May 9, 2021

From The Desk of Fernando Guzmán Cavero.

 DEAR FRIENDS


Tomorrow, Monday 10 May 2021,  I will not be with you with my " SELECTED DAILY NEWS" from  reputable sources, due to the maintenance and other private issues I must take care of.

.Please accept my apologies but need urgently to find out what is going on and the definitive take a decision  in this respect

Please stay tuned, honestly, I have no idea how long it will take me. Hope it will no be too  much time.


Sincerely,

Fernando Guzmán Cavero



May 8, 2021

Are and Where Ukrainians Are Preparing for All-Out War With Russia?

 nytimes.com

Where Ukrainians Are Preparing for All-Out War With Russia

Anton Troianovski

A dried-up canal running from Ukraine into Russian-occupied Crimea is emerging as one of Europe’s main flash points.


The Northern Crimean Canal was blocked with bags of sand and clay, preventing water from flowing further onto the Russian-occupied Crimean peninsula.
Credit...Brendan Hoffman for The New York Times

KALANCHAK, Ukraine — A makeshift dam of sand and clay, covered with patches of grass, blocks one of Europe’s great canals. Beyond it, swans drift in the trickle of water that remains. A duck slides into a wall of reeds below the bare, concrete banks.

This quiet spot just north of Crimea may not look like much. But some Ukrainians fear it could be the thing that ignites an all-out war with Russia.

“Putin could send his troops in here at any moment,” said Olha Lomonosova, 38, explaining why she had packed a getaway suitcase this year at her home upstream. “He needs water.”

President Vladimir V. Putin of Russia ordered some of the troops he had massed on Ukraine’s border this spring to pull back last month, but as many as 80,000 remain within striking distance, and many Ukrainians believe that the threat of a new invasion remains. A prime reason is the 250-mile-long Northern Crimean Canal linking Crimea with Ukraine’s Dnieper River: the main source of water for Crimea until Mr. Putin annexed it in 2014 and Ukraine, in a secret operation, hastily built the dam to block the canal’s flow.

Now, the fertile plain through which the canal runs in southern Ukraine’s Kherson Region has emerged as one of Europe’s main geopolitical flash points. The tensions over the canal spiked in recent months after a drought worsened Crimea’s water crisis, the risk of escalation rising along with the temperature of Mr. Putin’s showdown with the West.


Image

A map showing the canal at a museum Nova Kakhovka.
Credit...Brendan Hoffman for The New York Times

High-powered television transmitters have gone up just over the border in Crimea, beaming the Kremlin’s narrative into Ukrainian-controlled territory. At the canal’s source, huge Soviet-era letters announce “Northern Crimean Canal” in Russian, but they are now painted blue and yellow, the colors of the Ukrainian flag.

The canal is a concrete symbol of the ties that once bound Russia and Ukraine — and of Ukraine’s fundamental challenge of extricating itself from its Soviet past. Water continues to flow through the canal for 57 miles inside Ukraine before the dam cuts off the flow to Crimea, irrigating a land of melon fields and peach orchards where Russian is widely spoken even as a Ukrainian identity is being formed.

A shared Soviet past with Russia still evokes nostalgia among some older Ukrainians, and the Kremlin’s propaganda effort has not let up in the hope that pro-Russian attitudes will one day undo Kyiv’s pivot toward the West. But that nostalgia — along with lingering skepticism of the West’s motives and of the government in Kyiv — is not enough to allay the fears of many over a new war with Russia.

“There’s normal people over there,” Serhiy Pashchenko, 62, trimming pink-flowering peach trees, said of Russia, recalling that he was working on a construction project in Moscow when the conflict broke out in 2014. “But there’s a government over there that does not recognize us as a people.”


Image

Serhiy Pashchenko trimming his peach trees in Chornianka.
Credit...Brendan Hoffman for The New York Times

In Crimea, after a major drought last year, the water shortage has become so dire that Russian officials have started to evoke the specter of mass death — though warnings of humanitarian catastrophe are contradicted by Russian officials’ assurances that even tourists to Crimea will not go thirsty.

Blocking the canal, a senior official in the de facto Russian government controlling Crimea said in February, represented “an attempt to destroy us as a people, an attempt at mass murder and genocide.” Moscow has pledged to spend $670 million to address the water shortage, but this year reservoirs have been running dry and water is being rationed.

Ukrainian officials are unmoved. Under the Geneva Convention, they say, it is Russia’s responsibility as an occupying power to provide water, and they add that sufficient underground aquifers exist to provide for the population. The Kremlin says that Crimea willfully joined Russia in 2014, aided by Russian troops, after the pro-Western revolution in Kyiv; nearly every government in the world still considers Crimea to be part of Ukraine.

“No water for Crimea until de-occupation,” said Anton Korynevych, the representative for Crimea of President Volodymyr Zelensky of Ukraine, spelling out government policy. “Period.”

Mr. Zelensky checked Ukrainian troops’ readiness in a visit to the trenches at the Crimean border last month. Even though Russian troops are withdrawing, he warned, Ukraine must be prepared for them to return at “any moment.” In Washington, senior American officials believe that an incursion to secure the water supply remains a real threat, though the costs and difficulty of such a move appear to have been sufficient to dissuade Russia for now.


Image

Fishing from a bridge over a branch of the canal in Kalanchak.
Credit...Brendan Hoffman for The New York Times

About 10,000 young people from across the Soviet Union helped build the canal, a marvel of engineering that drops about an inch in elevation every mile for the first 129 miles so that gravity keeps the water flowing. Sappers and archaeologists led the way, said the canal’s resident historian, Volodymyr Sklyarov; they cleared World War II ordnance and the occasional trove of ancient Scythian treasure.

The canal even has its own anthem, still framed on the wall of the canal’s headquarters. “We built the canal in peace, along with the whole great and powerful country,” the words go. “Keep it, as dear as your breath, for your children and grandchildren!”

But when Russia seized Crimea in 2014, a senior aide in the Ukrainian president’s office, Andriy Senchenko, organized the damming of the canal as a way to strike back. Before the canal’s annual springtime opening, he directed workers to pile up a pyramid of bags of sand and clay near the border with Crimea. And he had them put up a sign saying they were installing a flow-measurement mechanism, to put Russian intelligence on the wrong track.

He is convinced that blocking the canal was the right decision because it imposed costs on Moscow, much as military resistance would have.

“In order to cause as much damage to the Russian Federation as was caused by seven years of blocking the canal, tens of thousands would need to have died at the front,” Mr. Senchenko said.

The temporary dam is still what holds back the water about 10 miles upstream from the Crimean border. Ukraine is building a more permanent dam right at the border with hatches that could allow the water flow to be restored if the government decided to do so, said the canal’s head, Serhiy Shevchenko. But those hatches are not yet operational, making it physically impossible for now to resume water delivery to Crimea, Mr. Shevchenko said.

The canal is a divisive issue on the ground, where some residents are influenced by what they see on Russian television.


Image

Lyda Batkevich, 81, sitting in her home in Khorly, where she receives Russian television stations.
Credit...Brendan Hoffman for The New York Times

Natalia Lada, a 58-year-old cafeteria director in the Black Sea beachside town of Khorly near Crimea, says she watches Russian television, even though it is “only propaganda against us,” because she finds it most convenient to receive. She says she has learned that Russia seems “ready for war, ready to conquer us,” perhaps just to win control of the nearby canal.

“If the question becomes, ‘It’s either water or peace,’ then peace is of course better,” Ms. Lada said. “Let’s give them water — why do we need war?”

Ukrainian officials say the reach of Russian television, particularly in the country’s border regions, is a security risk that has gone insufficiently addressed in seven years of war.

They say Russia has been erecting ever more powerful television transmitters in Crimea and separatist-controlled eastern Ukraine that direct signals into government-controlled Ukraine. Kyiv has been trying to counter that by erecting its own new transmitters, but the Russian signals are more powerful, officials acknowledge — a losing game of Whac-a-Mole on the airwaves.

“Filling all these holes is very hard, because their resources are greater,” said Serhiy Movchan, an official overseeing radio and television broadcasting in the regional capital of Kherson.

To hear Russian officials tell it, Ukraine’s leaders since 2014 have forced Russian speakers in the country to “renounce their identity or to face violence or death.” The reality is different in Kherson, where many residents still value some common bonds with Russia, including language — but want no part of a further military intervention by Mr. Putin.

A hill outside the city of Kakhovka, near the canal’s beginning, bears another reminder of historical ties to Russia: a towering Soviet monument of Communist revolutionaries with a horse-drawn machine gun, marking the fierce battles here in the Russian Civil War a century ago. Kyiv in 2019 demanded that the monument be taken down, calling it “insult to the memory of the millions of victims of the Communist totalitarian regime.” The city refused, and the monument still stands, overlooking rusty, dismantled lampposts.


Image

Tachanka, a famous Soviet monument, in Kakhovka.
Credit...Brendan Hoffman for The New York Times

Tending her mother’s grave at an adjoining cemetery, Ms. Lomonosova, a gardener, and her father, Mikhail Lomonosov, 64, said they did not want the monument torn down.

They spoke Russian, described themselves as “little Russians,” and said they occasionally watched Russian television. But if Russian troops were to invade, Ms. Lomonosova was ready to flee, and Mr. Lomonosov was ready to fight against them.

“We may have a Russian last name, but we are proud to be Ukrainian,” Ms. Lomonosova said. “Everyone has their own territory, though all have a shared past.”

It’s Time to Apply Warp Speed To Vaccinate The Globe

 washingtonpost.com

Editorial Board

3-4 minutes


THE PANDEMIC fortunes of the world have flipped. At the outset, the United States and Europe suffered intensely, while much of the global south was relatively unscathed. Now, the United States is tasting recovery, thanks to highly effective vaccines, while infection, sickness and death ravage the less developed world. South Asia and Latin America are being swamped by the coronavirus. This cries out for a more generous and ambitious response than has been forthcoming.

India is spiraling into disaster. On Friday, the nation reported yet another record-breaking tally of 414,188 daily new cases and 3,915 deaths amid horrific scenes of overcrowded hospitals, oxygen supply shortages and ghastly makeshift funeral pyres in parks. In the southern city of Chennai, only 1 in 100 oxygen-supported beds and 2 in 100 beds in intensive care units were vacant on Thursday, compared to 20 percent free only two weeks ago, Reuters reported.

That the virus knows no borders is also evident in South America, where Brazil’s viral explosion has spread across Uruguay, Argentina, Colombia and Peru. South America’s infections are being driven by a more transmissible variant, and doctors say the patients entering hospitals are now far younger and far sicker than before.

President Biden’s decision May 5 to seek World Trade Organization approval of a waiver of patent protection for vaccines was greeted by many as a salve for the developing world’s trouble. Such expectations are unlikely to be met. The negotiations will take months, until year’s end or beyond, when the pandemic death toll may surpass the 1.8 million of last year.

To really help those in need, two important efforts must be made. The first, in the near term, is for political leaders in besieged nations and cities to confront the virus with proven methods of intervention: lockdowns, masks and hygiene to slow the spread. Unfortunately, the leaders of Brazil and India have neglected this at great cost.

The second effort over the longer term is for the United States, Europe and others to help boost vaccine supply, manufacturing capacity and raw materials for these hard-hit nations. Start by donating surplus shots. Beyond the valuable Covax initiative now underway, wealthy nations should lend experienced personnel and manufacturing know-how to produce vaccines at scale and on the ground, which is far more useful than lifting patent protection. Why not create an Operation Global Vax to rush this vital aid to developing nations with the same urgency and ambition as Operation Warp Speed in the United States? Let’s give them what they genuinely need.

Is Mumbai Handling its Second Wave Better Than Delhi, If So Why?

 economist.com

Why is Mumbai handling its second wave better than Delhi?

May 8th 2021

Urbs prima in Indis
Why is Mumbai handling its second wave better than Delhi?

Credit a sensible administrative structure, decentralisation and data-driven planning


WHEN THE world sees images of India’s covid-19 crisis, it is through the eyes of the citizens of Delhi. That is not just because most foreign correspondents and photographers live—and are stuck—there. The capital’s caseload has been among the highest and deadliest of any city in the country. On May 3rd alone, 448 deaths were reported and untold numbers died unrecorded. One in every four tests is coming back positive, typical of an outbreak that is out of control.

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On May 5th the Supreme Court, situated in Delhi, told the national government, which is there too, to “look to Mumbai and take note” of its successes in managing the supply of oxygen. But the city has a lot more to teach. Even proportional to its somewhat smaller, if denser, population, a fifth as many people are dying there each day as in the capital. The positivity rate of tests, at around 11%, is less than half of Delhi’s. There are thousands of vacant beds. Of the beseeching tweets and WhatsApp messages asking for beds or oxygen, few give an address in Mumbai.

In interviews with the local media, the commissioner of the Municipal Corporation of Greater Mumbai (MCGM), an enthusiastic marathon-runner named Iqbal Singh Chahal, describes an immense, data-driven operation in which information and action-plans are managed and co-ordinated through a distributed network of 23 “war rooms”, or control centres, one for each of the city’s administrative districts. An online dashboard, visible to the public, is constantly updated by each war room and every hospital, displaying the availability of beds and a trove of other data. About 40% of Mumbai’s present capacity is in “jumbo” field hospitals, built during the first wave and wisely kept in a state of readiness even as emergency operations in other cities were closing shop. Mr Chahal’s task-force is already at work drawing up plans to combat an inevitable third wave, which it expects will arrive in July. Seen from Delhi, such foresight sounds like science fiction. How did the fates of India’s two biggest cities diverge so much?

The answer comes down to administration, in three different ways. The first is the structure of government. Mumbai has a unitary municipal corporation, whereas Delhi is a morass of overlapping authorities. There is no equivalent of Mr Chahal in Delhi. Instead, executive functions are divided messily between the national government; the elected quasi-state government, currently run by Arvind Kejriwal, its chief minister; and five municipal corporations, including one controlled by the armed forces. The national parliament voted recently to grant veto power over Mr Kejriwal’s government to a lieutenant-governor appointed by Narendra Modi, the country’s prime minister.

It is bad enough that Delhi has no dedicated government looking out for the city. Worse is that the overlap of interests means it also lacks what Yamini Aiyar of the Centre for Policy Research, a think-tank in the city, calls “political maturity”. Mr Kejriwal’s government is hamstrung at the best of times but, at times like this, the politicking between different levels of government is frantic. Party workers are hiring auto-rickshaws to deliver oxygen to hospitals and tweeting evidence of their heroics, since it is parties, not administrators, that are top of mind.

By contrast, Daksha Shah, a senior health officer at the MCGM, explains that one of the biggest benefits of her city’s unified chain of command is apparent in its system of triage. People who are afraid that they may not be able to get life-saving treatment are inclined to hoard it, like Westerners with loo roll last year. The MCGM‘s war rooms see test results before any of the city’s patients do. That way their field agents can bring the news to the identified cases and escort them to and from hospital beds exactly when and where the best treatment can be provided, to maximise efficiency.

Second, Mumbai may have had an advantage of administrative boundaries, too. India’s second wave started in the state of Maharashtra, of which the city is the capital. When cases began to rise in the central and eastern parts of the state, that caused warning lights to flash early for the local government. Likewise some of Delhi’s disadvantages may be because of its neighbours. The city spills over its borders to take in the most urbanised bits of two states with much worse health care. Neelkanth Mishra, a strategist for Credit Suisse, a bank, guesses that Delhi may be absorbing desperate cases from a wider area.

Lastly, the fact that the national government has some role to play in directly running Delhi may have contributed, too. When it gets it right, the city benefits. But when it is sluggish and dithering, as in recent weeks, that affects the people of Delhi more directly than those of any other region. The result has been to make India’s capital, in normal times a synonym for the country, the face of its catastrophe. "

Business This Week: by The Economist:

economist.com

Business this week

May 8th 2021

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After 56 years at the helm of Berkshire Hathaway, Warren Buffett named Greg Abel to succeed him as chief executive. It is not clear when the 90-year-old Mr Buffett will actually vacate the job. Berkshire’s share price underperformed the S&P 500 over the past two years, but has rebounded in the first quarter of 2021, pleasing its legions of investors. Quarterly net income came in at $11.8bn, in part because of the soaring value of investments in Apple and other stockmarket stars.

The announcement by Bill and Melinda Gates that they are to divorce after 27 years of marriage sent shockwaves through the world of philanthropy. The deep pockets of the Bill and Melinda Gates Foundation have funded many global public-health projects, often reshaping policy discussions. It invested early in vaccines for covid-19, working with the COVAX initiative to send doses to poor countries.

The Biden administration said it would support an effort to suspend patents for covid-19 vaccines, a change in policy that the head of the WHO described as a “monumental moment”. Suspending patents might help countries such as India and South Africa to produce generic doses. Drug companies are not happy. They claim this would put more strain on supply chains and hand new technology to China and Russia.

Facebook’s Oversight Board found that its ban on Donald Trump was right, but that the decision should be reviewed in six months. Mr Trump was removed from Facebook after the assault on Congress by his supporters on January 6th. The board said that Facebook’s actions against Mr Trump should be proportionate to other users’ transgressions.

General Electric’s shareholders rejected a pay package possibly worth up to $230m for Larry Culp, the chief executive. The vote was not binding, but highlights growing investor frustration at the high rewards some blue-chip companies dished out to executives during the pandemic. AT&T said less than half its shareholders approved a compensation plan for executives. Similar fights are brewing at Amazon, ExxonMobil and elsewhere.

Loose lips

Janet Yellen, America’s treasury secretary, made a swift about-turn and said she was not recommending or predicting a rise in interest rates, after she had remarked that rates would have “to rise somewhat to make sure that our economy doesn’t overheat”. Ms Yellen’s initial seeming support for an increase spooked markets. She offered further assurances that she is not worried about persistent inflation, but does think prices will rise in the short term as economic activity picks up.

America’s GDP grew by 1.6% in the first quarter over the preceding three months, and is virtually back to its pre-pandemic level. With lockdowns reimposed in many places, the euro zone’s economy shrank by 0.6% in the quarter following a contraction of 0.7% towards the end of 2020, which is technically a recession. Germany’s economy was 1.7% smaller in the quarter.

America’s deficit in goods and services jumped to $74.4bn in March, a monthly record. Imported goods from China soared to $48.2bn, as households flush with stimulus cheques splashed out.

Telenor, a telecoms company backed by the Norwegian government, wrote off its entire investment in Myanmar, where it is one of the biggest providers of phone services. It blamed the deteriorating security situation since the military coup on February 1st, but said it was not leaving and would continue to operate in the country.

A trial got under way in California to decide whether Apple abused its market dominance when it booted Fortnite off its app store last year after the game’s owner, Epic Games, tried to offer an alternative payment system for enhanced features. The case comes soon after Apple was accused by the European Commission of distorting competition in the market for music streaming, following a complaint from Spotify. The tech giant has 12 weeks to respond.

Darktrace made a successful stockmarket debut on the London Stock Exchange: the cyber-security company’s share price rose by a third, giving it a market value of £2.2bn ($3.1bn). Unconditional trading began on May 6th. The IPO was seen as a test of the demand for tech offerings in the City, after Deliveroo’s dud listing a month ago.

A blast from the past

Still knocking around from their early days as internet trailblazers, AOL and Yahoo were sold by their current owner, Verizon, for $5bn to Apollo, a private-equity firm. Despite their outmoded image the pair continue to generate sizeable revenues, providing Verizon with $1.9bn-worth in the first quarter. Apollo may try to enhance the sports-related bits of the platforms.

This article appeared in the The world this week section of the print edition under the headline "Business this week"

May 7, 2021

U.S. Market at Close Report: Dow jumps more than 200 points to another record as investors look past big jobs miss.

 cnbc.com

Yuan Li


Stocks rose to record levels on Friday even after a disappointing April jobs report as the weak number made investors believe easy monetary policies that powered the market's historic rebound will stay in place for longer.

The S&P 500 climbed 0.9% to hit a intraday record high. The Dow Jones Industrial Average rose 250 points, also reaching an all-time high. The tech-heavy Nasdaq Composite popped 1%.

The Labor Department said nonfarm payrolls increased by just 266,000 in April, far less than the 1 million total economists were expecting, according to Dow Jones. The unemployment rate rose to 6.1% last month amid an escalating shortage of available workers, higher than an expectation of 5.8%. Meanwhile, March's originally estimated total of 916,000 was revised down to 770,000.

Investors bet that the big jobs miss could keep the easy policies of the Federal Reserve in place, including record low interest rates and a massive bond-buying program. Tech stocks, which have been winning under the low-rates regime during the pandemic, outperformed after the data release. Facebook, Amazon, Netflix, Alphabet, and Apple all traded in the green. Tesla rose nearly 2%. Higher rates tend to hit growth stocks the most since they reduce the value of their future earnings.

"The Fed will feel some vindication in their hesitancy to embrace tapering," Adam Crisafulli, founder of Vital Knowledge, said in a note following the jobs report Friday.

Bank of America research warned as recently as Friday that strong economic data could hit stocks, especially tech shares, if it caused the central bank to dial back on its easy monetary policies.

Still, the disappointing jobs number poured cold water on many economists who estimated a sharp rebound in job growth. Goldman Sachs economists expected a total of 1.3 million jobs to have been added in April.

It also cast doubt on whether the economy could pull off a full recovery from the pandemic as quickly as many expect. Some economists are forecasting double-digit growth in the current quarter after gross domestic product rose at a 6.4% annualized pace in the first quarter. The Dow hit another record on Thursday on expectations for a booming economy.

"It was a disappointing read on job creation and brings into question the assumption that Q2 is going to carry-forward the positive momentum established at the beginning of the year," Ian Lyngen, head of U.S. rates at BMO, said in a note.

Bank stocks fell in wake of the report, weighing on the market a bit.

Some believe that April's jobs number could just be a blip and it shouldn't change minds about the direction of the U.S. economy.

"It was a huge surprise," Goldman Sachs chief economist Jan Hatzius said on CNBC's "Squawk on the Street." "I think that you always have to take every data release with a grain of salt and this one I think you may have to take with a rock of salt," he said, citing seasonal adjustments as a potential source of error.

Shares of Roku rallied more than 15% after the streaming company blew past expectations with its first-quarter results. Roku posted adjusted earnings of 54 cents​​ per share, compared to an estimated loss of 13 cents per share, according to Refinitiv. Revenue rose 79% from a year ago and exceeded expectations.

For the week, the Dow is up more than 2%, while the S&P 500 has gained 1%. The Nasdaq Composite had shed 1.5% so far this week.

Wonking Out: Braking Bad? by Paul Krugman

nytimes.com

7-9 minutes


Alert! Wonk warning! This is an additional email that goes deeper into the economics and some technical stuff than usual.

I began today’s column with Janet Yellen’s totally reasonable yet PR-problematic remark that the Fed might respond to an overheating economy by moderately raising interest rates. One question I didn’t get into but seems worth asking is: who disagrees with that proposition, and why? And asking that question seems to me to lead into some more meta issues about when you should — or shouldn’t — base policy arguments on novel economic ideas.

Let’s start with the economic model that, I believe, underlies a lot of the macroeconomic discussion you hear; it certainly underlies much of what I write about fiscal and monetary policy. The basic idea is simple: other things equal, the economy will be stronger the lower the interest rate set by the Fed:

The workhorse macro model.Author

(Why IS? Tradition. It stands for “investment-savings,” and it’s not worth going into why right now.)

The usual caveats apply. Aggregate demand doesn’t respond instantly to monetary policy, so this is a schematic, static representation of something that actually has hard-to-predict dynamics. We don’t have really good estimates of the IS curve’s slope or of the economy’s maximum sustainable potential either, so if you ask, “how much would rates need to fall to achieve maximum employment” all we can provide is a modestly educated guess.

Still, this is enough of a framework to understand the issue that has bedeviled economic policy for much of the past 15 years. The Fed can fight a slump by cutting rates, but there’s a limit to how low it can go — the “zero lower bound,” even if it’s not exactly zero. If that, for whatever reason, turns out not to be low enough, we’re in a liquidity trap, and we need fiscal stimulus that pushes the IS curve to the right to achieve full employment.

This was the logic behind the 2009 Obama stimulus. Unfortunately that stimulus was too small to close the output gap. (That’s not hindsight, I was screaming about it at the time.) This time, however, the American Rescue Plan, although not designed primarily as stimulus, is truly huge, and will probably deliver more than enough stimulus to close the gap and then some.

But will this lead to inflation? Way back in 2009 some of us argued, in vain, that there was much less risk in going too big than in going too small, because if the stimulus turned out to be bigger than needed the Fed could always tap the brakes:

Yellen’s point.Author

And that’s exactly what Yellen was saying. So who disagrees, and why?

Well, if you don’t believe that monetary and fiscal policy are potentially independent policy instruments — which is what I think the Modern Monetary Theory people are saying, although it’s always hard to pin them down — then you don’t believe the Fed can put the brakes on if the stimulus is more than needed. Notice, by the way, that in this case MMT, if taken seriously, should make you less willing to go big with progressive fiscal policies than if you were a conventional Keynesian: Janet Yellen and I believe that the Fed can contain any inflationary risks, but MMTers, as far as I can tell, don’t.

A more explicit critique comes from Larry Summers, who has warned that the stimulus may lead to stagflation. He appears to believe that the Fed can’t use monetary tightening to offset overheating generated by fiscal expansion without causing a nasty recession. But I have to admit to being a bit puzzled about why. As far as I know — and Summers and I have known each other and been professional colleagues for 40 years — his underlying macroeconomic model is pretty much the same as mine, and the same as the one illustrated in the figures above. And that model seems to say that the Fed can indeed tap on the brakes if needed.

Indeed, the Fed has done that in the past: in the 80s and again in the 90s it acted to rein in booms without causing recessions:

Braking without sending the economy into a skid. FRED

What I think he’s doing is assuming that the Fed will wait too long, allowing inflation to get embedded in the economy before it tightens. That could indeed be a problem — but isn’t that an argument for the Fed to be alert, rather than a reason to believe that it’s hugely dangerous to enact a stimulus that might be bigger than necessary?

In general, claims that we can’t rely on the Fed to rein in inflation if the stimulus turns out to be too big have to rest on some departure from the workhorse model most sensible people use to think about macroeconomic policy. Should you do that?

Obviously no model is sacred, and questioning conventional wisdom is something you should always be doing. But there is a danger in coming up with novel economic doctrines on the fly, especially when you’re using those novel doctrines to justify your political views. Are you really engaging in critical analysis, or are you simply engaging in motivated reasoning?

I speak, by the way, from personal experience. On election night 2016, I let my (totally justified) dismay over the results warp my economic judgment, making a recession call that didn’t flow from my own models. I retracted with a mea culpa three days later. What the episode reminded me was that new thinking should be done with a cool head, and you should be extra careful when it leads to conclusions you want to hear.

I should have known better (and did, after three days) after the history of economics in the aftermath of the Great Recession. When financial crisis struck, there were many calls for new economic thinking, but standard analysis actually did a pretty good job once economists realized that the rise of shadow banking had resurrected old-fashioned bank runs in a new guise.

Yet there was a considerable amount of influential new thinking — not on behalf of effective policies to restore full employment, but to justify austerity policies in the face of mass unemployment. In particular, there were unconventional analyses suggesting that debt in excess of 90 percent of G.D.P. would somehow have devastating effects on economic growth and that fiscal contraction would somehow be expansionary, because it would improve confidence. These novel ideas were enthusiastically adopted by many politicians and policymakers. They also turned out to be completely wrong.

So even if you’re uncomfortable with President Biden’s fiscal policies, you should be very cautious about making arguments against them that rely on novel propositions about why inflation can’t be contained. Conventional analysis says what Janet Yellen said: If the stimulus proves bigger than needed, the Fed can keep things under control. If you’re asserting otherwise, think hard about why you’re saying that..

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From The Desk of Fernando Guzmán Cavero.

 DEAR FRIENDS Tomorrow, Monday 10 May 2021,  I will not be with you with my " SELECTED DAILY NEWS" from  reputable sources, due to...