peak Globalization

November 13, 2018

The US-China trade war dominates the economic news, but in the long run, tariffs may be a minor detail.

Trade War Enters “Chips Ahoy” Phase

November 6, 2018

Today’s election, divisive though it is, can’t change one thing: We Americans love our sweets. This is bipartisan.

China Trade Solution Is Hiding in Plain Sight

October 30, 2018

If the news media’s White House sources are correct, President Trump’s trade war with China may soon intensify.

How Free Trade Can Fix Healthcare

October 23, 2018

I wrote last week about the huge amount of money Americans spend on healthcare. Many people simply can’t afford to get the care they need.

Healthcare Is Eating the Economy

October 16, 2018

Being sick is no fun, whether you’re a patient or the economy. Illness disrupts people’s lives and, economically speaking, diverts scarce resources from more productive uses.

NAFTA Isn’t Gone Yet

October 9, 2018

To hear some people talk, the North American Free Trade Agreement is practically dead. Soon a newly negotiated revision will take its place.

Trump’s China Tariffs Not Playing in Peoria

October 2, 2018

Free trade is amazingly popular for something that doesn’t actually exist. Even Americans who can’t define free trade tell pollsters they love it.

Machines Will Do Half Our Work by 2025

September 25, 2018

Whether you see it or not, a machine is coming for your job right now. Yes, yours.

Wage Growth Surging? Not Really

September 18, 2018

The US economy is at “full employment,” says the official 3.9% unemployment rate. Every educated person who wants to work has at least one job. Some of us have several.

Reality Gets Too Virtual at SXSW

September 11, 2018

Patrick Watson is working on a special project this week. The following is one of his most popular columns, originally published March 21, 2017.

Do We Really Know What Causes Events?

September 4, 2018

Suppose we asked 100,000 random people to flip a coin until it landed on tails. 50,000 would get tails on the first flip.  On the next flip, 25,000 would get tails, then 12,500, and so on.

How Trump Could Light a Federal Reserve Time Bomb

August 28, 2018

Those worried about the Fed’s so-called “independence” from politics are a little late. The US presidents, who nominate its board members, long ago put political loyalty high on the qualification list.

Productivity Riddle May Be Simple

August 21, 2018

Finding more and better-trained workers is the top challenge for many US business owners. They say current workers can’t produce enough to meet growth objectives.

Gasoline and Free Money

August 14, 2018

Gasoline prices have been strong this summer, though they’re still below last May’s peak, when the national average was near $3 a gallon.

No Shoes, No Shirt, More Money

August 7, 2018

A penny saved is a penny earned, goes the old saying… but that’s not true. In today’s world, a penny saved is better than a penny earned.

How to Solve Information Inundation

July 31, 2018

“Information overload” used to describe the amount of news available to us. Now the term is woefully inadequate. We are not just overloaded, but inundated.

“National Security” Auto Tariffs Are the Real Witch Hunt

July 24, 2018

President Trump likes to call the Russia investigation a “witch hunt.” Yet he also thinks your car endangers US national security. Yes, your car, the one in your garage right now. It is the enemy.

If Robots Learn Surgery, Is Any Job Safe?

July 17, 2018

Economists disagree about job automation: Some see imminent doom, others think we can adjust. There’s not a lot in-between.

Pet Care Is a Recession-Proof Industry

July 10, 2018

Americans may be bitterly divided on everything else, but we all agree on one thing: We love our dogs. Our cats, too, plus a few other companion species. We’ve made them part of the family.

Face It: Social Security Is Welfare

July 3, 2018

According to the dictionary, “welfare” is a word that describes our health, happiness, and fortunes. But in the US, it usually refers to government support, which many consider shameful. No one wants to be “on” welfare.

Trade War Is Coming, But We Don’t Know How

June 26, 2018

We’re in a trade war. No, we’re not. Yes, we are, but it won’t be so bad.

The Dismal Science Depends on Bad Data

June 19, 2018

Those who call economics “the dismal science” are half right. It is indeed dismal (“dingy and unwelcoming”) to think about, except for dweebs like me.

How to Save Social Security

June 12, 2018

Some things you just don’t question. For American workers, Social Security is one of them. You pay into it your whole career, and you expect to get paid when you retire. No politician dares say you won’t.

To Save the Economy, Don’t Retire

June 5, 2018

The US economy is growing but corporate profits are not, according to data released last week. That’s disappointing for stockholders.

If You Want to Be Rich, Want Less

May 29, 2018

Our endless drive for more money, more stuff, and just generally “more” has turned into a vicious cycle of materialism.

Fear, Starbucks, and FDR

May 22, 2018

Financial markets move when humans (or machines programmed by them) decide to buy or sell. In theory, these decisions are rational, but in reality, they’re often driven by emotions.

Overheated Highways

May 15, 2018

This month, my wife and I drove from Austin to Memphis. Going across Arkansas on I-30 and I-40, the number of trucks seemed quite high.

Moving Millionaires

May 8, 2018

You’ve heard the old line about three kinds of falsehoods: lies, damned lies, and statistics. All three are easy to find on the Internet.

Capitalism Can’t Work Without Losers

May 1, 2018

Those who support free-market economics say it is the best, most efficient path to maximum prosperity for everyone.