Why has the AI impact on the economy been limited to date? It has to do with two issues: 1) The O-ring theory; 2) Verification. 1//

They say an author is "pregnant" with a book. As a new mum, I can confirm the analogy doesn't stop there: books have a postpartum period too — copy-edits, page proofs, sleep deprivation and all. Anti-fascist Economics has reached the final pass at @penguinrandomhouse.bsky.social! Out in October!

One of the best meetings of my entire time serving Ambassador Tai was with Sister Smerilli and her team when I was in Rome in 2024. I knew from reading Fratelli Tutti that Pope Francis had an outstanding economic team, and so I was not surprised that Magnifica Humanitas is as good as it is.

Some amazing quotes in this article about how Ford replaced hundreds of engineers with AI, which broke a bunch of shit causing billions in damage and forcing them to rehire those people. www.the-independent.com/tech/ford-ai...

The IMF was created in the wake of the collapse of the gold standard & competitive currency devaluations that resulted. Bretton Woods negotiators punted on trade until the monetary system could be sorted. Yet as the IMF became neoliberal, it turned a blind eye to competitive currency devaluations.

3/3 The IMF was created in 1944 to help manage unsustainable capital imbalances. By noticing the associated trade imbalances only after the consequences had led to deficit-economy retaliation, the IMF has been pretty much asleep at the wheel.

Germany failed to equip its new EV subsidy scheme with buy-EU/buy-ally clauses. As VW announces a 100.00 layoffs, I doubt Berlin would make the same mistake today — just 4 months later. So it seems like a good moment to re-up Lucas, Nils and my blueprint for a harmonised EU EV industrial policy.

My point is just that, in American politics, whether elites call themselves a "capitalist," "liberal," or "socialist" isn't always that informative about what policies they will pursue.

genuinely crazy to watch these people freak out over what is essentially 21st century new dealism

Can the ECB stop chasing oil price spikes, please? This is the message of this important study in a nutshell. Inflation is all about fossilflation. So, we need a way to stabilize our economies that does not undermine the green transition we need, which is exactly what rate hikes end up doing.

In many ways, this is the actual point of "The End of History and the Last Man," one of many academic texts cursed by a popularity that came from wild misunderstandings and misreadings. But it is this basic idea, cited by the Thorne here, that has been profoundly vindicated.

This hostility to organized labor is part of the reason the International Trade Organization Charter - with its enforceable fair labor rules - failed, and we ended up with a system of tariff cuts (GATT) instead of a system to balance capital and labor in a globalizing world.

Entertaining (and IMO groundbreaking) conversation among Katherine Tai, Luigi Zingales, and Bethany McLean about how what we have come to think of as "free trade" is really "captured trade" or "jungle trade." www.youtube.com/watch?v=o7zl...

The frame Europe is “starting“ a trade war with China is strange. China has been waging trade and industrial policy battle against Europe, sector after sector. EU diplos asked for change nicely for years. Now the EU wants to do something about it and it’s the aggressor? Aha.

It’s true Herr Dr Setser and I have not agreed with the Fund’s line on imbalances, nor the second China shock. The IMF is catching up a tad - was high time after wrongly predicting imbalances would narrow for years. Chart from Shahin shows the IMF got mugged by reality.

Passport control out of Frankfurt: 2 hours. Passport control out of Madrid: 2 minutes.

Most economists will do anything to avoid examining the actual rules of the rules-based order. These guys would have been all in on the gold standard in the 1920s and 1930s.

Rather humbling. Handelsblatt: "A key factor in the Chancellor's change of course was, among other things, a research paper by economists Sander Tordoir and Brad Setser" Pleased Brad and I could contribute to Chancellor Merz's thinking on China Shock 2.0 with analysis and a few policy ideas. 1/

On a German train. A Brit and a German talking about how the offshoring of production to China was driven by rent-seeking.

Animal spirits meet herd mentality.

It’s been brought to my attention that the Economist cover story is blaming Gen-Z socialism on “an influential group of socialist academics” led by @isabellamweber.bsky.social. Turns out Gen-Z got radicalized by … our analysis of corporate earnings calls. Huge if true!

The Iran War is lowering real wages: the year-over-year 4.3% inflation outpaced the 3.4% wage growth, leaving American workers worse off.

This is also one of the core problems with the Section 301s on forced labor - forced labor is indeed something that should be eradicated, but using it at home means we don’t have credibility when we try to sanction others for it.

In practical terms, this isn't a huge deal. $900 million over 10 years is a rounding error. The underlying point is that CBO makes lots of mistakes and yet its underlying models lock in certain types of policymaking. And this is a choice by Congress. prospect.org/2023/04/06/2...

A member of the Cabinet is LDS and a veteran.

Three months of war and supply shocks and the first real stock drop is when the jobs numbers are too good www.nytimes.com/2026/06/05/b...

The Middle East conflict is putting significant strain on energy and food systems across Africa, which could threaten credit ratings on the continent. Several governments have already tightened fiscal policy, leaving them with few options if the situation continues to deteriorate, S&P warned.

Economics can either enable the slide toward fascism, or defend affordability, dignity, and democracy. I wrote ANTI-FASCIST ECONOMICS with my baby by my side—a constant reminder that the future should be livable for all. Out in October with Random House.

Ouch. Not surprising for those of us who have been paying attention, but a powerful data visual. I don’t think Röpke Eucken nor Dutch Ordoliberal philosophers would approve of a do nothing response to such distortions. (h/t @tbenner.bsky.social )

its like we're doing the 80s again but you're allowed to know how Marx works now

if you want a picture of capitalist anti-intellectualism it would be hard to do better than this leader. no arguments, no opponents. it's a perfect distillation of the underread elite outlook, where six unrelated things you hate are evidence the great unwashed is rising dangerously above its station

The U.S. Trade Representative has determined that "Brazil has failed and continues to fail to take sufficient enforcement action to combat bribery and corruption." www.federalregister.gov/documents/20...

Here is what AI boosters and boomers (sometimes literally the same people) just totally miss: human agency. We have a dysfunctional society, yet. But faced with something as salient as AI (thanks boosters/doomers!), people will shut shit down if it's actually a threat. 1/.

The one thing I'd strongly encourage everyone (European countries as well as the US) to prioritize is full employment. And here the US in the past 10 years has done a relatively better job - leading to strong real wage growth. Talked about this with @maxjerneck.bsky.social today.

Von der Leyen getting serious on China trade defence. Germany moving on capital market integration. At least for today, Europe seems to have found the Draghi memo: deepen the single market at home - and defend it against unfair competition from abroad. www.politico.eu/article/von-...

The core challenge the EU & others will need to face is that export-led growth has its limits, especially when the “rules” incentivize deregulatory arbitrage. Democracy & the planet won’t survive *that* kind competition. It’s the core flaw in the 1990s system (contrary to the vision of the 1940s).

You and Brad have broken through what I had thought was an impenetrable wall. 🥳👏 Have a great, and well-deserved, holiday!

One piece of discussion: how modern research about the workings of the labor market in many ways supports the Rehn-Meidner Swedish model, emphasizing wage compression and full employment, highlighting importance of the job ladder and productivity gains from reallocation.

Cascade effects from systemically significant prices like energy and chemicals are coming, but it takes some time for them to ripple through supply chains. So, stay tuned. Thanks for the shoutout, @weisenthal.bsky.social! Our research paper is available here: academic.oup.com/icc/article/...

Jake and I have been writing for the past year that the “moderate” vs “progressive“ policy debate is largely missing the point (no empirical evidence of effects of ideology on votes). Now Jentleson admits voters don’t think in these terms and the alpha on issue positioning is mostly gone. That’s a W

2/2 I've said this many times before but it bears repeating: you cannot set excessively high GDP growth targets while also preventing the creation of excess capacity in property, manufacturing and/or infrastructure. It is only the latter that allows you to achieve the former.

yeah totally, it is the best formalization so far pointing out "you are using equillibrium models to assume away transmission mechanism problems and that's not going to work out" on the narrow point tho, its an advance bc it says "dont try to use the demand channel to manage supply shocks"

This massive swing in capital goods + China dwarfing Germany in net auto exports are the best examples of how the second China shock is deindustrializing Europe's industrial heartland

SCMP: "China needs a coordinated policy package of currency appreciation, tariff cuts and elevated labour benefits to rebalance its massive trade surplus, former Chongqing mayor Huang Qifan said. He described China’s 2025 US$1.2 trillion trade surplus as “shocking”." www.scmp.com/economy/chin...

Consistent with work on the Inflation Reduction Act - R.I.P. - where public dollars were pulling in private dollars at a ratio of 4-5 if memory serves on work from Goldman and Atlantic Council at the time.

Incredible

I cannot stress this enough. European and German policy-makers need to catch up with new realities in the global economy. Stale WTO speaking points aside, there is a potential massive global coalition worried about China's surpluses. Europe has a lot to offer those partners.

The whole reason the IMF was created before trade talks even launched in 1946 is because of competitive currency devaluations in the 1930s after the collapse of the gold standard. Baffling, and ironic, that currency devaluation was seen as no biggie during the Washington Consensus era.

I appreciate David is a free trader, but wishing to go back to the world of yesteryear - when the global economy is going through profound shifts, and the US and China have abandoned the WTO - is insufficient to me. I also wonder how you'd deal with Chinese coercion over supply chains. Do nothing?