Full Stack Economics

I've seen a lot of speculation like this article, something to the effect of "these sanctions will weaken the international power of the U.S. dollar by forcing more countries to consider non-dollar monetary systems."

It's a reasonable concern. But I think it's important to consider the reasons why that might not happen.

Alan Cole from Full Stack Economics provides a couple good general thoughts on sanctions here [1], but I'll highlight my favorite:

> The fact is that the US has most of the world’s largest economies on its side. China is the world’s second largest economy at nominal exchange rates, and Russia is about eleventh. The top ten also include Japan, Germany, the UK, France, Italy, Canada, and South Korea, all of which are actively participating in the anti-Russia sanctions.

> Financial commentators love talking about the dollar losing its status as reserve currency, because it gives them a permission structure to wildly speculate. But there is little constituency for a Russia-friendly financial system among the world’s largest economies. And for countries seeking a relatively neutral and rules-based system free of geopolitics, China isn’t a very good alternative anyway. (It has a variety of idiosyncratic foreign policy demands of its own, and regularly uses economic might to help reinforce them.)

The fact is that a huge majority of the world's GDP is actively in support of of these sanctions. This is not some arbitrary, capricious act – Russia is engaged in the…

> https://www.shadowstats.com/

No. Just No.

First off the math makes absolutely no sense:

> But if we take away the outlier 2020 data points, the average real annual GDP growth from 2010-2019 was 2.3%. The inflation rate in that time averaged roughly 1.8% per year.

> If you’re one of the conspiracy people who believe inflation has actually been running at 5-6% per year, that would assume the economy has been contracting by 1-3% per year over the past 10 years.

> And if you’re a full tinfoil hat person who assumes inflation is actually 10-12% per year[2], that’s like saying we’ve been in a full-blown depression and the economy has lost 80% of its value.

* https://awealthofcommonsense.com/2021/01/inflation-truthers/

Second, the methodology is all wrong:

* https://www.fullstackeconomics.com/p/no-the-real-inflation-rate-isnt-14-percent

As much as you can call it a "methodology" of taking the official CPI number and adding your own, which the author of the site admits to:

> I’m not going back and recalculating the CPI. All I’m doing is going back to the government’s estimates of what the effect would be and using that as an add factor to the reported statistics.

* http://econbrowser.com/archives/2008/10/shadowstats_res

* https://en.wikipedia.org/wiki/Shadowstats.com#Negative

Further, the current price of a subscription to the 'full report' is $175/year right now, the same as it was in 2014:

*…

Homelessness also decreases when cities simply let more housing be built, even if luxury housing. https://fullstackeconomics.com/how-luxury-apartment-buildings-help-low-income-renters/

For some reason liberal policymakers (or their constituents) either can't seem to get that in their head, or can't act on it. And instead cling to things like rent control, which "feel good" in the short run but end up doing the opposite of what was intended.

Sometimes I think that every policy (that isn't a "duh, of course" policy) should come with an expiration date. So that the people you wanted to help are specifically identified, and given a finite time to be helped -- and people who come after know that it's a one-time intervention and the system is what it is from now on. Then when the people you thought it would serve / benefit are gone, you are required to assess whether it worked as you thought, and it doesn't just go on autopilot forever. Now, whether the policymakers would respect that, or simply keep on extending it on public opinion, who knows.

It's just too easy for well-intentioned people to put in place rules they think will work, and go away for 10 years and discover it didn't, and then still do nothing to fix it.

I don't think so at all and the evidence points to a profound stagnation in our ability to build. So, if we can't even admit that we're terrible at building fast, there is very little hope. Step No. 1 is admission and introspection:

https://www.fullstackeconomics.com/p/why-america-cant-build-big-things-any-more

https://www.nytimes.com/2019/02/25/us/california-high-speed-rail.html

https://www.nytimes.com/2023/02/05/opinion/economy-construction-productivity-mystery.html

https://www.nytimes.com/2021/01/04/opinion/manufacturing-united-states-masks.html

https://www.palladiummag.com/2022/06/09/why-america-cant-build/

https://www.wsj.com/articles/infrastructure-us-costly-explained-solutions-11658263884

https://techcrunch.com/2019/02/19/why-cant-we-build-anything/

you need to compare the alternative. and also take into account the growth that happened thanks to cheap mortgages.

there was a nominal price bubble (especially visible in the rent vs buy graph) but rents did not show the same spike, there was no general shortage (as seen in vacancy rates), and since interest rates fell nominal prices went up, and the central bank overcorrected.

https://www.fullstackeconomics.com/p/the-2000s-housing-bubble-was-greatly-exaggerated

... the obvious problem is the low productivity of suburbs. spending a lot of money on building them is good for short-term GDP growth, but long-term it's a poor investment compared to the usual recommendations.

Shadow stats is a crank blog with absolutely no validity. Choose your debunking source, but the owner of the blog literally just adds an amount to the official rate that he thinks represents the government error. There’s no calculation, there’s no “pre-1980 methodology”, just one dude’s vibes. If the rate has averaged 9% over the past 25 years, you’d be talking about over 750% inflation since 2000. You can buy any manner of new car today for $35k - could you buy a new car for $5k in 2000? Did a gallon of gas cost $0.40/gallon? Could you rent a modern $1,500 apartment for $200/month?

https://www.fullstackeconomics.com/p/no-the-real-inflation-rate-isnt-14-percent