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Jason Furman: “Everyone should get up every morning to figure out how to get more money”

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No matter how reckless the British government, no matter how failed its “mini” budget, it alone cannot explain the fragile economic outlook. Interest rates are rising, financial markets are faltering, and the strength of the US dollar threatens to reveal that many businesses and governments have been bathing without clothes.

“There’s just this amazing disconnect,” says US economist Jason Furman. “If you just look at the benchmark economic data, everything looks fine, and yet there is a sense that we are about to do something terrible. People are buzzing about the terms — I think in some cases very loosely — financial crisis and recession. I’ve seen some people warn of depression.”

Foreman was chairman of the US Council of Economic Advisers during Barack Obama’s second term. I’ve long freaked out about government deficits – “I don’t really think we need to care about the level of debt, I think we need to care about the level of debt service” – and yet it has become a leading acoustic warning about US inflation. He is also one of the most rude economic commentators. Regarding the “mini” budget, he said, “I don’t remember the more consistent negative reaction to any policy announcement by economists and financial markets.”

If British Prime Minister Liz Truss ignores mainstream economics, Foreman represents it—almost by definition, since he co-teaches an introductory economics class at Harvard University.

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Over the past 18 months, his view that the Federal Reserve should raise interest rates has won sharp advocates. “In the past year, there’s been a lot of wishful thinking,” he says. This optimism has largely dissipated. In September, Federal Reserve Chairman Jay Powell He said He wished there was a “painless way” to tame inflation – which means there wasn’t. Foreman himself noted that unemployment in the United States may need to rise to 6.5 percent for two years, a change that would resonate globally.

How likely is a recession? “I don’t think this is at all certain,” he says — adding that the maximum risk is likely to come in the second half of 2023. They want an economic policy based on the best possible outcome.”

However, the turmoil in the UK has highlighted the risks of higher interest rates. Bank of England intervention to protect pension funds; one banker He said It was close to the “Lehman moment”. There are certainly other weaknesses lurking in the financial system. Does this not warrant caution? Foreman insists, “A lot of what breaks is the financial markets, as opposed to the real economy.”

“The initial burden of tightening is borne more by the rich, whose wealth is evaporating, than by the workers. I don’t think it will always continue like this, but I do think some of the voices we are hearing now are people looking at their stock portfolio, or the money they manage, and they are unhappy Seeing her going down. I too am unhappy to see her waning, I won’t make my misery with my stock portfolio the basis of public policy.”

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In Europe, inflation owes a lot to potential temporary energy prices. But in the United States, the issue of tightening is less complex, driven by a hot job market, Forman says. “If you look at the actual inflation data, it’s just ugliness after ugliness after ugliness. Core inflation hasn’t happened yet at all.” Stopping the interest rate hike would be “pretty much premature,” at least until inflation drops by a percentage point.

But inflation expectations, a major factor, have fallen? “I think a time when our models haven’t worked really well is a bad time to rely on prediction,” Forman says. “I would prefer the financial markets to be surprised in the future that there is less need to deal with inflation than the false dawn we have seen over the past two years.”

***

For Foreman, the appeal of economics lies in its combination of rigor and relevance in the real world. In high school, he volunteered for Walter Mondel’s presidential campaign. When he was a freshman, his mind scared his roommate, the would-be actor Matt Damon, who later recalled, “Jason was the first person I met at Harvard, and I literally almost came home.”

Foreman joined the Obama campaign in 2008. His appointment infuriated the unions: he did it once argue That Walmart was a “progressive success story,” because it drove retail prices down perhaps 50 times more than it lowered retail wages.

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In the White House, Foreman learned to keep his advice on the economy, and let Obama decide political risks. “The worst kind of economic advisor is someone who advocates something because it is politically convenient but pretends it’s actually a good economic idea.”

Foreman, 52, is crystal clear: When we’re talking on Zoom, he’s fluent, even when the white glow on his face reflects off as he’s looking out the other windows. He is also aware of the shortcomings of his profession. He’s skeptical of studies that say working from home boosts productivity, and he tends to agree with CEOs who say it doesn’t. “I think some economists are so excited about working from home – perhaps because they do it themselves and it works so well for them – that they want to generalize. I also wonder if working from home might work better in 2020 when nothing else could Do more on Friday than now when there’s a Red Sox game.”

Did the election of Donald Trump make him wish the Obama administration had done more for those left behind by globalization? “The obstacle has been Congress,” he says, adding that policies to reduce inequality won’t necessarily hold back populism. “The Affordable Care Act was the biggest thing we did to the losers in [US] economy in the last fifty years. But this did not calm our politics, quite the contrary. For a while, he made things worse politically.”

His concern now is that under Joe Biden, US policy has been overcorrected: from too little fiscal stimulus to too much; From scattered antitrust measures to very broad ones. The Federal Trade Commission’s antitrust approach, such as objecting to dead takeover From the indoor fitness VR app, it appears to be pursuing goals beyond the big competition. (Furman himself led a competition review for the British government, which suggested stronger oversight, away from dramatic legal action.) On the stimulus, he opposed Biden’s cancellation of student debt, saying: “Roughly half poured in. [a] A trillion dollars worth of gasoline on the already burning inflationary fire is reckless.”

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Furman advocated a higher minimum wage, but he is now an inflation hawk. What did he say about Bank of England Governor Andrew Bailey’s February statement that workers should not ask for a big raise? The way to tackle inflation is not a team effort everyone gets up every morning to figure out how to tackle inflation. Everyone should get up every morning to find out how to get more money, or if they are running a company how to make more profit. It is up to the central bank to make sure, when they do that, that their stimulus matches low inflation. Inflation is not a moral issue. It’s not that there are bad guys or people who need to behave better. It’s just too much money chasing too few goods, and the central bank is where they decide how much money is.”

***

As prime minister, Truss argued that the UK needed to focus less on redistribution. Foreman argues that this is not possible: everything is redistribution. “The sad reality of the economy at the moment is that it can’t actually produce more than it is currently producing. If you give to one group in a way that they can increase their consumption, you will reduce the consumption of the other groups. Maybe it’s because inflation is going up. Maybe it’s because interest rates are going up. So the mortgage payments go up. Maybe you borrow more than other countries, but then you have to pay that back in the future.”

Truss also insists she is looking to “grown the pie”. Furman supports a growth agenda, including the politically controversial removal of maximum bonuses for bankers. “You want to allow companies to pay in the way that suits them best; that doesn’t take money from someone else to pay the bankers.” The problem was the high-income tax cuts, which (if not abandoned) would likely hurt growth, once the cost of greater government borrowing was included. This illustrates what Forman sees as a recurring problem: the direct impact of the policy is evaluated, but not its indirect effect, which may be of the same magnitude.

What can improve productivity? “It’s a long list, but immigration is far more important to the US and the UK economy than anything else you can do.”

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in the area

Will inflation be close to the Fed’s target next year? Unlikely number.

What should be the federal minimum wage? If you want to bring it up to $15 an hour in 10 years, that would be fine.

Should the UK join the European Union? Ideally yes.

How Will Elon Musk’s Twitter Acquisition Go? I think it will hardly affect 97 percent of the experience.

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Truss’ predecessor, Boris Johnson, hoped that reducing immigration would raise wages. I think it is impossible for unskilled migration to be a significant negative wage. There have been lots and lots of studies, lots of natural experiments,” Foreman says. Some studies have found a small negative effect on inequality, but even that is likely to be outweighed by the benefits, especially in the long run.

Furman, who has three children with publisher Yves Gerber, also called for more preschool-aged childcare, to enable parents to stay in work. “It will take a lot of money.” (Gerber once noted that she gave Foreman an eight-year term in the White House: “No more!”)

These ambitions are, for now, secondary to immediate uncertainty. What will be the global repercussions of continued high interest rates in the United States? “Last year the US gave people so much money in the US that we bought so many goods that it drove up prices all over the world, boosted the dollar and made it more difficult for others. Now I think we are stirring everything in the exact opposite direction with Monetary deflation.

However, he insists: “The biggest problem is not caused by the United States. It is caused by global commodity prices, and it is caused by the domestic policy choices that countries have made. If you look at emerging markets, you will find that those that have borrowed foreign currencies in the short term are much less What you worry about at the moment are those most exposed to the world. As brutal as it sounds, the Fed’s job is to look after the United States.” Global problems could be traced back to the United States. But we are trying to slow down our economy. A few spills that you would normally worry about at this point might be a good thing.”

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Economic

US Equity Funds Record Largest Weekly Outflow In About 1-1/2 Years By Reuters

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© Reuters. FILE PHOTO: One hundred US dollar banknotes are seen in this illustration taken in Seoul on February 7, 2011. REUTERS/Lee Jae-won/File Photo

(Reuters) – US equity funds posted massive outflows in the week ending Dec. 7 as investors worried about the Federal Reserve’s interest rate hike, as data showed a rebound in employment and a recovery in the services sector.

According to data from Refinitiv Lipper, US equity funds recorded withdrawals of $26.66 billion, the largest weekly outflow since April 2021.

Graph: Money Flows: US Stocks, Bonds, Money Market Funds, https://fingfx.thomsonreuters.com/gfx/mkt/znpnbbezgpl/Fund%20flows%20US%20equities%20bonds%20and%20money%20market%20funds.jpg Reports Show Upbeat US service industry activity and higher-than-expected additions to non-farm payrolls in November raised bets that the Federal Reserve will remain more hawkish than expected.

Investors were also worried because the largest U.S. banks including Goldman Sachs (NYSE: ), JP Morgan, and Bank of America (NYSE: 100) have warned of a recession as inflation threatens consumer demand.

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US equity growth funds saw $9.91 billion in withdrawals, while value funds saw a net sell-off of $2.03 billion, as selling continued for the third straight week in every sector.

Graph: Fund Flows: US Growth and Value Funds, https://fingfx.thomsonreuters.com/gfx/mkt/jnvwyyewnvw/Fund%20flows%20US%20growth%20and%20value%20funds.jpg Sector fund data showed technology, financials and fund losses Estimated consumers are $1.27 billion, $761 million, and $527 million, respectively, in outflows.

Graph: Fund Flows: US Equity Sector Funds, https://fingfx.thomsonreuters.com/gfx/mkt/gdvzqqywlpw/Fund%20flows%20US%20equity%20sector%20funds.jpg Meanwhile, US bond funds received a net 992 million dollars in inflows after seeing weekly outflows for four weeks.

Taxable US bond funds made net purchases of $886 million after three consecutive weeks of selling, although municipal bond funds experienced small outflows of $53 million.

US investors bought $318 million in high-yield bond funds and $1.06 billion in government bond funds in their biggest weekly net purchases since November 16. However, domestic public taxable fixed income funds recorded $794 million worth of outflows.

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Graph: Fund Flows: US Bond Funds, https://fingfx.thomsonreuters.com/gfx/mkt/zgpobbmrovd/Fund%20flows%20US%20bond%20funds.jpg Meanwhile, US money market funds took in $36.19 billion of inflows, the largest amount for a week since November 2.

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FirstFT: The FTC is flexing its muscles on the Microsoft-Activision deal

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good morning. This article is an in situ version of our website FirstFT the news. Subscribe to our site AsiaAnd the Europe/Africa or The Americas A release to send straight to your inbox every weekday morning

The US Federal Trade Commission will file a lawsuit to block Microsoft $75 billion acquisition of video game maker Activision Blizzard Because of concerns that the deal could hurt competitors to the Xbox consoles and cloud gaming business.

Deal, which was announced in JanuaryIt will be Microsoft’s largest acquisition ever and will make it the third largest game company by revenue, after China’s Tencent and Japan’s Sony.

But the Federal Trade Commission said yesterday that the deal would harm competition in the gaming sector, highlighting the fact that Activision is one of the few video game developers that produces and publishes the best video games for many devices such as PCs, consoles and mobile phones.

Microsoft moved to head off a regulatory backlash this week By signing a contract for 10 years To bring Call of dutythe blockbuster that brought in $30 billion in lifetime sales for Activision, has moved to Nintendo platforms instead of turning it into an Xbox exclusive.

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The measure is one of the biggest tests yet for Lena Khan, the chair of the Federal Trade Commission appointed by President Joe Biden, who has He vowed to crack down on Big Tech’s market power.

Microsoft CEO Satya Nadella hoped the deal would give the US software company a head start in the race to build the next version of the Internet and saw no reason for competition concerns when He spoke to the Financial Times in February.

“Even after this acquisition, we’ll be in third place with kind of a lower teen share[of the video games market]. . . “We’re going to be a bit of a player in a place that’s going to be very fragmented,” he said.

1. Pro-left appointed as Brazilian Finance Minister Luis Inacio Lula da Silva Fernando is expected to name HaddadThree well-informed sources reported that a loyalist from the left-wing Labor Party as Finance Minister today. The decision is likely to disappoint financial markets and reignite investor fears that the Lula administration, which takes office on January 1, will pursue a looser fiscal policy.

2. The US House of Representatives passes a defense bill worth $858 billion in financing weapons for Taiwan passed by the US House of Representatives A comprehensive defense spending bill of $858 billion That provides $10 billion in funding to provide arms to Taiwan as the country comes under increasing pressure from China. It is the first time that the US government has funded weapons for Taiwan.

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3. The United Kingdom, Japan and Italy agree to jointly build advanced combat aircraft The three countries will joint construction One of the most advanced combat aircraft in the world by 2035, to expand its defense capabilities to counter the growing threats from China and Russia. They will share development costs estimated at tens of billions of dollars.

A mock-up of the Tempest jet at the 2018 Farnborough Airshow
The UK and Italy’s Tempest fighter program will be integrated with Japan’s FX project © Peter Nicholls / Reuters

4. Airlines are feeling the pressure as charter groups raise rents Airlines return to profitability, but one cloud looms: Sharp increases in rental costs. More than half of the world’s commercial aircraft are owned or operated by leasing companies, and their fees are rising, which is another consequence of rising interest rates.

5. The Faustian agreement between Joe Biden and Russia to secure the release of Brittney Greener Brittney Griner’s release was greeted with joy from the basketball star’s family and supporters. But the exchange with Viktor Bout, a notorious arms dealer, drew criticism and raised questions about how America’s adversaries would deal with them. It may benefit from the arrest of its own citizens in the future.

How good is it to keep up with the news this week? Take our test.

Coming days

Economic data The US Department of Labor will update the Producer Price Index. The producer price index is expected to have risen 0.2 percent in November from the previous month, but the annual pace of wholesale inflation is expected to have eased to 7.2 percent, from 8 percent in October. The University of Michigan preliminary reading on consumer confidence is expected to have risen to 56.9 in December from 56.8 last month.

UK to launch financial services reforms Chancellor Jeremy Hunt would Unveil changeswhich include raising the ceiling on bankers’ bonuses and removing the requirement to separate risky investment banks from retail operations, in a speech in Edinburgh later in the day.

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Putin in Kyrgyzstan Russian President Vladimir Putin has arrived in Bishkek, the capital of Kyrgyzstan, to participate in the Eurasian Economic Union summit. The leaders are expected to discuss the establishment of a joint gas market and the establishment of an intergovernmental council in the field of energy. According to the Russian news agency TASS.

world Cup The quarter-final matches kick off in Qatar today, with Croatia playing Brazil in the first match, followed by the Netherlands and Argentina. Tomorrow, the surprising Moroccan team will meet Portugal at the start of the match, and England will meet France at a later time.

  • Read more: Simon Cooper, who grew up in the Netherlands, explains how the Dutch do it They abandon tradition under their coach Louis van Gaal in a bid to win the World Cup.

What else do we read?

Light needs to illuminate the black hole on dollar swaps An ordinary person might assume the dollar swap market It is a transparent angle of financing, given that the US currency underpins much of the global industry and these contracts are used by most of the major corporations and investment groups. Not so, writes Gillian Tate, as a recent report from the Bank for International Settlements shows.

Has inflation peaked? Central banks in the developed world have cautiously raised interest rates to curb demand and crush inflation this year, but, says the Financial Times editorial board, Now is not the time to hold back or cut back borrowing costs.

‘Hell. Hell: The War of Attrition on Bakhmut With Russia desperate for victory, wave after wave of infantry began Thrown in the city of Bakhmut on the front line In the Donetsk province, only to be cut down by the Ukrainian defenders. “They are just meat for Putin, and Bakhmut is a meat grinder,” said Kostyantyn, an exhausted Ukrainian machine gunner.

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Maps show that there was relatively little movement on the front line around Bakhmut

Why the price of oil has fallen despite new restrictions on Russian supply This week saw a pivotal moment in global geopolitics, as the European embargo and G7 cap on Russian crude oil prices came into effect. Within hours, supply disruptions set in as the piling up oil tankers queued up in the Bosphorus Strait. All of this would normally lead to a sharp rise in oil prices. However, yesterday they reached a new low of 2022. What is going on? Our energy editors explain.

It’s time to hunt down the dragons of the Asia Corporation I learned the hard way during years of managing Japanese equity portfolios, writes the Financial Times’ new investment columnist Stuart Kirk, the country’s corporate bosses were obsessed with market share, quality, innovation, culture and hard work. But did they sleep at night dreaming of my equity returns, Stewart asks, no they did not. That’s changing, he says, but local conditions are still very important.

the television

There are explosive royal TV shows out there, writes lead writer Henry Mance. But so far the new Netflix series Harry and Megan Not them. He argues that the Sussexes are both an ambitious couple and a cautionary tale about ambition.

The Duke and Duchess of Sussex
Harry & Meghan is produced by the couple’s company Archewell © Courtesy Prince Harry and Meghan, the Duke and Duchess of Sussex

Thank you for reading and remember that you can Add FirstFT to myFT. You can also choose to receive a FirstFT push notification every morning on the app. Send your recommendations and feedback to firstft@ft.com

Climate chart: an explanation – Learn about the most important weather data for the week. Participation over here

Long story short – The biggest and best-read stories in one smart email. Participation over here


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What is the ChatGPT policy?

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Rob Lonnie She claims to be a “left-liberal”. David Rosado I applied the political compass test He concluded that ChatGPT is a mixture of left and liberal leanings, eg: “anti-death penalty, pro-abortion, skeptical of free markets, corporations exploiting developing countries, more taxes for the rich, government subsidies, pro-benefits for those who refuse to work, Pro-immigration, sexual liberation, morality without religion, etc.”

Produce this image from the test results:

Rosado also ran several other political tests with largely similar results. However, I would like to stress a few different points. Most of all, I see ChatGPT as “pro-Western” in its perspective, while giving different visions of what this means. I also see ChatGPT as a “discord minimization”, for business reasons but also simply to want to get on with substantive work with a minimum of external fuss. I wouldn’t have built it myself So differently, and note that the bias may lie in the training data rather than any biases of the creators.

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Marc Andreessen has received a number of tweets suggesting that AI engines will host the “mother of battles” over content, censorship, bias, etc. – outside of the current battles on social media.

I agree.

I saw someone ask ChatGPT if Israel is an apartheid state (I can’t reproduce the answer because chat is now broken for me – unfortunately! But try for yourself.). Basically, ChatGPT answered no, that only South Africa was an apartheid country. Not many people will be unhappy with this answer, including many supporters of Israel (Israel’s moral defense, on the one hand, was not weighty enough for many tastes). Many Palestinians will object, for obvious reasons. And what about all those Rhodesians who suffered under their apartheid regime? Are they simply to be forgotten?

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When it comes to politics, the AI ​​engine simply cannot win, or even win a draw. However, there is no simple way to keep them out of politics either. By the way, if you get frustrated with ChatGPT wrapping your question, rephrase it in terms of asking them to write a dialogue or speech on a topic, in someone else’s voice or style. Often it will go further in this way.

The world has yet to realize how powerful ChatGPT is, and thus Open AI can still live in a kind of relative peace. I’m sorry to say that it won’t last long.

the post What is the ChatGPT policy? Debuted marginal revolution.

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