Image source: Pixabay

Here are three things I think I am thinking about this weekend.

1) How Did We Get Here?

I won’t bore you with more of the tariff debunking that I did last weekend. If you want to read that please go back and touch on each of the bullet points I covered. Tariffs are perhaps the most non-partisan issue in economics. It might be the only thing that Paul Krugman and Milton Friedman agreed on. But somehow, someway the narrative got hijacked in recent years. How did this happen? How did we get to this place where something that was once so universally believed, has somehow become controversial?

In my opinion the erosion of trust starts after the tech bubble collapse and 9/11. The mistrust of institutions and Capitalism was growing. And the Great Financial Crisis was the knockout punch. From there no one knew what to believe and bad narratives began to proliferate all over the place. The internet exacerbated this and made it easy to trust anyone with a megaphone. In fact, the only reason anyone knows about my work is because half the stuff I read during the GFC years was BS and I made it my mission to debunk a lot of the terrible economic narratives out there. I wrote thousands of posts on the old Pragmatic Capitalism blog in the Myth Busting section.

One of the worst narratives that came out of the GFC was this idea that America was a house of cards, built on market manipulation that masked an underlying real economy of collapsing living standards. This narrative was usually promoted using double axis charts of the Fed’s balance sheet, scaremongering about the economy and the ever persistent nonsense chart of real wages being flat since 1970. This was all stoked by narratives about how inequality was soaring and only the biggest boats were rising.

But the reality was that all the boats were rising and America and the global economy it dominates, was far better off than the rest of the world, even if inequality was increasing. Here’s the data:

• Household net worth at record highs (before we blew it up in the name of tariffs)
• US households spend less on necessities than ever. This “problem” is so bad that the loudest complaints are now about the cost of luxuries like a college education or healthcare. These are things that the average American couldn’t dream of having just 100 years ago.
• Inflation adjusted median income is up 50% since 1975.
• The misery index is low by historical standards.
• Real GDP is at all-time highs.
• Median American net worth of over $200,000 places them in the top 10% of global net worth.
• Global life expectancy is improving dramatically.
• Child mortality has collapsed.
• The world has so much food that we are suffering from an obesity epidemic.
• We are experiencing exponential growth in technological advancements.
• The share of the world living in extreme poverty has collapsed.

None of this is intended to downplay the many problems that exist in the USA and around the world. But there are always problems. And yes, we should fight to solve those problems. But we can do that while also acknowledging that a lot of very good things have happened to our living standards in recent times. But in the last 20 years we convinced ourselves that modern life is in decline, probably because we have no way of gauging how bad life was for almost every past generation that ever lived. And so here we are convinced that we need to tear down the entire system. A system that while flawed, has served Americans especially well. In fact, you might argue that the global free trade system was structured by Americans and for Americans so as to benefit them disproportionately. The economic data certainly bears that out. But again, we have no way of gauging this relative prosperity because most of us have not walked a single day in the shoes of a middle class Chinese, Brazilian or Spanish family.

And as we collectively convinced ourselves of this demise we siloed ourselves in our preferred echo chambers where we would reinforce whatever narrative we most wanted to believe. And the narrative that apparently won is this idea that we need to punish the rest of the world with tariffs in order to right all these wrongs. So. Here we are.

2) Bad tariff narratives.

Speaking of all the bad tariff narratives. I wanted to post the views of two of the leading voices of Conservative economics in my lifetime – Milton Friedman and Thomas Sowell. In this 10 minute video they do a brilliant job of explaining the flaws behind some of the most common narratives used to justify tariffs. Give it a watch.

video length: 00:10:11

3) My Current Economic Views.

Here’s an interview I did this week about my market and economic outlook. It’s pretty brief, but the long story short is that we’re playing a very dangerous game of chicken here with these tariffs. And if this game plays out for an extended period it could have very damaging consequences.

I hope you’re doing something distracting this weekend. Next week might be a very long one.

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