It’s natural to categorize people—put them into little boxes with other people sharing similar characteristics. And there are certainly a few boxes into which I might comfortably fit. But I often see commenters put me in the wrong box, based on a misreading of my actual views.
For the most part, I’m neither an optimist nor a pessimist about the macroeconomy. I’m neither a monetary hawk nor a dove. I’m neither a foreign policy hawk nor dove. I’m neither a left-winger nor a right-winger. I’m neither a Democrat nor Republican. I’m neither pro-Israel nor pro-Palestinian. I could go on and on.
That’s not to say I’ve never offered an optimistic or pessimistic take on the economy. But my baseline view is that the market forecast is optimal, despite the fact that the market forecast almost never turns out to be precisely correct.
As an analogy, if the Eagles were favored by 3 over the Chiefs in the Super Bowl, then I would forecast the Eagles to win by 3. But I’d also assume that the odds of that precise outcome occurring are probably less than one in ten. For the economy in 2024, I see some risk of both recession and excessive inflation, even as a soft landing appears to be the market forecast.
This is why I believe it is impossible to reliably predict the business cycle; you’d be predicting Fed failures. I can predict that drunk drivers and inflation targeters will have more accidents than sober drivers and NGDP level targeters, but I cannot predict precisely when those accidents will occur. People try to avoid having accidents!
Similarly, I may seem hawkish at some times (2022) and dovish at others (2009), but my basic view favors 4% NGDP growth, level targeting. Because many people have a strong dovish or hawkish bias at almost all times, I get lumped into a box with people who interpret something I said as suggesting that I have a consistent policy bias in one direction or another. I do not.
On foreign policy, I oppose neoconservative adventurism. Instead, I favor blocs of like-minded non-aggressive nations that promise mutual help in the event an evil outside power invades one of their members. If that group becomes large enough, then no outside power would dare to invade. As an analogy, 48 states came to the aid of Hawaii in 1941, despite the fact that Iowa had little fear of a Japanese invasion. The bigger this mutual self defense group becomes, the better.
This view makes me seem hawkish when the alliance is attacked, and dovish when it is not attacked. (Yes, there are ambiguous cases, such as when to provide financial aid to non-members that are being attacked, or what to do about piracy on the high seas, terrorism, etc.)
Although I am neither particularly optimistic nor pessimistic about the near-term course of the macroeconomy, I do have views on other issues. I’m relatively pessimistic about the fiscal situation, which is likely to get worse in the medium term. I’m also pessimistic about the medium term global political situation, as the rise of nationalism is likely to produce bad outcomes. These worries are related, as populism underlies both trends.
In the long run, the global political cycle will turn again. I just hope it doesn’t take a disaster such as the two world wars before people wake up to the folly of nationalism.
Merry Christmas everyone. And when you go into the voting booth in 2024, remember to ask yourself: What would Jesus do?
Giovanni Battista Tiepolo:
