I found Chris Wallace’s interview of master bond trader Mohammed El-Erian on Fox News Sunday (the only thing I watch routinely on Fox News) quite interesting. I’ll publish a link should one become available.
I found his reaction to the good employment numbers in the Bureau of Labor Statistics’s Employment Situation Report, released last Friday, about right. It’s too early to tell whether the bounce was a sign of a quick economic recovery, a fluke, or cooking the books. I don’t believe that last.
He also expressed concern that the good news would stymie additional economic stimulus. He expressed particular interest in a package that included retraining for those whose jobs have vanished as a consequence of the lockdowns. Intrigued, I waited in vain for his plan for retraining the millions of cooks, waiters, and busboys in the restaurant industry as bond traders.
There was an excellent point in his remarks, however, which deserve more explicit expression. The next few months present an opportunity, without parallel in our lifetimes, for influencing what the post-lockdown economy will look like. I’ve already said what I think it should look like. I think that the federal government should do everything in its power to shorten supply chains to make our economy more resilient in the face of crises like the one we’ve experienced for the last three months. U. S. companies need fewer suppliers in China or who depend on other suppliers in China and a lot more in Mexico, Canada, and, yes, the United States. Carefully crafted subsidies will help that happen. Continuing income subsidies on the other hand will encourage a return to a reliance on China.
I wish that Mitch McConnell and Nancy Pelosi would put aside partisan and ideological objectives in favor of a quickly designed plan for shaping the post-lockdown economy in a way that would benefit all Americans and particularly American workers rather than favored constituencies. I’m under no illusion that’s likely to happen. I wish that Mr. El-Erian had expressed himself on which he thought was better: a rancorous partisan battle over whose constituents would receive handouts from a bigger, better “stimulus” package or no stimulus package at all but I wait for that in vain as well.
“. I think that the federal government should do everything in its power to shorten supply chains to make our economy more resilient in the face of crises like the one we’ve experienced for the last three months.”
Probably the best we get is a reduction with China. Remember trade deficits? Looked them up recently. Our deficits with China have decreased but overall we continue to increase. We are just going to move production to other poor countries for the most part.
Steve
I agree with that and don’t have a problem with it as long as the poor countries are fairly small and our involvement is dispersed. As I’ve said before I’d prefer it if a lot of those poor countries were in the Western Hemisphere.
“I waited in vain for his plan for retraining the millions of cooks, waiters, and busboys in the restaurant industry as bond traders.â€
Oh, I don’t know. Compared to some floor traders I’ve known they are overqualified…….
“…as long as the poor countries are fairly small and our involvement is dispersed.â€
aka avoiding concentration risk. Which is usually justified by its advocates based upon the positive attributes of the counterparty. With China we didn’t even have that.