EclectEcon

2605: More Background Information

A former high school classmate recently bought my three novels,

• 2605,
• Susan's Story, and
• Murder at the Office Christmas Party.

He has just begun reading 2605 and here's what he wrote to me [reproduced with his permission]:

... I always have said if I’m going to read a book it better capture my attention in the first 10 pages or so. 2605 did that. I started reading it yesterday and I just read the first 160 pages. I’m not a fast reader but I have not been able to put this book down. [emphasis added] I read a few chapters and lay it down but I can’t help but wonder what’s in store for Carl.

In the back of my mind I can’t help but wonder if this is something that maybe you had contemplated doing. I mean who so methodically thinks these things so far in advance to set up a bank account and actually get a fake ID and Soc. Anyway great book and I’m looking forward to reading the others.

And here's what I replied [slightly edited], revealing more about the background for the novel:

Thank you SO much for buying the books and for your message!! ...

I'm really glad the plot intrigues you so much. That was my goal. I started writing the book maybe 15-20 years ago and after only a few pages gave it up and decided I'd never write a novel. It was horrible. Then about three years ago for some bizarre reason, it hit me how to structure the novel. I wrote solidly for the next week or so and completed the first six chapters [They've been edited dozens of times since then] and I couldn't stop working on it. Still, it took me nearly a year to finish the book.

My friends have had lots of fun trying to discern what portions/incidents of the book are autobiographical and which are from other life experiences. I'll tell you this much: I never had the dream of disappearing. As in the book, that came from a colleague after a plane went off the runway into Boston Harbor at Logan Airport, long before 911.

I think there are lots of stories about people who put aside some money in hidden accounts, just in case. I really believe that Fred dearly loved Susan, but was also very confused about meaning in his life. He truly needed to find an escape, even if not a physical, actual escape, from his life while he tried to find his own inner meaning. It was to help him escape mentally and emotionally that he set up the secret account and false i.d. After one friend read 2605, he told me he suspected his former son-in-law did something like this, so I guess it isn't wholly implausible.

I got a lot of blow-back about the guy leaving his wife and kids. Well-deserved blow-back. How could he do this? My son asked me, "Dad, do you like Fred?" because he didn't. But then as Fred emerged as Carl, he became understandable, if not likeable. In the next few months I hope to re-re-.... re-edit the book (and the others, too). The re-edit of 2605 will mostly be for style, grammar, typos, smoothness, etc. But another basic criticism is that it ends too abruptly. When you finish, I'd value your feedback.

If I add an epilogue, I'd make it available to those who have already purchased the book. Anyway, thanks again!!! Here's hoping I can sign the books for you the next time I get to Muskegon (which will most likely not be until our 60th class reunion).

And when my older son (David Ricardo Palmer) read that exchange, he replied to me,

If you ever go missing, you know we are all going to descend on [city name deleted] and start looking at all the bald, clean-shaven men in the city very closely, right?

 

The Decision to Self-Publish My Novels

I have self-published my novels 2605, Susan's Story, and Murder at the Office Christmas Party on Amazon. Why did I self-publish them instead of finding an agent and publisher? After all, the reviews on Amazon and Goodreads are, for the most part, pretty darned good.

The short answer: I'm old, and I wanted to see them in print before I die.

Getting a agent isn't easy (see the long quote below), and if you get one, then dealing with all the revisions and changes 'recommended' by an agent and then by an editor takes a lot of time and can change the heart and soul of my work (I once had a director recommend such substantial changes to the plot of a play I'd written, that I decided not to have it produced!), and then the publisher will want changes and will dither, too. I foresaw years of agony that I wasn't willing to go through, with a reasonable probability that my manuscripts would, after all that time and work, just languish on my computer hard drive.

But the novels are written now, and three of them are published (that's three more than I ever imagined myself writing four years ago). I will perhaps begin the search for an agent soon; I feel as if I now have the time to consider everything that's involved with the process. I've accomplished the immediate goal: see my books in print before I die, and get some positive (and other, helpful) feedback; now I can maybe consider some longer-range goals.

So at this stage, the time delays are less serious; also I'm used to rejection (academic journal articles, past dating life, etc. gave me lots of experience), and so that won't bother me much; but the editing (if it gets that far) concerns me. I tell myself that it shouldn't concern me -- I've had excellent editors for some of my past academic writings, but still I worry.

Anyway, I need to let "Shrink-Wrapped Murder" sit for a bit before I re-edit it for publication. So maybe in a few days I'll begin the arduous process of trying to find an agent.

Arduous? You bet. Here's a recent Facebook post by the daughter of a friend:

BUCKLE UP, PALS. I HAVE A STORY.

As many of you know, I write novels. A few years ago, having written a couple and not knowing what to do with them, I learned something from an author I admire: in order to submit to a big publishing house, you gotta have an agent. Pretty much every popular author you can think of will have an agent. OK, EASY, I thought. I’m a good writer. I can get one of those.

(This marks the occasion of my MOST WRONG assumption about publishing. THAT SHIT IS SO NOT EASY.)

I had no idea what I was doing, but I submitted to a bunch of agencies. I was rejected. A LOOOOTTT. Whew, I think that was the first time my ego really took a hit.

So I wrote a new book. I got up two hours earlier than necessary almost every day for 3 years just to write. I came home from school/work and wrote.

Edward James

put up with my single-minded fervour. I researched and made a list of good agencies. I didn’t want to settle for anyone I didn’t think could actually sell my book. But agencies get thousands and thousands of submissions. I got rejected again. A LOT MORE. If I’m being honest, I considered settling for a less qualified agency.

Alas, I wrote another book. Then another. Then another. Then another. One in particular got tons of interest. I was chosen for a program where an agented writer helped me edit and query. It went really well. Big agents asked to read it, then asked me to do big revisions. I did them. It took months. AND THEN......rejected.

Dude, I could paper my whole bedroom with rejections. One agent in particular really liked it, but wanted EVEN MORE revisions. I was bummed, cause I could see myself working with her - great agency, great sales, her wishlist said she liked “dark, edgy and weird” (my brand, tbh). But by now I was tired of that book, dammit. So I wrote.... you guessed it! Another book. I wrote and revised it FAST during quarantine. This time I sent it out to only a small handful of agents, including the one mentioned above.

Anyway, 11 days later (this is SUPER CRAZY FAST in publishing time), she emailed me saying she loved it and asked for a phone call. I screeched.

And if you read this far, I am absolutely thrilled to announce that I’m now officially represented by Claire Friedman of Inkwell Management in New York.

If you want to talk about my work, you must now go through her.

JK. But seriously, I’m psyched.

Keto-Atkins Eggs/Breakfast

This is a typical breakfast (more like brunch) for us. It is high in protein and fat, and low in carbs.

The secret is to begin with the idea of making scrambled eggs with

1.  lots of butter and
2. zero milk or cream.

We've discovered that "light and fluffy" scrambled eggs whipped up with milk often taste dry and gravelly. These eggs in this recipe are definitely NOT dry and taste great!

I started with about a quarter of a stick of butter, and I set the burner just below medium. I set it that low for two reasons: first, I can't work fast enough to keep up with everything when the heat is on high; second, I wanted the veggies to simmer for awhile in the butter a bit to soften up a little.

While the butter was melting, I sliced off a bunch of the bottom ends of asparagus stalks and put them in the melting butter. I like doing this because otherwise we'd probably just throw the ends away, and that just seems to wasteful to me (I know, I know, we could freeze 'em and make soup, but we don't seem to do that).

And then I sliced up two entire green onions and added them to the frying pan:

As the asparagus and onions simmered, they soaked up a lot of butter, so I added more:

And then I diced up two very large cremini mushrooms and added them:

Those veggies were soaking up more butter, so I added more. In total, I think I used about half a stick.

Add three large eggs,

and a bunch of factory-shredded Tex-Mex cheese (a quarter cup? half a cup? It varies from meal to meal.

And plate with a slice of ham each:

I know this isn't most people's idea of scrambled eggs, but it is FANTABULOUS!

Depending on what's on hand, we might use broccoli and/or cauliflower stems, and/or spanish onions.

And for those who ask, my LDL is marginally above what my GP would like, but it hasn't changed much at all in the past 40 years. And I just had a thorough checkup with a cardioguy who seems to think I'm doing okay.

Butter, ham, eggs, and lots of veggies: good stuff!

Still a Top Blog

Despite a marked slowdown in my blogging about economics, EclectEcon is still listed among the top 100 economics blogs. Here's an excerpt from the notice I just received:

5th Annual Top Economics Blogs Winner

Dear John,

I wanted to let you know that your blog, EclectEcon has been featured in the Top 100 Economics Blogs of 2020

Congratulations!

https://www.intelligenteconomist.com/economics-blogs/

Gubmnt Profligacy

Recently, I spent three hours listening to brief speeches by members of group that includes urban planners and policy-makers, i.e. listening to the pleadings of elitist-interventionist rent-seekers. Here's a major portion of my feedback to the organizers, slightly edited. I apologize here for misspelling 'gubmnt' in the letter.

 

Dear _____

 

Let me begin by saying I recognize that I clearly come from a different discipline, with a very different outlook from that of everyone else in the organization....

 

Today's meeting really upset me. I heard politician after politician and urban planner after urban planner pleading for more money from the Federal government. And I heard lots and lots of stories about the importance and the "needs" of major urban areas. As I tell students, "when an economy's scarce goods are allocated on the basis of 'needs', the number and importance of needs multiplies a thousand-fold." This was little more than intellectual rent-seeking, for the most part, saying, "Here's why other taxpayers should help pay our bills."

 

Just because cities have lots of people in them and have lots of people working in them, that does not justify asking taxpayers elsewhere to support those bureaucracies. Self-purported 'need' doesn't make cities any more worthy of Federal support than it does farmers or Alberta oil workers or Maritime lobster fishers. All it does is create multiple layers of competing (and co-operating) bureaucracies, all trying to get a bigger slice of the take from taxpayers.

 

Furthermore, if every city got the money they want from the Federal government, they would, for the most part, be asking the Federal government to tax everyone in everyone else's city and then flow the tax receipts through multiple costly bureaucracies to their own cities. That is a negative sum game: each municipality may get more money, but that money has to come from somewhere. More money for the cities to spend doesn't come out of thin air, and not one single speaker addressed this point; all they said was, "We need it", and everyone else nodded their heads.

 

The other issue that bothers me is that many cities seem not to have saved very much in their reserves for unforeseen contingencies. This is especially troublesome for those cities which are legally restricted in their borrowing. 

 

Of course they didn't see this [the Covid-19 pandemic] coming, and probably didn't anticipate the seriousness of the Covid19 recession even in January. But that's what reserves for unforeseen contingencies are supposed to be for! You put money aside "just in case". You don't say, "Oh we'd rather pay for our pet projects that the voters 'need' instead of building up our reserves." 

 

Cities (and, indeed, all levels of government) have been profligates for a number of years leading up to 2020. Times were good, judging from GDP growth and declining unemployment rates. Those are the times when governments should be running surpluses and putting aside more funds in their reserves. Instead we saw government after government, at all levels, running up their deficits, spending as if the unforeseen contingencies would never happen.

 

Well, they happened. And now these same profligates, instead of losing their jobs, instead of resigning in shame, are begging taxpayers everywhere outside their own municipality to bail them out. It's morally reprehensible, but also from a practical point of view it's a perpetuation of fiscal ponzi schemes and negative-sum games that cannot continue. 

 

My summary take: 

1. If the Covid19 pandemic taught us anything, it should be that cities need to build up stronger reserves for unforeseen contingencies.
2. When you ask for higher-level government financial support, you are really asking other taxpayers to cover for you.

Addendum: Shortly after I sent this letter, I read this article, Just Say No to State & Local Bailouts, by former student, David Henderson. In the article he points out that mismanagement and capitulation regarding pension funds in states like California, Illinois, and New York are not good reasons to bail out those states. He and I are clearly in tune with each other, as evidenced by this sentence:

The most vocal advocates of the subsidy are members of Congress and/or governors of states with big budget deficits, such as California, Illinois and New York. Their budgets are in shambles. Do they have an argument beyond “we need it” and “it's a moral obligation”?

Confessions of an "Outside Agitator": I'd do it again

From September, 1965, until July, 1967, I attended The Chicago Theological Seminary and lived on the South Side of Chicago. During that period we participated in numerous civil rights marches and numerous anti-war demonstrations. At every one of those events, I was outside my neighbourhood and, in many cases I was in a different city. I was one of the many, many outside agitators. And I'd do it again.

On the civil rights front, our seminary was a hotbed for activism. We were a de facto base for Martin Luther King's civil rights activities in the summer of 1966, while Jesse Jackson was a student in the seminary (a year ahead of me). We marched in Skokie and Gage Park and other places I can't remember. I even trained to be a safety marshal on those civil rights marches. We were determined to be non-violent. We demonstrated for a break down of racial barriers in housing and jobs in particular, and we had considerable success along those lines legally and nominally (or so it seemed; I think we had far less success on the schooling front.). Yes, we lectured people about racism, but we had specific, achievable goals as well.

On the anti-war front, we traveled to Washington DC for an antiwar demonstration (only about 25,000 in total) in the spring of 1966, and we traveled to New York for a massive march against the war (hundreds of thousands) in the spring of 1967.

Also in Chicago at the same time, there were race riots, especially on the west side. We thought we understood much of the frustration of black people in Chicago and we hoped their actions would lead to more action on the housing and jobs fronts. We didn't condone the fires, looting, or the shootings, but we understood a chunk of the frustrations. That same summer, Detroit experienced devastating race riots, as did other cities.

While the two actions, marches and riots, were linked in their underlying causes, they manifested themselves very differently. King, Jackson, the SCLC, and all the civil rights demonstrations had specific goals: We may not be able to change people's minds and hearts, even though we wanted to, but we can at least make laws and practices combine toward providing more nearly equal opportunities and protections. We white people knew things had to change legally and governmentally to achieve the desired goals.

At Iowa State, from 1967 - 1971, we continued our activism, joining and participating in movements to end the war in Vietnam and to fight racism on campus.

How does that relate to today?

First, I present my background above in part, I'm sure, as virtue signaling, but also to draw what I think are some truly important contrasts between then and now.

I believe there is systemic racism. I had thought that by providing better housing, job, affirmative action, etc. policies, things had improved substantially for non-whites. I hadn't imagined the strength of the systemic racism until I saw black students cheering wildly when O.J. Simpson was found not guilty. I agreed the crown had not made its case, but their wild cheering made me realize there was a gulf to which I had been blind. I kept asking myself, "What has happened to these kids? They are cheering that he was freed because he was black, not because the crown didn't make its case." I realized I didn't understand. And I had no idea what it was I didn't understand.

Further, when I knew people were making decisions in the 2008 US election based on race, I knew there was endemic racism. It hurts. It hurts that it's there, and it hurts that it affects us all in so many ways we don't know or comprehend. And it hurts that it creates a gulf that I'm not sure we can entirely bridge.

Today's clashes remind me of the summer of 1966 but with one major exception. The protests back then had specific, achievable goals. I'm not sure what the goals of today's protests are, other than to impress upon us the extent of racism. When politicians in Canada (e.g. Stockwell Day and Doug Ford, inter alia) deny there is systemic racism in Canada, they are clearly out of touch. Ford understood it and backtracked, to his credit.

Here's a more direct goal for current protestors, then: If we haven't stopped extreme police brutality against non-whites, let's work to stop extreme police brutality. Let's limit police "qualified immunity"; let's maybe even make police pension funds liable for civil damages resulting from police brutality to create an incentive for police officers to police other officers. Let's roll back the phenomenal macho-brutalism in the police forces, and let's roll back the extreme militarism of the police forces. If police can't do these things at all, they can't do them to non-whites. My more recent Facebook postings point in these directions.

I'd like to add, "And let's have more discourse so we can try to understand each other," but that may be more pollyannaism than a real goal; I don't see it as a very successful strategy. I anticipate that the discourse that will likely emerge will be dominated by political posturing, playing the victim or race card, playing the law and order card, virtue-signaling, distortions of facts (see every headline in every media source, right or left), misuse of data, et cetera, et cetera.

I see it all the time on Facebook. Hell, I know I'm even part of it sometimes. People lash out with memes, misrepresentations, and ad hominems, et cetera, without addressing important issues fairly.

It is time for us to admit that there is systemic discrimination.

It is time for us to do what we can individually to try to overcome it in ourselves.

It is time for us engage in discussions and not arguments.

And it is time to try to address potential feasible solutions.

I'm lucky. I have friends from all over the place, politically, geographically, religiously, racially, LGBTQ-wise, etc. I am confronted by conflicting arguments and flame wars all the time. They upset me and disturb me, but I rarely unfriend or block anyone involved in these events.

And yet, they tear me apart inside.

Inflation: a Long-Term Outlook

Earlier this month, I wrote a post predicting that we will experience inflation in the 2-3 year long-term. This prediction was based solely on the expectation that central banks will be forced to monetize the massive deficits being created by gubmnts at all levels. Furthermore, even if these are short-term huge increases in deficits, they won't just go away. They are enormous additions to gubmnt debts and will have to be dealt with somehow even if gubmnt deficits return to pre-pandemic levels in the next year or so.

The trouble is, if I'm right and if others agree with me, then long-term interest rates should be higher than they are, and TIPS (inflation-protected bonds) rates should reflect higher inflation expectations. Given that neither the long-term bond rates nor the TIPS yields reflect an expectation of strong inflation, clearly others don't agree with me.

So was I wrong? Am I wrong to hold onto these beliefs?

As a part of a webinar* that I attended yesterday, presented by Dennis Lockhart and David Altig, both affiliated with the Atlanta FED, the question of long-term inflation was addressed.

They mentioned the exploding balance sheet of the FED. They pointed out that although an exploding balance sheet would normally go along with rapid inflation, in this case the velocity of money has shrunk considerably as people are holding onto money, not spending, etc. They continued,

• The FED balance sheets have been growing rapidly and will likely continue to do so, at least in the short run
• Aggregate Demand and Aggregate Supply curves are both shifting to the left, and without much implication about what will happen to overall price levels. When both curves shift to the left, we know output will fall, as it has, but we can't predict much about the overall price level without knowing more about the relative shifts.
• There will be some (or considerable, they weren't sure) structural shifting in the makeup of AD .
• Most of the growth in the FED balance sheet has been in very short-term paper. The FED has mostly been buying up short-term debt, Treasury Bills, and lending money very short-term through re-purchase agreements with major banks. Unlike the financial crisis of 2008, the commercial banking system seems pretty solid and solvent, but providing sufficient liquidity has been the aim of the FED.
• As countries emerge from the pandemic, the FED will gradually scale back its creation of reserves, and the balance sheets will shrink slowly, roughly in sync with the emergence from the pandemic. 

Two issues where they didn't really face the questions I have:

1. The gubmnt debt is growing rapidly. The FED can't let all the short-term paper expire; they'll have to monetize the debt. This is a potentially serious problem. All that increased debt created by governments at all levels simply won't go away. And as the FED monetizes that debt, there will be inflationary pressures. One possible out might be to increase the interest rate the FED pays on reserves, but neither of them mentioned that possibility.
2. (and this one really bothered me) They argued that the Fed massively increased the balance sheet in dealing with the 2008 banking crisis and we didn't have inflation. My reaction would have been (if it had been a Zoom) don't be myopic:

• • That was when the Fed started paying interest on reserves. The Fed created reserves and the commercial banks saved them. The extra reserves didn't lead to much of an increase in the money supply as a result.
  • They both seemed to think we'll emerge from this depression as quickly as possible as soon as we know we have a vaccine and/or treatments. If so, can the FED shed all those short-term securities just as quickly? 
  • How quickly we can emerge from it will depend on how serious the structural re-alignment will be and has been.

Put differently (or the same way I started), I don't think gubmnts are going to reduce their deficits or debts by cutting spending or increasing taxes much; Central Banks are going to monetize these increases in debt for the most part:

How can Central Banks monetize such extreme increases in gubmnt debt without creating inflationary pressures eventually?

And if I'm right, why aren't markets reflecting higher inflationary expectations?

-----

*I'm grateful to the Global Interdependence Center for inviting me to participate in their sponsored webinar, "College of Central Bankers presentation: Assessing the Monetary Policy Response"

 

Masks: Pluses and Minuses

I wear a mask every time I leave our condo building, and I go out for walks maybe four or five times a week. Over the past month and a half, I have had some thoughts about the pros and cons of wearing a mask.

Pluses:

• For others: A mask will trap some or most of the virus as I exhale or if I cough or sneeze, thus reducing the likelihood that I will transmit the virus if I have it (I don't think I do, but who knows?).
• For me: A mask will trap some, but almost surely not all, of the potential droplets or aerosols containing the virus if I'm near someone who has the virus. When I go walking, I wear a mask made from a T-shirt  (see this and this) into which I insert a triple layer of paper towels and a double layer of facial tissue. It's a good, tight fit, and I expect it's at least as good as many surgical masks. The very few times I have gone shopping and the one time I had to go to a clinic I wore an N95 mask. I know my wearing a mask won't stop all the viruses all the time, but it will most likely reduce the probability of my being hit by a cloud of virions, and the evidence I've seen suggests that is good.
• Face: Wearing a mask keeps me from touching my face. Unkind friends also point out that it keeps them from having to see my face.
• Signaling: When I'm walking, people see that I'm wearing a mask. They tend to give me a wide berth. I don't know why for sure, but I think some do because they can see that I am concerned and they want to honour that; another reason might be because a mask signals that maybe I have Covid19 and they want to avoid it if I might transmit it. Either way, the signal seems to lead to some distancing behaviour on the part of others.
• Virtue Signaling: It's a different type of signaling. It says to the world, "Look at me. I want to save lives." I don't know, honestly, if I regard this as a plus or a minus because it seems too much like the Pharisees of the New Testament, but I'll marginally call it a plus.

Minuses:

• Hydration: It's really hard to keep hydrated if you're wearing a mask. So I don't, even though I know hydration is generally a good idea. Instead I drink a lot before I leave home.
• Itchiness: People generally don't realize how often they touch their faces until they wear a mask. I often find I'd like to scratch my cheek or nose but can't because I'm wearing a mask.
• Glasses: The masks I wear do not have exhale vents, and so some of my exhaling seems to find its way up to my glasses. On cooler (and colder) days, my glasses fog up, which probably means there's too much leakage, but I can't imagine there isn't leakage around most masks. Fortunately, my eyesight is good enough, I can just take off my glasses when I'm wearing a mask.
• Nuisance: It's a pain, putting on a mask. For me, it's probably more of a pain because I have to refit my layers of filter each time, tie the mask on properly, untie it when I get home, throw out the filter, and put the masks in the washing machine. We put the N95s on the balcony in the sun to disinfect because otherwise we can't reuse them, and we have only one apiece.
• Recognition: Friends in our condo building don't recognize me: I wear a hat, no glasses, and a mask covering most of my face. It's only a little amusing; I see it as a negative more than a plus.
• Smiling [added after the original post] It's hard for people you meet on the trail to know whether you're smiling. I try to avoid people, but there are times when you meet someone; you both take opposite sides of the trail or sidewalk and try to leave at least 10' between you. I'd like to smile (and in fact I do) but I'm not sure they can tell, and so I nod or wave or try to indicate friendliness or kinship or something.

On balance for me, in our situation, the pros strongly outweigh the cons, and I'll keep wearing a mask for quite some time when I leave our building. We distance assiduously, wash frequently, and use hand sanitizers a lot; and our building does not permit any visitors, but there are enough people living here who are at risk that I want to be careful not to bring the virus here. Other nearby buildings have had Covid19 cases, but we've been careful and lucky here... so far.

I know I could reduce the risks even more by not going out for walks at all, by hiring others to do our shopping, etc. But in the great realm of trade-offs and risks, these are the few chances I'm willing to take. I'm just super cautious when I take those risks. But if some stores in this area require customers to wear masks before going in, those are the stores that will get my business.

My BMI Went Up Again

A number of years ago, I realized my sons were taller than I was. I asked if they'd been growing (in their 30s!), but it turned out I had begun shrinking. And so, as a lark, I started a "Shrink Chart" on a door jamb to measure how much I shrink. The top line in the photo was my height about 7-8 years ago, the bottom line was today. The difference between the top line and the bottom line is about two inches, and that's after I had already begun shrinking.

Even though I've lost some weight, my BMI went up!

[note: yes, I take meds and supplements to strengthen my bones, and yes I do back exercises too (probably not enough).]

The Meaning of Life -- Perspectives Matter

It snowed this morning!

And so I was able to do some snowstomp art.

I call this piece, "The Meaning of Life".

Let me explain my interpretation of the work and why I titled it The Meaning of Life:

If you look at the artwork from right to left, it looks as if the circles are being forced smaller and smaller with fewer lines and less body. That is how life looks sometimes. We're born with all sorts of possibilities but as life goes on, we're trained and shaped and forced into various conformities. The extra possibilities are compressed, shaved, and removed as we slowly feel ourselves shrinking into only one or two of the many options with which we began.

But if you look at it from left to right, you see emergence: we grow, we learn, we acquire new skills, we expand our horizons, we explore new possibilities.

Perspectives matter.

Update:

The meaning of life is so elusive. Here's the artwork just an hour and a half later:

 

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My previous snow stomp art:

        The Meaning of Life (this post)

        Peter Cottontail Visits the Condo

        Fight CV19 and STAY HOME

        Skool Daze

        I Think It Might Rain

        The Penrose Triangle

        Snowflakes (done with my granddaughters)

       Tobogganing Through the Trees   

        Kilroy Was Here

       Happy St. Patrick's Day, 2019

       Spring is Sprung

       You Wanted Spring? 

       Too Cold to Build a Snowman 

       Simply a-MAZE-ing 

       Let There Be Music

      Ommadawn 

      The First Robin of Spring? 

      Be My Valentine, 2018

      Curling AND the Super Bowl

      I'm No Escher... 

      Hark! the Herald Angel Sings

      Nativity Scene, 2017

      Planning an Escape

      Caught in the Net

Surf's Up 

Diagonally Warped in a Parallel Universe, Part 2

      Diagonally Warped in a Parallel Universe

      Pikachu

      Happy New Year, 2017

      O Tannenbaum

      Nativity Scene

Special Weather Statement

Think Tropics

Qubix

Valentine, 2016

Paisley'd Circles

Happy New Year, 2016

The House of the Rising Sun

Easter Eggs

A weak pattern in the blowing snow.

The same pattern after some melting

New Year's Champagne

Tiptoe Through the Tulips

Happy Valentine's Day

Cabaret

A Christmas Tree (my first effort)

 

How Can I Predict Inflation in the Face of Such a HUGE Drop in Consumer Spending?

Apparently consumer spending declined in March by nearly 8%, by far the largest drop in recent history.

How can I predict inflation when there has been such a drop in demand?

One big reason is that inflation arises when there is too much money chasing too few goods, and the recent drops in GDP have been monumental.

Here's more of an explanation for my predictions:

The drop in consumer spending provides an impressive graph, to be sure! From it, alone, it looks as if a lack of consumer (and undoubtedly business) demand will keep the lid on spending pressures, at least in the short run. 

 

The argument coming from me and other monetarists [channeling Milton Friedman, I hope] is that there's been a massive reduction in output, as well, and it won't get back to 2019 levels for a long time; at the same time there has been and will continue to be a massive injection of spending power (the money supply) as central banks monetize the rapidly growing gubmnt debt. Unless the extra money supply is soaked up somehow as we come out of the depression, it'll create inflationary pressures. 

 

Consider the old quantity equation of money: MV=PQ, where

M is the money supply

V is the number of times each dollar turns over during the year in spending for final goods and services.

When interest rates are low, this number also tends to be low because the cost in terms of foregone interest income tends to be minor. When interest rates are high, people move money into earning assets more quickly and the 'Velocity' of money tends to rise.

P is the overall price level

Q is the rate of real output [i.e. Real GDP]

 

The equation is a tautology, with V being the variable that makes it true by definition.

 

But it's clear that V is pretty low right now (people fleeing to cash for security, hence not turning money over so rapidly; also because interest rates are low). So current increases in M are not having much impact on P despite a falling Q. 

 

As the economy emerges from the depression, Q will grow back to 2019 levels, but V will also grow. And M will be much higher than the 2019 levels, meaning P will have to grow. 

 

When and how much?

As Friedman is famous for having said, "It's a long and variable lag."

 

 

Crustless Quiche

 

Here's our latest version of crustless quiche. The custard mixture is amazingly light even though we don't whip it. I expect the cream (or half & half) really help. Delicious!

The recipe is at the end of this post.

The recipe we have put together says to whisk (very lightly) 4 large eggs, two cups of half and half, some salt and pepper to taste (I'm guessing we used about a tbsp of salt and a tsp of pepper, but it's hard to tell since we just put them in without measuring), and then stir in 1 and 1/2 tbspns of melted butter.

Spray or grease or butter the bottom of a large pie plate.

Cut up two decent-sized slices of ham into smallish cubes. Many recipes say to use cut up cooked bacon, but I prefer using ham because it's a whole lot easier.

Next, cut up half a large green pepper into small pieces and put them in the pie plate on top of the ham.

Cut up 1/4 of a large onion and add it to the pan. We don't precook any of these cubed things (of course the ham is already pre-cooked).

Put a bunch of cheese slices on top of the chopped mixed. We like jalapeno-havarti. We pretty much cover the entire pie plate. We used three slices here:

Notice that we put the pie plate on a cookie sheet to catch any spillovers in case we overfill the pie plate.

Add the liquid mixture.

Oops, we had too much, so we didn't put it all in.

Put a tonne of Tex-Mex shredded cheese on top of all that. I'm guessing that in all we used roughly 1/4 of a package. Ms. Eclectic says it might have been more than that.

What did we do with the rest of the "custard"? We put it in two large ramekins along with cheese.

We baked everything at 350 for 45 minutes and then took out the ramekins. They were wonderful!

They remind me in looks of the quiche bites from Tim Hortons, but these tasted infintely better!

We baked the big quiche for another 15 minutes until it was golden brown on top didn't jiggle in the middle.

Once again, here's the final product (included twice for the sake of Facebook to get the final product to show in the preview (I hope).

Here's the recipe (quantities are approximate):

Ingredients:

Whisk these to make the custard. Keep it in a separate bowl until ham and veggies are in the pie plate:

• • 4 really large eggs
  • 2 cups of half and half
  • 1 tablespoon of salt
  • 1 teaspoon of pepper
  • 1 and 1/2 tablespoons of melted butter

Put these on the bottom of a greased/sprayed/buttered pie plate in any order:

• • 2 thick slices of ham, cubed
  • 1/2 green pepper, cubed
  • 1/4 onion, cubed (we often use cut up green onions)

Put the cheese slices on top of the cubes:

• • 3 slices of jalapeno havarti cheese (we used two more for the ramekins)

Pour the custard over the mixture.

Add the shredded cheeses

• • 1/2 cup or more shredded Tex-Mex cheese

Bake at 350F for about an hour or so.

Let cool and set for about 20 minutes.

Addendum:

During the isolation, I find we use a lot of things from the fridge, either because I just bought them and we don't want them to go bad or take up too much space, or because they're about to go off and we want to use them up. One thing for sure, we're throwing out much less 'bad' food these days than we did before isolation. So we call the quiches we make now "Isolation Quiches".

Tiff Macklem, the New Governor of the Bank of Canada

The Globe and Mail has reported that Tiff Macklem has been appointed Governor of The Bank of Canada as of June 2nd . This is great news!

Tiff Macklem (Western Ph.D. 1989) Named as Future Governor of the Bank of Canada

Tiff Macklem (Western Economics Ph.D. 1989) has been named the new Bank of Canada Governor by Finance Minister Bill Morneau. Macklem, former Senior Deputy Governor and Chief Operating Officer at the Bank of Canada, was appointed Dean of the Rotman School of Management at the University of Toronto in May 2014. Macklem has remained closely involved in nearly all of the Bank's major initiatives. He will replace Stephen Poloz (Western Economics M.A 1979, Ph.D. 1982)... 

Tiff was a teaching assistant for me waaayyy back, probably in 1979 or so. He was a kind and diligent student then, and I was both pleased and not surprised when he became Deputy Governor of the Bank of Canada in 2004.

About ten or eleven years ago, we met up again when he was on campus to talk about his role at the Bank of Canada and at the Ministry of Finance during the financial crisis of 2007-8. He was great then, and I'm sure he will be great again.

This new job won't be easy for him.

During the regime of Stephen Poloz, the world and Canadian economies were slowly emerging from The Great Recession. Steering monetary policy was comparatively easy over the past seven years (until this past January), as economic growth continued, inflation rates were kept low, and the unemployment rate dropped to levels not seen in decades (see this).

However, as I have posted before, Tiff Macklem will have to deal with what most economists expect to be a serious world-wide and continent-wide recession. Furthermore, he will have to control (i.e. fight against) intense pressure from the government to monetize all the newly created debt we are seeing.

The government is borrowing now to pay for all their new programmes (in addition to all their previous deficit spending of the past few years), but who can they borrow from? They can't just wade into the money markets and drain all the liquidity from those markets; and foreign investors won't want all of the newly issued Canadian debt. So, as has happened before (see 1977-82), the Bank of Canada will be obliged to step forward to buy up a HUGE percentage of the newly issued government debt.

The government will be injecting billions of spending dollars into the spending stream but their borrowing won't be from the public and won't drain off much of that extra liquidity created by the spending (and transfer payments). Borrowing from the private sector through the money markets would help ameliorate the inflationary pressures, but if the government tries to borrow enough to cover all their increasing deficits from the private sector, it will drive up interest rates and crowd out what little private investment there is right now.

What can Tiff Macklem do in this situation? He's between a rock and a hard place.

If he refuses to monetize the debt, he'll be in the midst of a major clash with the government, reminiscent of The Coyne Affair of 1961. If he does continue to monetize the debt, he'll be in danger of setting off more rapid inflation than would be politically tolerable, once again hurting people who are currently locked into fixed nominal contracts and creating uncertain expectations for the future.

One option I would like at least to see on the table is for the Bank of Canada to pursue nominal GDP targeting, advocated lucidly by Scott Sumner (who blogs at EconLog and The Money Illusion). From the Wikipaedia article about Sumner,

Nominal GDP targeting[edit]

Sumner contends that inflation is "measured inaccurately and does not discriminate between demand versus supply shocks" and that "Inflation often changes with a lag...but nominal GDP growth falls very, very quickly, so it'll give you a more timely signal stimulus is needed".^[10] He argued that monetary policy can offset fiscal austerity policies such as those pursued by the British government in the wake of the 2007 economic crisis.^[10]

Selling that policy, or even trying to do this as a matter of unannounced policy, will be difficult, though. Politicians will continue to want to spend more and more and more, and voters will resent both higher taxes and higher rates of inflation. Macklem has his work cut out for him.

---

As an aside, the continuing influence of PhDs from The University of Western Ontario on monetary policy both in the Bank of Canada, and elsewhere (e.g. the C.D. Howe Institute and the Fraser Institute) is a reflection on the high quality of education provided for students at UWO in monetary economics back in the 1980s. Canadian monetary policy has been highly regarded by all leading policy makers and financial economists around the world for having done an admirable job with monetary policy.

Professors David Laidler and Michael Parkin, in particular, played major roles in teaching and training students like Stephen Poloz (current governor of the Bank), Tiff Macklem, and Timothy Lane (senior deputy governor of the Bank). These students were fortunate to have studied with such scholars before the rational expectations, manufactured-data-general-equilibrium models dominated the field. Canadians are fortunate, too.

- - -

My recent posts about the upcoming recession, inflation, etc.:

https://www.eclectecon.net/2020/04/covid19-despondency.html

https://www.eclectecon.net/2020/04/grocery-prices.html

 

 

Contest!!! What's the oldest thing you have found in your freezer or pantry during the covid19 isolation?

After I posted a photo to Facebook of some half-year-old ground beef we found in our freezer, others began commenting that they, too, had come across treasures in their freezers that were considerably more past their expiration dates. So here's the contest:

Contest #1:

Post a photo, either in the blog comments or on Facebook, commenting on this post, with a photo of something old from your freezer. The oldest item for which a photo is posted will win a signed copy of one of my novels, either 2605 or Murder at the Office Christmas Party. E.g., here's some not-so-old ground beef:

Contest #2:

Post a photo, either in the blog comments or on Facebook, commenting on this post, with a photo of something old from your pantry (I have a box of tea from 2009, for example). The oldest item for which a photo is posted will win a signed copy of one of those two novels, as well.

General:

• Contest ends 10am EDT, June 1.
• The photo must show the "best before" date on the box, can, or package. It's probably a good idea if the photo also shows what the product is, too.
• Each winner gets their choice of novel.
• I'll add the novel, Susan's Story to the prize list if I receive the author's copies in time.
• Anything dated before 1975 is automatically excluded.
• I reserve the right to alter the rules if people find loopholes. 8-).

I Love My T-Shirt Masks, but tie them correctly

Last month I posted on how to make a mask from an old T-shirt in 15 minutes. I have two of them now, and my guess is that they're at least as good as most surgical masks. Here are some tips for using them, if you decide to make them:

1. Watch this ODIVI video. Alternatively, the steps are laid out in my blog post (linked above).
2. Don't cut it the way she does or the way I did in the earlier blog post. Instead, to get good straps, cut it so that you leave the full tops and bottoms of the sleeves -- that way you'll have good straps, as I did in the photos below.
3. Sew a rough seam along the bottom of the mask to hold the front and back together and to hold filter material in the mask, like a pocket. I did this by hand while watching tv.
4. Put fresh filtering material in the pocket you just made, between what used to be the front and back of the T-shirt. I use three layers of paper towels plus two layers of Kleenex. Someone suggested to me that the blue paper towels used by mechanics are good filters, too, but I don't know for sure.
5. Change the filtering material for each use.
6. Tie it right. The upper straps go under your ears and tie in the back of your head. The lower straps pull the mask up under your chin and tie right on top of your head. I know, that can look stupid, but it works for the woman in the video. It works for me, too, because I always wear a hat when I go out.
7. The minute you get home, dispose of the filtering material and put the mask in the washing machine (that's why I have those two plus some other masks).

I just returned from a five mile walk and had zero problems with my mask. I took these photos near the end of the walk:

 

 

Distancing -- a serious question about various activities

Background:
I try to get out of our condo unit nearly every day. Some days I just leave the unit and climb the stairs  for exercise within our building. Other times, if I'm not shopping (and only rarely am I shopping), I go for walks.

Inside
In this building, for several weeks we had a policy of only one person on the elevator (or two if both are from the same unit). We also had a policy of absolutely no visitors at all, and we have hand sanitizers next to the elevator doors on every floor. We also have hand sanitizers strategically placed throughout the main lobby and in the parking garage. Whenever we encounter someone else in a hallway or near the mailboxes, we all wait patiently. Most of us try to leave at least ten feet between us and someone else.

The elevator rules have now been slightly relaxed so that we can have up to three people on an elevator so long as we don't face each other, which seems pretty anti-social to me. I'm okay with having one other person on the elevator, standing diagonally across from me, so long as they aren't looking directly at me when they talk. But it's a small building and that has happened only once.

Outside is a different story.

Near us there are numerous wonderful paved walkways through parks and alongside branches of the Thames River. Joggers, runners, bikers, skate-boarders, and walkers all make considerable use of these walkways, especially on nice sunny days.

I wear a multi-filtered homemade mask when I go out of the building for these walks. Most of us using the the walkways try to practice distancing. Whenever I see someone coming toward me, I move off onto the grass; often they do, too, but not always. And runners or bikers (or fast walkers) sometimes pass me and don't leave as much distance between us as I would prefer. For the most part, it works out okay, aside from bridges and tunnels. For those, not everyone waits. If I start on a bridge or through a tunnel and someone at the other end doesn't wait, I turn around and go back and wait for them to pass.

Actually, I've found it easier to distance from others when I walk through residential areas. It's relatively easy to go up on a lawn when I meet someone and just about as easy to cross the street. Increasingly my walks are like these.

And now the question(s):

If I can do these things, why can't people golf (it's pretty easy to distance on a golf course)? How is that different from walking (properly distanced) with a few friends in a park?
If I can do these things, what about going to a beach so long as I distance just as I would in a grassy park?
Given that I'm pretty careful and pretty concerned about not wanting to bring Covid19 home, you can bet I'd stay away from others on the beach, and I'd not even get out of my car at the beach if it looked crowded.

Is it because policy makers don't trust others to distance? Recent photos from the beaches in Florida looked to me as if most people were trying to distance, though not all were, for sure. And keep in mind that UV is a pretty effective sanitizer.

Is it because if someone goes to the beach, is asymptomatic but infected, and doesn't distance, they could consequently transmit Covid19 to others? As a potential victim, I'd try to distance ... a lot ... but others might not.

Still, that's gotta be safer than walking on sidewalks downtown riding on a bus or subway where distancing can be much more difficult.

Addendum: Here's the photo from the Washington Post. [much better quality if you click on the link]. Most of the people in it are distancing, but if I went to the beach and saw this, right now I wouldn't stay.

Covid19 Despondency

Below is a letter (somewhat edited) I wrote to a friend this morning.

How are you handling the CV19 situation there? I hope you're healthy and will continue to be healthy. I don't know about you, but I feel so blindsided by the whole thing.

 

...

 

I worry about and for everyone. I see no way out of this for at least a few months, and meanwhile so many people will have been pushed to the edge. I try to control my despondency by thought-blocking and thinking about positive things, but every once it awhile it hits.

 

So far, Ms. Eclectic and I are okay. We're both over 75 and have some health issues, and so we're trying to be careful... very careful. Over a month ago, we visited our oldest son and his wife and their new son, but since then we have had only two outings together: once to meet some friends in a parking lot where we opened our trunk and the friends put a bag with homemade masks and shields in it. And once when we took lawn chairs to an open park and sat in the sun, well away from everyone else, while I tried to fly my kite.

 

Our visit to our son was the last time we saw any of our children, grandchildren, or great grandchildren in person. We miss the hugs, kisses, and laughter together. We Facetime, but it's not the same.

 

Meanwhile, I'm going stir crazy, but fortunately only some of the time, and I have it under control when it hits. I know it's a bit risky, but I get out of our condo unit every day. Some days it's just to climb some stairs up and down here within our condo building; other days I go for walks. Rarely, I go out to do shopping. Every time I leave the unit, I take hand sanitizer with me and use it after any incident when I might have touched some surface. And every time I go outside the building, I wear a mask.

 

Mostly, now, I walk in residential areas, not on popular paved walking trails; it's easier to avoid other people in residential areas.

 

 If I'm just going for a walk where at worst I'll pass jogger or biker, I wear a homemade mask, but I line it with two layers of paper towels and two layers of Kleenex tissue to improve the filtering. For shopping, I have an N95 mask that I wear, but I've had to trim and reshape my beard and sideburns so it fits properly. We also take our temperatures frequently now. We have become borderline paranoids. At our age and in our states of health, we figure the odds are high that we're goners if we get it.

 

... Our sons have both been able to arrange most/all of their work to do it at home, but our daughter and some of our grandchildren and their families are really beginning to feel the economic effects of the shutdowns.

 

Meanwhile, my three main outside social activities are gone: 

• Encore, the concert band, no longer rehearses and will likely have to cancel our June concert. I'm hoping things are under control enough we can resume in the fall.  
• I no longer do stage work, but the mystery dinner theatre shows have been canceled until fall at the earliest. I'm hoping those can resume then, but who knows if customers/clients/restaurants will want to hire us even then?
• I (used to) play bridge weekly with three other men, but of course we no longer see each other, not even to get together with the others (or anyone else) in the building. 

[addendum: It's been so long that I forgot to add a fourth thing: we like to eat in restaurants, and can no longer do that. We order takeout or delivery now and then, but not often, and yes we are amazingly careful (I hope) when interacting with others in those situations. ... pay in advance, get it left outside our building where I'm waiting 15' away, or have them set it outside their establishment for me to pick up, etc.]

 

I miss the social contacts. Of course I'm much more actively exchanging emails with some friends and relatives, and I spend far too much time on "pandemic porn", watching counts and policies. 

 

I'm also doing some writing. I've published two more novels (see my .sig file below) and am working on another, but I'm not getting much written on it because of all the emotional and other distractions caused by Covid19.

 

I fear that we are in for a major economic depression. In addition, I fear all the central planners who want to reshape society and economic activity without regard for the benefits of individual freedom and choice. And I really worry about the ever-present nationalistic, protectionist tendencies I see regaining strength everywhere. This pandemic will set the world back by 3 years, if not 30 years. This is just one of the many very serious reasons I despair.

 

I felt early on, thinking about our friends and relatives who work in and/or run small businesses, that we (our countries) needed an emergency assistance programme in addition to our otherwise reasonably adequate social safety net. Everyone in those positions was completely blindsided (as were most of us), even if they saw it coming in early January (when most of us were more concerned about Australian wildfires). So many businesses will have to shut down, and so many landlords will lose massive amounts of income as business and residential tenants default on rent payments (and many in Ontario will actually choose to do so because the province has put policies in place to protect tenants who miss a couple of months of rent payments). And so many residential tenants on the edge will eventually lose their apartments. Shelters are overflowing and find it difficult to practice any kind of distancing. And people living on the financial edge will face serious mortgage issues.

 

So many little people will be hurt. So many. 

 

Believe it or not,  I'm glad politicians are trying to help out those people. Yes, even I, John Palmer, quasi-libertarian, Mr. small-gubmnt, think it is right for gubmnts to do this. But I detest the bailouts of major corporations, and I resent the fact that so much tax money will be used for the cronies in the name of helping out the little people. 

 

Where is the money coming from for all these programmes??? Before this happened, both the US and Canada were already grotesquely adding to their deficits and debts despite the good economic conditions (when budgets should have been in surplus!), and now there's less wriggle room. 

 

Will they raise taxes? How much? and on whom? Now would be a great time for tax reform, but instead of a simple flat tax without all the deductions and exemptions exploited mostly by the rich, I'm afraid we'll see a return to higher marginal tax rates for high income folks, and we'll return to the sluggishness of the pre-Thatcher "English Disease" and the pre-Reagan era. 

 

Will gubmnts borrow? Now is not a bad time to lock in long-term debt at low interest rates, but watch for runaway inflation and stagflation about two years from now. And with inflation,  interest rates will go up considerably.

 

And I further resent the use of the term "stimulus". There's nothing to stimulate! This is a major supply-side shock to the economy, and until people can start producing goods, and especially services, we can't help but experience a major drop in GDP.

 

Anyway, I'm sure I've rambled on far too long. Despite the despair I feel, I'm also fairly happy and contented. We're okay, and for now so are our progeny.

 

I hope you and yours are doing well. 

 

------ John Palmer,   www.EclectEcon.net ------  

Buy my novels:   2605

  Susan's Story

  Murder at the Office Christmas Party

 

Economics and old age have much in common: Both dwell on foregone opportunities

Peter Cottontail Visits the Condo

Snow on Easter Weekend!

My previous snow stomp art:

        Peter Cottontail Visits the Condo

        Fight CV19 and STAY HOME

        Skool Daze

        I Think It Might Rain

        The Penrose Triangle

        Snowflakes (done with my granddaughters)

       Tobogganing Through the Trees   

        Kilroy Was Here

       Happy St. Patrick's Day, 2019

       Spring is Sprung

       You Wanted Spring? 

       Too Cold to Build a Snowman 

       Simply a-MAZE-ing 

       Let There Be Music

      Ommadawn 

      The First Robin of Spring? 

      Be My Valentine, 2018

      Curling AND the Super Bowl

      I'm No Escher... 

      Hark! the Herald Angel Sings

      Nativity Scene, 2017

      Planning an Escape

      Caught in the Net

Surf's Up 

Diagonally Warped in a Parallel Universe, Part 2

      Diagonally Warped in a Parallel Universe

      Pikachu

      Happy New Year, 2017

      O Tannenbaum

      Nativity Scene

Special Weather Statement

Think Tropics

Qubix

Valentine, 2016

Paisley'd Circles

Happy New Year, 2016

The House of the Rising Sun

Easter Eggs

A weak pattern in the blowing snow.

The same pattern after some melting

New Year's Champagne

Tiptoe Through the Tulips

Happy Valentine's Day

Cabaret

A Christmas Tree (my first effort)

Grocery prices During the Pandemic

Have you noticed that grocery prices have risen? Some of my friends have mentioned it, and yesterday I think I saw some prices that are higher now than they were a month ago.

If prices are higher now, are rising, and are expected to continue to rise for the next few months or longer, here are some possible explanations:

I. Microeconomics

Costs are rising:

• Many grocery chains and other retailers have given their employees raises of 10% or more
• Many grocery stores have put down tape or spray painted markers 6' apart inside and outside their store to promote distancing; they have also put up queue-control barriers to keep people distancing in the queues instead of crowding near the front; doing this is not cost-free.
• Many grocery stores have someone at the door to limit the number of people in the store at any given time.
• They also have people wipe down the handles of the baskets, carts, trolleys, etc.
• Some even have sanitizer stations for people to sanitize their hands.
• Restocking shelves isn't cost-free either, and since people are staying at home and eating at home more now, this means they're also buying more at grocery stores rather than at restaurants, hotels, trains, planes, etc. How does this add to costs/unit? see the next item.
• Diminishing marginal product: you can add more product and you can hire more employees (maybe), but it's hard to add more space in the store and in the back storage areas. More people and more product means more congestion and more congestion costs. Also, hiring more workers means digging deeper into the pool of potential workers, and retraining current employees is also costly
• Higher demand typically means stores just try to order more from their suppliers, but there are higher costs for suppliers, too, as they face shortages and rising costs of their own.
• Given that the value of the Canuck buck has declined relative to the US dollar, that means Canadian importers are paying more for everything that might end up on the shelves or might be used to produce things that might end up on the shelves.

Demand is rising:

• As I noted above, people are buying more from grocery stores than they used to.
• As some managers and some suppliers see the increased demand, they raise the prices. Often not in any major or obvious way. Pricing decisions are not simple textbook [find the q/t for which MR=MC] but rather involve considerable trial and error, either at the store or at some regional or head office.
• When people have to queue up to get into stores, and when people read or hear about stores being out of some things, they don't worry so much about paying a few cents more for many of the items on their shopping list. [in econ-speak, the price elasticity of demand is lower in those instances]
• Some stores have fewer sales, and some stores no longer put out flyers advertising sales.

II. Macroeconomics

Aggregate Supply

• The CoVid-19 pandemic has caused a decline in the overall rate of production. Many (probably most) manufacturing facilities are still trying to operate full time, but they are facing increased supply problems for some items, in part due to transportation issues and in part due to bottlenecks.
• The lock-down, quarantine, and isolation policies have primarily affected the service sector of the world economy, but not exclusively. Also, the drop in production of services has led to a major shift to the left of the overall Aggregate Supply curve.

Aggregate Demand

• One would think that with so many people's incomes dropping, Aggregate Demand would decline. However...
• In both Canada and the United States, numerous policies have been implemented to dampen the effect of the pandemic on people's incomes. This is especially important if (1) people expect the support policies to be reasonably lucrative, (2) people expect to be supported if they over-extend, and/or (3) they expect it all to be over in a couple of months or so. Following the Friedman permanent-income-hypothesis, if people consume according to expected income (including gubmnt programmes), consumption may not drop much at the aggregate level.
• What is there to spend money on? People who regularly (or even irregularly) traveled, ate in restaurants, shopped a lot in person, etc. all have less to shop for. They (we) are driving up demand for the things we can still buy.
• Over the next year or so, the gubmnts plan to increase their fiscal deficits astronomically. These deficits will almost surely be monetized to a great extent by the central banks. [in colloquial language, the gubmnt won't raise taxes to pay for all the programmes; instead it will print more money]. The increased money supply will lead to much more rapid inflation over the the next two years unless the central banks try to neutralize that effect. They've shown no indication they intend to so so.

Sectoral Shifts in Demand

• As consumers try to buy more household products in general, manufacturers cannot instantaneously hire and train more employees the products that consumers want more of. As I once wrote (albeit in reverse) back in the late 1970s, "you can't easily transport and train all the workers in the oil patch to some place where they can produce more surgical masks, toilet paper, etc.

Grocery Shopping during the CoVid-19 period

Walmart opened at 7am today for Geezers/Elders/Seniors/etc. I arrived at 7:15 and had to join a queue of about 15 people waiting to get in because the store was limiting the number of people in the store. Of those in front of me, not one was wearing a mask; I was wearing a cloth mask over my N95 mask (for reasons I'd rather not go into). Photos below.

They let about 4-5 people in at a time. When I neared the front of the line, I looked back and over half the people in the lineup behind me were wearing masks, mostly surgical masks.

Also while I was near the front of the line, a woman went to the security guard who was controlling the number of people being let in and asked, "Seniors can go in early, can't we?"

"Yes, that's the lineup."

"For seniors???"

Every person in the line was clearly a senior. The man behind me in line and I looked at each other and laughed, complimenting ourselves for looking so young.

- - - -

How do single parents, working couples, or for that matter anyone who works regular hours get any shopping done? The Walmart lineup was VERY long when I left, and the line up at Costco (London North) looked to be at least 100 people long an hour before they opened! Is it that bad everywhere? If so, it reminds me of the old gasoline shortages in 1979 when people queued up for hours to get gas and many people hired others to do the waiting for them. I see a potential for a booming business for seniors who will shop for other people.

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I was disappointed (though I shouldn't have been surprised) to see none of the employees wearing a mask. One was, but it was down around his neck. I can imagine that Walmart might be reluctant to outbid healthcare employers/employees for even surgical masks, but I thought maybe some of the employees might be wearing some they had made for themselves.

Everyone tried to maintain distancing, but it's not always possible in the aisles, even with fewer people in the store. That's the reason I trimmed my beard and sideburns last night and wore my mask combination.

I saw one employee cough. Only once, but into her hand, not her arm or elbow. I avoided the area where she was working. She needs lessons in coughing, for sure.

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Checking out was carefully policed for distancing, both in the overall queue and at each cash register. Walmart would still let shoppers use their own reusable bags, but I didn't expect that, so I didn't have ours with me.

I was stunned to see the customer in front of me pay for their shopping with cash and receive cash in change. Currency is a great way to transmit a virus.

After I received my order, I thanked the cashier for working today. She said others had thanked her, too.

[Addendum: they had toilet paper (our brand, even), chicken, chicken parts, eggs, milk, most everything I wanted. I didn't see any hand sanitizer or sanitizing wipes or sprays, though.]

 

This is getting too long. I'll post about grocery prices in a separate post.