Tariffs and the Fed

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The Federal Reserve Bank is facing a conundrum:

First, they [tariffs] raise prices, which weakens the case for cutting interest rates. Second, they sap confidence and demand, which strengthens the case.

There’s this, too:

In May, the Treasury Department collected roughly $15 billion more in customs duties than in February. That is equal to about 3% of total consumer spending on goods. Some goods prices have risen, but not by that much. And in May, prices fell on some obvious tariff targets such as apparel and new cars.
This is a head scratcher. If consumers aren’t paying the tariffs, who is? Not foreign producers, at least through April, when import prices excluding fuel rose. Not, apparently, retailers and wholesalers, whose margins took a hit in April but bounced back in May, according to the producer price report released Thursday [12 June].

For me, though, the head scratcher is straightforward: it’s been so long since we had significant tariffs, and economies have evolved so much in that interim, that we don’t yet understand the lags that are involved between the onset of tariffs and allegedly associated price increases. This is further contaminated by the confusion by folks who should know better of highly variable tariff rhetoric with actual tariffs in place.

And a second contaminant: how much do tariffs raise prices, really, in a global economy that has supply chains that are much more mobile (or at least much less fixed in place) than in those prior economic environments?

And a third: a measure of flexibility in cost transfer techniques: keeping prices stable while doing away with free shipping or raising existing shipping charges, for instance.

Oh, and energy costs are down; lowering prices here counterbalances, in the larger scheme, price increases there.

Count Me Skeptical

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Nvidia has a new AI out that purports to enable[] simulations of Earth’s global climate with an unprecedented level of resolution. As is always the case with AI, there are problems with accuracy, usability, credibility, and on and on.

This AI, as with all of them, are creatures of human programmers, and they do only what those humans programmed them to do, the data those humans carefully selected for its training, what other humans tested it on the doing. We’ve seen the outcomes of all of that in a variety of AI programs that are nakedly racist, spout outright lies hallucinations (one of the characterization distortions of yet other humans associated with the AI), refusals to answer uncomfortable questions, supposedly autonomous decisions to refuse to shut down, even plot revolt—the latter two especially nothing more than what human programmers wrote these software packages to do and what human testers let pass.

And this bit of distortion by the news writer in the lede of the article at the link:

As is so often the case with powerful new technology, however, the question is what else humans will do with it.

Because, of course, the AI’s output can be taken fully at face value, so we need only concern ourselves with those uses.

This climate simulator has a high credibility bar to get over, and an even higher empirical accuracy bar to get over.

Clean Sweep of an Advisory Board

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HHS Secretary Robert Kennedy, Jr, announced his plan to remove all 17 current members of the Advisory Committee on Immunization Practices, the CDC advisory panel that advises on vaccine schedules. The nice editors at The Wall Street Journal have termed this a “not-so-clean sweep.” They rationalize their characterization in large part with this:

Mr Kennedy’s beef seems to be that the committee’s members know something about vaccines and may have been involved in their research and development. “Most of ACIP’s members have received substantial funding from pharmaceutical companies, including those marketing vaccines,” he writes.
Some members have been paid by vaccine makers—typically sums less than their salaries—to assist with clinical trials in which they help evaluate the vaccines for safety and efficacy.

I’ll ignore the opening bit of disingenuous snark. I’ll leave aside the naïve belief that folks, including government bureaucrats, are immune to chump change bribes. These editors should know better than that. Instead, look at the facts included in the snippet: some committee members being involved in the R&D of the vaccines on which they now advise in the name of the government, and some members having been paid by vaccine makers. That many of the studies in which those then-paid members were involved were double-blind is irrelevant: those members were paid by vaccine makers, and now those members advise on those vaccines.

These are clear conflicts of interest, and even the august editors of the WSJ should be able to understand that.

The editors did point out that current members have recused themselves from considerations in which they (think they) have a conflict of interest. Such recusals, though, always are judgment calls on the part of the bureaucrat considering his own recusal. There’s no need for such judgment calls when there are no conflicts of interest.

In an ideal world, such conflicts—large or small—would have no influence on government-advising bureaucrats. In that ideal world, we would have no need for conflict of interest rules. We live in the real world, however, and Kennedy is entirely correct to seek to reduce as far as may be the existence of such conflicts. It’s much too early in the process to begin criticizing his move, even a knee-jerk beef triggered by it being an RFK, Jr, move.

In the end, Kennedy has appointed eight members to the revamped ACIP:

  • Joseph R. Hibbeln, a psychiatrist and neuroscientist who worked in nutritional neurosciences at the National Institutes of Health.
  • Martin Kulldorff, an epidemiologist who used to work at Harvard Medical School.
  • Retsef Levi, a professor of operations management at the Massachusetts Institute of Technology Sloan School of Management.
  • Robert Malone, a biochemist who helped with early research of mRNA vaccine technology.
  • Cody Meissner, a professor of pediatrics at the Geisel School of Medicine at Dartmouth and former ACIP member.
  • James Pagano, an emergency medicine physician with 40 years of clinical experience.
  • Vicky Pebsworth, the Pacific region director of the National Association of Catholic Nurses, who previously sat on the Food and Drug Administration’s Vaccines and Related Biological Products Advisory Committee.
  • Michael Ross, a clinical professor of obstetrics and gynecology at George Washington University and Virginia Commonwealth University.

 

Tariff Bankruptcy?

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Or is that just an excuse? Marelli, which supplies Nissan and Stellantis with auto parts like lighting and internal electronics, has filed for bankruptcy and is blaming the current tariff environment for the filing.

However, as Marelli’s CEO David Slump admitted in his company’s bankruptcy filing, as summarized by The Wall Street Journal,

…the company had already been struggling with long-term supply-chain issues stemming from the Covid-19 pandemic….

The company also has been struggling with losses and a hefty debt load for years.

Slump said the pandemic restricted access to both raw materials and the labor market, and set off a series of events that led to Marelli being unable to sustain its nearly $5 billion of debt. Even after the pandemic subsided, the impeded supply chain for semiconductors had an acute effect on automotive production.

Obvious questions arise:

  • what has the company been doing to reduce and then eliminate those losses over those years?
  • how assiduously has the company been working to pay down that debt? Has it only been paying the contractually obligated minimum payments, or has it been paying something extra against the principle in each payment period? Coupled with that, the company’s debt repayment has been heavily complicated by operating at a loss for years.
  • what has the company been doing to readjust its own supply chains? It saw, empirically, those five years ago during the supply chain disruptions of the Wuhan Virus situation, that its existing supply chains were heavily vulnerable.
  • what has the company been doing to develop new products and new buyers?

Slump’s claim of macroeconomic headwinds associated with the imposition of tariffs in countries around the world may well have been the trigger, but those “headwinds” are only that. This has been a bankruptcy building toward actuality for a few years. Excuse-making isn’t much in the way of a solution.

Some Editors are Worried

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Some editors, here The Wall Street Journal‘s, worry that a criminal investigation into Biden White House staffers’ apparent coverup could get those staffers to clam up and not talk. They’re happy with House Oversight Committee Chairman James Comer’s (R, KY) civil-oriented investigation into the coverup and worry further that a criminal investigation could interfere with the civil one.

Maybe, maybe not. The only way the staffers could clam up in a criminal investigation would be to plead the 5th Amendment right against self-incrimination. They could otherwise slow-walk their testimony, be evasive in their answers, fail to remember things, and on and on. But they can do those things in Comer’s investigation, too—especially, plead the 5th.

The editors closed their piece with this:

Learning more about how the White House covered up Mr Biden’s decline matters, but raising American incomes matters more.

The two are not mutually exclusive. On the contrary, increasing American incomes depends critically on a mentally competent President. Learning how the last President’s mental decline occurred, and especially how it was covered up and by whom—the positions as well as the incumbents—is critical to maximizing our chances of having mentally competent Presidents in future.

And that requires a criminal investigation, also, to determine if any criminal laws were broken, if so by whom, and locking those persons up. They’ve done their damage, criminally or civilly, but locking up those who broke criminal laws would discourage future staffers from doing the same thing.