Economics-Watching: Fourth-Quarter GDP Growth Estimate Inches Up

The growth rate of real gross domestic product (GDP) is a key indicator of economic activity, but the official estimate is released with a delay. Our GDPNow forecasting model provides a “nowcast” of the official estimate prior to its release by estimating GDP growth using a methodology similar to the one used by the U.S. Bureau of Economic Analysis.

GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 and social mobility beyond their impact on GDP source data and relevant economic reports that have already been released. It does not anticipate their impact on forthcoming economic reports beyond the standard internal dynamics of the model.

Recent forecasts for the GDPNow model are available here. More extensive numerical details—including underlying source data, forecasts, and model parameters—are available as a separate spreadsheet. You can also view an archive of recent commentaries from GDPNow estimates.

Please note that the Federal Reserve no longer supports the GDPNow app. Download the Federal Reserve’s EconomyNow app or go to the Atlanta Fed’s website to continue to get the latest GDP nowcast and more economic data.

Latest estimate: 3.9 percent — January 3, 2023

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2022 is 3.9 percent on January 3, up from 3.7 percent on December 23. After last week’s Advance Economic Indicators report from the U.S. Census Bureau and this morning’s construction spending release from the U.S. Census Bureau, the nowcasts of fourth-quarter real gross private domestic investment growth and fourth-quarter real government spending growth increased from 3.8 percent and 0.8 percent, respectively, to 6.1 percent and 1.0 percent, respectively, while the nowcast of the contribution of the change in real net exports to fourth-quarter real GDP growth decreased from 0.35 percentage points to 0.17 percentage points.

Japanese Philosopher KARATANI Kōjin (柄谷 行人) Awarded the 2022 Berggruen Prize

An expansive thinker who crosses boundaries.

[from Nōema Magazine, by Nathan Gardels, Editor-in-Chief]

KARATANI Kōjin has been named this year’s laureate for the $1 million Berggruen Prize for Culture and Philosophy. An expansive thinker who straddles East and West while crossing disciplinary boundaries, Karatani is not only one of Japan’s most esteemed literary critics, but a highly original mind who has turned key suppositions of Western philosophy on their heads.

In Karatani’s sharpest departure from conventional wisdom, he locates the origins of philosophy not in Athens, but in the earlier Ionian culture that greatly influenced the so-called “pre-Socratic thinkers” such as Heraclitus and Parmenides. Their ideas centered on the flux of constant change, in which “matter moves itself” without the gods, and the oneness of all being—a philosophical outlook closer to Daoist and Buddhist thought than to Plato’s later metaphysics, which posited that, as Karatani puts it, “the soul rules matter.”

In the political realm, Karatani contrasts the form of self-rule from Ionian times based on free and equal reciprocity among all inhabitants — “isonomia” — with what he calls the “degraded democracy” of Athens that rested on slavery and conquest. He considers the former the better foundation for a just polity.

In a novel twist on classical categorizations, Karatani regards Socrates himself as fitting into the pre-Socratic mold. “If one wants to properly consider the pre-Socratics, one must include Socrates in their number,” he writes. “Socrates was the last person to try to re-institute Ionian thought in politics.”

A Degraded Form of Democracy in Athens

For Karatani, Athenian democracy was debased because it was “constrained by the distinctions between public and private, and spiritual and manual labor,” a duality of existence that Socrates and the pre-Socratics sought to dismantle. As a result, by Karatani’s reading, Socrates was both held in contempt by the “aristocratic faction,” which sought to preserve its privileges built on the labor of others, and condemned to death by a narrow-minded mobocracy for his idiosyncratic insistence on autonomy and liberty in pursuit of truth.

Appalled at Socrates’ fate, Plato blamed democracy for giving birth to demagoguery and tyranny, radically rejecting the idea of rule by the masses and proposing instead a political order governed by philosophers. In Karatani’s reckoning, Plato then “took as his life’s work driving out the Ionian spirit that touched off Athenian democracy”—in short, throwing out the baby with the bathwater but maintaining the disassociations, such as citizen and slave, that follow from the distinction between public and private grounded in an apprehension of reality that separates the spiritual from the material.

In order to refute “Platonic metaphysics,” Karatani argues, “it is precisely Socrates that is required.”

Turning Marx On His Head

In his seminal work, The Structure of World History, Karatani flips Marx’s core tenet that the economic “mode of production” is the substructure of society that determines all else. He postulates instead that it is the ever-shifting “modes of exchange” among capital, the state and nation which together shape the social order.

For Karatani, historically cultivated norms and beliefs about fairness and justice, including universal religions, compel the state to regulate inequality within the mythic commonality of the nation, which sees itself as whole people, tempering the logic of the unfettered market. As he sees it, the siren call of reciprocity and equality has remained deeply resonant throughout the ages, drawing history toward a return to the original ideal of isonomia.

Expanding the Space of Civil Society

Not an armchair philosopher, Karatani has actively promoted a modern form of the kind of reciprocity he saw in ancient Ionian culture, which he calls “associationism.” In practical terms in Japan, this entails the activation of civil society, such as through citizens’ assemblies, that would exercise self-rule from the bottom up.

In the wake of the Fukushima nuclear accident in 2011, Karatani famously called for “a society where people demonstrate” that would expand the space of civil society and constrict the collusive power of Japan’s political, bureaucratic and corporate establishment. Like other activists, he blamed this closed system of governance that shuts out the voices of ordinary citizens for fatally mismanaging the nuclear power industry in a country where earthquakes and tsunamis are an ever-present danger.

An Expansive Mind

Along with The Structure of World History (2014) and Isonomia and The Origins of Philosophy (2017), the breadth of Karatani’s interests and erudition are readily evident in the titles of his many other books. These include Nation and Aesthetics: On Kant and Freud (2017), History and Repetition (2011), Transcritique: On Kant and Marx (2003), Architecture As Metaphor: Language, Number, Money (1995) and Origins of Modern Japanese Literature (1993).

The prize ceremony will be held in Tokyo in the spring.

Preparing for the 2020 Round: Select Topics in International Censuses

[from the U.S. Census Bureau, December 9, 2022]

The U.S. Census Bureau is pleased to announce the release of additional technical notes in the series entitled Select Topics in International Censuses. Each one highlights a new subject or method relevant to census planners in middle-to low-income countries. They complement the U.N. Principles and Recommendations for Population and Housing Censuses [archived PDF] by describing select topics in more detail.

The new notes [archived PDFs] focus on:

Sponsored by the U.S. Agency for International Development (USAID) and prepared by U.S. Census Bureau experts, the Select Topics in International Censuses series is designed to assist staff in NSOs to address some of their most pressing census issues.

Technical notes on other topics are in development and will be released in the near future.

First Clean Energy Cybersecurity Accelerator Participants Begin Technical Assessment

[From the National Renewable Energy Laboratory (NREL) News]

Program Selected Three Participants for Cohort 1

The Clean Energy Cybersecurity Accelerator™ (CECA)’s first cohort of solution providers—Blue Ridge Networks, Sierra Nevada Corporation, and Xage—recently began a technical assessment of their technologies that offer strong authentication solutions for distributed energy resources.

The selected solution providers will take part in a six-month acceleration period, where solutions will be evaluated in the Advanced Research on Integrated Energy Systems (ARIES) cyber range.

Working with its partners, CECA identified urgent security gaps, supporting emerging technologies as they build security into new technologies at the earliest stage—when security is most effective and efficient. The initiative is managed by the U.S. Department of Energy’s (DOE’s) National Renewable Energy Laboratory (NREL) and sponsored by DOE’s Office of Cybersecurity, Energy Security, and Emergency Response (CESER) and utility industry partners in collaboration with DOE’s Office of Energy Efficiency and Renewable Energy (EERE).

“We are thrilled to welcome and work with the first participants to the secure energy transformation,” said Jon White, director of NREL’s Cybersecurity Program Office. “These cyber-solution providers will work with NREL, using its world-class capabilities, to develop their ideas into real-world solutions. We are ready to build security into technologies at the early development stages when most effective and efficient.”

The selected innovators:

Blue Ridge Networks’ LinkGuard system “cloaks” critical information technology network operations from destructive and costly cyberattacks. The system overlays onto existing network infrastructure to secure network segments from external discovery or data exfiltration. Through a partnership with Schneider Electric, Blue Ridge Networks helped deploy a solution to protect supervisory control and data acquisition (SCADA) systems for the utility industry.

Sierra Nevada Corporation (SNC)’s Binary Armor® is used by the U.S. Department of Defense and utilities to protect critical assets, with the help of subject matter experts to deliver cyber solutions. SNC plans to integrate as a software solution into a communication gateway or other available edge processing to provide a scalable solution to enforce safe operation in an unauthenticated ecosystem. SNC currently helps secure heating, ventilation, and air conditioning systems; programmable logical controllers; and wildfire detection, with remote monitoring for two different utilities.

Xage uses identity-based access control to protect users, machines, apps, and data, at the edge and in the cloud, enforcing zero-trust access to secure operations and data universally. To test technology in energy sector environments, Xage provides zero-trust remote access, has demonstrated proofs of concept, and deploys local and remote access at various organizations.

Three major U.S. utilities, with more expected to join, are partners with CECA: Berkshire Hathaway Energy, Duke Energy and Xcel Energy. At the end of each cohort cycle, cyber innovators will present their solutions to the utilities with the goal to make an immediate impact.

Additionally, CECA participants benefit from access to NREL’s unique testing and evaluation capabilities, including its ARIES cyber range, developed with support from EERE. The ARIES cyber range provides one of the most advanced simulation environments with unparalleled real-time situational awareness and visualization to evaluate renewable energy system defenses.

Applications for the second CECA cohort will open in early January 2023 for providers offering solutions that uncover hidden risks due to incomplete system visibility and device security and configuration.

NREL is the U.S. Department of Energy’s primary national laboratory for renewable energy and energy efficiency research and development. NREL is operated for DOE by the Alliance for Sustainable Energy LLC.

World-Watching: How the G20’s Succession of Developing Country Presidencies Could Help Re-shape the Global Economy

[from Asian Development Bank Institute]

Indonesia’s Group of 20 (G20) presidency in 2022 marks the start of three successive years in which the annual forum of the world’s largest economies will be hosted by developing countries, to be followed by India in 2023 and Brazil in 2024.

In this podcast, Pramod Bhasin, Chair of the Indian Council for Research on International Economic Relations (ICRIER), discusses India’s G20 presidency countdown and policy imperatives. He also describes the outlook for Indonesia, India, and Brazil’s G20 presidencies and their potential significance for the global economy.

[Archived podcast MP3]

Read the transcript. [Archived PDF]

View the full playlist of audio insights into ADBI’s ideas for developing Asia and the Pacific.

Webinar: Creating Differentiation in an Increasingly Competitive Logistics Market

[from FreightWaves]

You can’t control what you can’t see. The market is feverishly growing as more 3PLs see visibility as a strategic advantage. Given the communications and compliance blind spots in a supply chain where double loading and double brokering have become more common and 3PLs are turning to unfamiliar carriers in a search for capacity, 3PLs with superior technology can separate themselves from the pack. 

Join FreightWaves as they partner with Overhaul for a live webinar on Thursday, August 4 at 11 AM ET (45 minutes), where they will discuss how you can win in the current market not just by being reliable—but by being transparent and proving the integrity and security of the products you’ve been trusted to move.

Featured speakers will include:
• Frankie Mossman, Chief Customer Officer, Overhaul
• Sara Lieser, Senior Vice President of Partnerships, Overhaul 

Register today to join FreightWaves & Overhaul for the live session.

Bond-Watching: Corporate Bond Market Distress Index, July 2022

[from the Federal Reserve Bank of New York]

The Corporate Bond Market Distress Index (CMDI) has updated with data through July 2022 on the New York Fed’s public website.

The CMDI uses weekly metrics to construct an aggregate index of corporate bond market conditions for both the primary and the secondary markets.

The CMDI will be updated regularly at 10:00 a.m. ET on the last Wednesday of each month. Data are available for download. Sign up to receive alerts when the New York Fed posts new content.

July 2022 Update

Access the Corporate Bond Market Distress Index.

The Early Universe and the Future of Humanity/Xi Risks Losing the Middle Class

[from The Institute of Art and Ideas]

The Life and Philosophy of Martin Rees

An Interview with Martin Rees

Astronomer Royal and best-selling science author, Martin Rees pioneering early work led to evidence to contradict the Steady State theory of the universe and confirm the Big Bang. His influence then spread to the wider public—knighted in 1992, elevated to Baron in 2005, then giving the Reith Lectures in 2010. Most recently his attention has turned from the early universe to the future of humanity. In this interview, Lord Rees discusses the ideas and experiences which led to such an illustrious career.

Xi Risks Losing the Middle Class

The zero-COVID strategy has run its course

Kerry Brown | Professor of Chinese Studies and Director of Lau China Institute, King’s College London. He is the co-editor of the Journal of Current Chinese Affairs, and author of Xi: A Study in Power.

China is continuing with its tough zero-COVID policy. But the cracks in the economy and a discontent middle class mean that Xi’s Imperial-like governing style is under challenge, writes Kerry Brown.

China’s zero-COVID strategy operates in Chinese domestic politics a bit like Brexit does in the UK. Despite complaints from business networks and broader society about the negative impact on economic growth and citizens’ freedoms, it’s a policy commitment the government is sticking to no matter what.

Of course, no one voted for the draconian lockdowns implemented across China. And, unlike Brexit, the lockdowns are very much in line with expert advice in the country, rather than running against it. The Chinese Centre for Disease Control and Prevention (CCDC), the main governmental body advising the government over crisis response in this area, said in a weekly update last November that without comprehensive restraints on people’s movement and quarantines on anyone testing positive for the virus, the national health system would soon be overwhelmed with cases, and find itself in the same bind as those in the US or Europe did.

That the words of the experts have been taken so much in earnest is striking for a regime that previously hasn’t been shy to dismiss them. The Xi leadership may be confident in the way it speaks to the outside world, but it seems that it has the same profound wariness in the robustness of the country’s public health as everywhere else. Things have not been helped by clinical trials showing the Chinese vaccines – the only ones accepted in China – are not as effective as foreign ones where the length of protection is in question). On top of this, vaccine take-up by the elderly, the most vulnerable group, has been poor. It is easy to see therefore why the central government might be very cautious. What is harder to understand, however, is why the cautiousness has bordered on obsessiveness.

The Xi way of governing is increasingly almost imperial in style, with broad, high-level policy announcements made in Beijing, sometimes of almost Delphic succinctness.

One scenario is simply about the structures of decision-making in China. This was an issue right from the moment the variant started to appear in late 2019, and local officials in Wuhan stood accused of trying to hush the issue up, delaying reporting to the central authorities till things had already gone on too long. As a result of this, in February 2020 key officials in the city were sacked. But this is unlikely to change the fact that provincial officials are very risk averse under Xi, and that any central direction to manage the pandemic will be interpreted in the purest terms and executed to the letter.

This explains the completeness of the Xian government’s virtual incarceration of its 8 million population after just a few COVID cases at the end of 2021, the first of the more recent lockdowns. It also explains why the traditionally more free-thinking municipal authority of Shanghai and its similarly liberal approach was fiercely knocked back by Beijing last February, to make an example for any other provinces thinking of going their own way. The absolute prohibition on people moving from their homes there, in one of the most dynamic and lively cities of modern China, was perfect proof that if the government could bring about this situation there, it could do it anywhere.

This case study also reveals some important things about the Xi way of governing. It is increasingly almost imperial in style, with broad, high-level policy announcements made in Beijing, sometimes of almost Delphic succinctness, which are then handed down to various levels of government to do as they will. Exactly how and when the discussion amongst Xi and his Politburo colleagues on the best response to COVID happened is unclear. In a world where almost every political system seems to leak incessantly, the Chinese one is unique in maintaining its opacity and secretiveness – no mean achievement in the social media era.

The Communist Party is very aware of how relatively small incidents can mount up and then generate overwhelming force. It itself coined the Chinese phrase ‘a single spark can start a prairie fire.’

Rumors of clashes between Xi and his premier Li Keqiang on the effectiveness of the current response remain just that – rumors, with precious little hard evidence to back them up. Who in the current imperial system might dare to speak from the ranks and say that policy must change is unclear. Scientists should deal in hard facts – but we all know that science is susceptible to politicization. Experts in China have to offer their expertise in a highly political context. A declaration that the current approach is not fit for purpose can easily be reinterpreted as an attempt to launch an indirect attack on the core leader. With an important Congress coming up later this year, at which Xi is expected to be appointed for another five years in power, sensitivities are even more intense than normal. It is little wonder that the COVID strategy status quo settled on last year has not shifted.

Things, however, may well change, and change quickly. China is moving into tricky economic territory. The impact of the pandemic on global supply chains, along with the various stresses domestically on the housing market, and productivity, have shrunk expectations for growth. A predicted 6% in the earlier part of the year now looks overly ambitious. There is a real possibility China might experience a recession. At a moment like this, the government, which after all operates as a constant crisis and risk management entity, might do what it does best and prompt rapid, and dramatic, changes.

The handling of COVID-19 might look like further proof that Chinese politics under Xi is repressive and zero-sum. But even in an autocratic state like the current People’s Republic, the pandemic will not leave politics unchanged.

This doesn’t mean that China’s COVID-19 bind gets any easier. Like the country’s serious demographic challenges, with a rapidly aging population, the only thing the government will be picking an argument with is reality as it proceeds into the future. As with Europe and the US, being more liberal about facing COVID-19 will involve accepting some of the harsh consequences – rising fatalities, particularly for the elderly and vulnerable, and health systems put under enormous stress. In such a huge, complex country, and of enormous geopolitically importance, a misstep could easily lead to huge and unwanted consequences, generating discontent and triggering mass protests in a way reminiscent of 1989. The Communist Party is very aware of how relatively small incidents can mount up and then generate overwhelming force. It itself coined the Chinese phrase ‘a single spark can start a prairie fire.’ One such spark – the introduction of Marxism into China in the 1910s – led to its gaining of power three decades later.

The handling of COVID-19 might look like further proof that Chinese politics under Xi is repressive and zero-sum. But I suspect that even in an autocratic state like the current People’s Republic, the pandemic will not leave politics unchanged. In particular, the middle classes in cities like Shanghai have had their patience tested in recent months. This is the key group for Xi, the heart of his new innovative, more self-dependent, higher-quality service sector workers in an urbanized economy. Their support remains crucial if Xi is able to steer China towards the moment when it hopes it will become the world’s largest economy. Policies to try to placate them by addressing imbalances, critical environmental issues and improving public health are likely to only increase. Delivery however will be key.

Faced with a potentially life-threatening infectious disease, the Party can throw out injunctions and claim it has been the victim of bad luck. But an ailing economy and no clear signs of the government knowing how to manage this will prove a toxic mixture for it. Xi and his third term in office will be all about delivery. The question is whether, even with the formidable suite of powers he has, he can do this. Governing China has always been the ultimate political challenge. COVID-19 has made that even harder.

Carbon-Watching: Will Civilization Collapse Because It’s Running Out of Oil?

[from the Post Carbon Institute]

Abstract

This paper [Archived PDF] assesses how much oil remains to be produced, and whether this poses a significant constraint to global development. We describe the different categories of oil and related liquid fuels, and show that public-domain by-country and global proved (1P) oil reserves data, such as from the EIA or BP Statistical Review, are very misleading and should not be used. Better data are oil consultancy proved-plus-probable (2P) reserves. These data are generally backdated, i.e. with later changes in a field’s estimated volume being attributed to the date of field discovery. Even some of these data, we suggest, need reduction by some 300 Gb for probable overstatement of Middle East OPEC reserves, and likewise by 100 Gb for overstatement of FSU (floating storage unit) reserves. The statistic that best assesses ‘how much oil is left to produce’ is a region’s estimated ultimately recoverable resource (URR) for each of its various categories of oil, from which production to-date needs to be subtracted. We use Hubbert linearization to estimate the global URR for four aggregate classes of oil, and show that these range from 2500 Gb for conventional oil to 5000 Gb for ‘all-liquids’. Subtracting oil produced to-date gives estimates of global reserves of conventional oil at about half the EIA estimate. We then use our estimated URR values, combined with the observation that oil production in a region usually reaches one or more maxima when roughly half its URR has been produced, to forecast the expected dates of global resource-limited production maxima of these classes of oil. These dates range from 2019 (i.e., already past) for conventional oil to around 2040 for ‘all-liquids’. These oil production maxima are likely to have significant economic, political and sustainability consequences. Our forecasts differ sharply from those of the EIA, but our resource-limited production maxima roughly match the mainly demand-driven maxima envisaged in the IEA’s 2021 ‘Stated Policies’ scenario. Finally, in agreement with others, our forecasts indicate that the IPCC’s ‘high-CO2’ scenarios appear infeasible by assuming unrealistically high rates of oil production, but also indicate that considerable oil must be left in the ground if climate change targets are to be met. As the world seeks to move towards sustainability, these perspectives on the future availability of oil are important to take into account.

Read the full paper. [Archived PDF]

U.S. Pension-Watching: Interest Rate Update: July 2022

[from the U.S. Pension Benefit Guaranty Corporation]

Updated information is now available about the interest rates used to determine the “premium funding target” [external charts] (i.e., the present value of vested benefits) for variable-rate premium (VRP) purposes unless the plan has an election in effect to use the Alternative Premium Funding Target.

Because the following interest rates are updated on a quarterly basis, no updates are available for the following interest rates at this time: