US retail sales

Strong retail sales. Higher rates seemingly can’t kill the consumer, can’t restrain investment, can’t tame the budget (which is politically determined, really, not quite the standard rates related resource constraint).

The Americans are really living over there.

If r* (the natural rate of interest) moved up +2% in the space of a few years, the whole slow-moving demography piece (and low loadings on deficits) seems very dubious.

Brad Delong (American academic) has a nice framing about the reliability of observed economic regularities (like r*), namely that everything you think you know can be counted on to crumble, and that’s worth keeping in mind when thinking about the level of sustainable interest rates.

My common refrain at the moment is the tried and true “markets are designed to make you look foolish”.

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