Along with Kate Mackenzie and three people who have never been in my kitchens.*
From Phenomenal World:
The material economy is back. Economists and commentators in recent decades had heralded (or lamented) the arrival of an automated, redundant, frictionless system of international commerce. But over the past two years, multiple global crises have exposed the fragile physical underpinnings of world trade. Persistent shortages and spiking energy bills are transferring the pain of distant crises to ordinary workers and consumers.
The global pandemic and the invasion of Ukraine are proximate causes of the current turmoil. But longer-running forces are driving the seize-up in supply chains, making it unlikely to let up. Policymakers are taking emergency lessons in the sinews of global trade: energy, materials, location, logistics, labor. We see a mad scramble to reacquaint leaders with the hard stuff of the global economy, with the moment calling for a new set of experts to come forward—and talk to one another.
The last two years has demonstrated the power of feedback effects—how crises and policy responses magnify each other. Sanctions have sharpened geopolitical tension, for example, and produced more inflation. Uneven international access to finance for energy worsens climate vulnerability, causing countries to then pay a higher price for debt.
This roundtable discussion—“The Geopolitics of Stuff”—featured Kate Mackenzie, Tim Sahay, Joe Weisenthal, Thea Riofrancos, and Skanda Amarnath. Experts in subject matter ranging from price controls to metals mining to markets, the panelists explored recent policy moves towards more direct management of the economy: bans, nationalizations, rationing, windfall taxes, and price controls. Where are these measures well-designed? When are they counterproductive? Read an edited transcript below, and watch a recording of the event here.
The event is the inaugural presentation of a new project: The Polycrisis, a series focused on the political economy of climate, and its attendant security dilemmas, with an emphasis on Global North/South dynamics. The Polycrisis is founded and led by Tim Sahay and Kate Mackenzie. Coming soon, you can expect a series of articles, more roundtables, and a newsletter by Tim and Kate. Sign up here to receive updates and new content.
A discussion on commodities, supply chains, and climate
Kate mackenzie: Joe, on Odd Lots, you and Tracy Alloway have covered the world of “stuff” over the past two years—choke points, bullwhip effects, bottlenecks, and the impacts of increasingly frequent and severe weather events. Back in the macro blogging days of the late-2000s, understanding how the world worked, where crises came from, was all about getting to grips with finance. What is the role of macroeconomic policy in this new world we’ve entered?
joe weisenthal: Post-2008, we were all concerned with bank balance sheets and sovereign finance. In 2010, the biggest challenge that most rich economies faced was insufficient aggregate demand. There has been a flip, and we can mark that shift in March of 2020. Since Congress’s huge fiscal bill and the unveiling of new tools by the Fed, the story has changed. From 2021 to today it’s been supply chains and energy. For us as journalists, the approach has been to start with the issues people are talking about and then pull on the strings.
We did our first episode on supply chains in December of 2020, when shipping costs between China and the US rose dramatically. We spent all of 2021 talking about supply chains, but it wasn’t intentional—in questioning why shipping costs were so high, we found out that the unidirectionality of US imports from China meant that ships returning to China had no containers on them. As a result of the shortage, container prices increased. This brought us into the ports, and the trucking bottlenecks there.
In retrospect, I think a lot of us would like to return to the earlier set of problems, because we actually know how to solve an aggregate demand shortfall. Today, things seem much more challenging. I don’t think there is some grand solution to solving questions of global stuff, whether that’s logistics or the incorporation of renewable energy onto the grid.
It’s important to understand, though, that the traditional macro world still exists. There’s a lot of appetite to talk about lumber prices and used car prices, but the Fed still operates in a traditional macro framework. But what we have learned is to ask, “Why is this really going on?” We’re interested in pressure points, so when the Fed argues that we need to raise interest rates to fight inflation, we have to ask how this instrument will really operate. Similarly with the ECB and energy prices—we all know it isn’t equipped to deal with them. So the question for us now is: what happens when we apply these blunt instruments to a world which is fragmented and complex? This tension I think is the interesting story of our moment.
Km: It is tough when the tools available just don’t really seem to be up to the job.
jw: We can see this very clearly with housing. Everyone, including at the Fed, knows that rents are unaffordable and home prices are surging. When the Fed raises interest rates, mortgages go up but supply worsens because home builders exit the game. The blunt tool will pressure the housing market and probably help ameliorate inflation, but it won’t resolve the core problem underlying US housing: why is it perpetually so expensive? At some point we will need a housing-specific policy....
When Cliff makes it to the Final Jeopardy question with an insurmountable lead, Alex Trebek asks the contestants to identify Archibald Leach, Bernard Schwartz and Lucille Lesueur and says
"Cliff, unless you've done something incredibly stupid like wagering everything, you've won"Cliff bet all his money.
His answer was "Who are three people who have never been in my kitchen".
The categories for the game were:
- CIVIL SERVANTS
- STAMPS FROM AROUND THE WORLD
- MOTHERS AND SONS
- BEER
- BAR TRIVIA
- CELIBACY
Cliff's "Dream Board".
Here's Cliff:
