wfrost

wfrost

@wfrost.bsky.social

Sound Money (Democratic) Socialist, Montessorian, and Rortystan

1.1K followers1K following9.7K posts

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wfrost
@wfrost.bsky.social

Is inflation good for real wage growth? Not historically. Across 18 advanced economies since 1871 (JST Macrohistory + OECD data), there were 519 country-years of deflation and 2,179 of inflation. Median real wage growth was nearly 3x higher in deflation years (vs. inflation years): +3.1% vs. +1.1%

wfrost
@wfrost.bsky.social

Just saying the Cheesecake Factory has a great opportunity to lower prices and make noise about it (if they want more customers)

wfrost
@wfrost.bsky.social

The rate of change is mostly irrelevant at these levels. It’s fair and valuable to question the veracity of these charges, as the article does, but 150 voter fraud charges is nothing compared to the number of voters.

wfrost reposted

David Rothkopf
@djrothkopf.bsky.social

The central issue in the US election and elections worldwide is corruption writ large-a system that only works to serve the rich at the expense of everyone else, a system in which politicians and the rich are in bed together and yet screwing the rest of us. Affordability and corruption are the same.

wfrost
@wfrost.bsky.social

One thing I do really like about LLMs is how they have leveled the playing field with automated - and generally commodified - customer service You want to make me deal with your asshat robots? Fine. Then you’ll deal with mine.

wfrost reposted

Adam Rutherford
@adamrutherford.bsky.social

Michael Atiyah 🇪🇬: Fields Medal 1966 (also Abel Prize 2004), for K-theory. Ahmed Zewail 🇪🇬: Nobel for Chemistry 1999, for his work on femtochemistry. Omar M. Yaghi 🇯🇴: Wolf Prize 2018, Nobel for Chemistry 2025, for his work on reticular chemistry Naguib Mahfouz 🇪🇬: Nobel for literature 1988

The Bulwark@thebulwark.com

RFK: "There's five hundred million Arabs in the world. And yet they don't produce science. They don't win the Nobel Prize. They don't win the Fields Prize. They don't win the Wolf Prize. They don't produce literature."

wfrost
@wfrost.bsky.social

Finally!

Jesse Felder@jessefelder.com

‘Corruption has become a key source of American discontent in the closing days of midterm election campaigning, with a large majority of US voters saying they are worried about graft in Donald Trump’s second administration.’ www.ft.com/content/2770...

wfrost
@wfrost.bsky.social

I struggle to see the excitement here This inflation is mostly supply-side (imported costs + shrinking workforce), not demand-driven, and demographics plus debt/GDP suggest that won't change Inflation does help debtors (the state) and shareholders. Debt relief seems like the only structural win

Japan FinTech Observer@index.www.fintechobserver.com.ap.brid.gy

Japan is decisively closing the chapter on decades of structural deflation, positioning its economy and capital markets for higher nominal expansion, rising bond yields, and attractive equity returns over the next 10 to 15 years, according to J.P. Morgan Asset Management’s "2027 Long-Term […]

fintechobserver.comJapan Shakes Off Deflation as Capex Revival, Corporate Reforms, and a Cheap Yen Power Long-Term Asset ReturnsJapan is decisively closing the chapter on decades of structural deflation, positioning its economy and capital markets for higher nominal expansion, rising bond yields, and attractive equity returns over the next 10 to 15 years, according to J.P. Morgan Asset Management’s "2027 Long-Term Capital Market Assumptions" (LTCMA). Driven by rising corporate investment, intensifying governance pressure on undervalued companies, and the imperative to automate a shrinking workforce, Japan is emerging as a primary beneficiary of global capital rewiring and a standout diversifier for institutional portfolios. ## Sign up for Japan FinTech Observer Cutting through the noise of Japanese Finance & FinTech Subscribe Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. ## 1. Macroeconomic Outlook: Modest Growth Driven by AI and Capex * **Real GDP Upgrade:** Japan’s long-term real GDP growth forecast has been revised upward by 10 basis points to an annualized 1.0% (up from 0.9% in the 2026 edition). * **Productivity vs. Demographics:** The growth upgrade is driven entirely by artificial intelligence adoption and automation, split evenly between gains in total factor productivity (TFP) (+5 bps) and capital deepening (+5 bps). Japan’s trend total TFP is projected at 0.7%, comprising a 0.4% non-AI baseline and a 0.3% AI dividend. * **Workforce Dynamics:** Severe demographic contraction remains a persistent headwind. While increased labor force participation among female and older workers helps cushion the decline, it softens rather than cures Japan’s demographic deficit. * **Capital Spending & Returns:** Corporate capital expenditure in Japan is currently expanding at 1.6% year-over-year, outpacing Europe (1.4%) though trailing the U.S. capex boom (6.1%). Over the past decade, Japanese corporate Return on Invested Capital (RoIC) has averaged in the low teens, compared to approximately 17% in the U.S.. * **Long-Term Infrastructure Needs:** Japan, alongside the U.S. and Europe, faces an estimated USD 31 trillion in cumulative infrastructure modernization needs through 2040, centered on electrical grids, logistics networks, and transportation hubs. ## 2. Inflation and Monetary Regime: The Deflationary Era Ends * **Long-Term Inflation Boost:** Long-term Japanese consumer price inflation is projected to average 1.9% per year, an upward revision of 20 basis points from the previous 1.7% forecast. * **Structural Break:** Sustained domestic capital spending and fiscal initiatives have "decisively ended the era of exceptionally low inflation in Europe and Japan," permanently extricating the economy from chronic stagnation. * **Underlying Price Pressures:** Japan's projected inflation path sits just below the Bank of Japan’s 2.0% target. While long-term inflation expectations and labor market dynamics exert downward pressure, upward forces from fiscal policy, green energy transition spending, and global trade frictions keep trend inflation firmly positive. ## 3. Fixed Income: Higher Starting Yields Rebuild JGB Return Profiles Japanese fixed income return expectations reflect normalized yields and steeper yield curves: * **10-Year Japanese Government Bonds (JGBs):** Expected to deliver an annualized return of 3.3% in local currency terms, anchored by a cycle-neutral equilibrium yield of 2.7%. * **30-Year JGBs:** Projected to return 4.9% annualized, with a cycle-neutral yield of 3.1%. * **Cash Rates:** Japanese cash yields are pegged at a cycle-neutral 1.9%, with an expected compound return of 1.8%. * **Investment Grade Corporate Credit:** JPY-denominated corporate credit is forecast to yield an annualized return of 3.1%, based on a cycle-neutral yield of 3.2% and an equilibrium credit spread of 75 basis points. ## 4. Currency: Severe Yen Undervaluation Sets Up Long-Term Rebound * **Valuation Disconnect:** The Japanese yen trades at an extreme discount to fair value, ranking among the most heavily undervalued currencies in the developed world at roughly 35% below purchasing-power-parity levels. * **Driver of Dollar Weakness:** Over the 10- to 15-year forecast horizon, ongoing trade-weighted depreciation of the U.S. dollar is expected to be led primarily by Asian currency pairs—specifically the Japanese yen, South Korean won, and Chinese yuan. * **Spot and Terminal Targets:** * Starting Spot Rate: 157.40 USD/JPY. * 10- to 15-Year Terminal Forecast: 117.02 USD/JPY (a 1.1% adjustment from 118.34 in the 2026 assumptions), implying substantial long-term yen appreciation against the greenback. ## 5. Equities: Corporate Reform and Attractive Valuations Fuel 9.1% USD Returns * **Expected Return Upgrades:** * **USD-Denominated Returns:** Japanese equities are projected to generate a 9.10% compound annual return (10.37% arithmetic return) with 16.89% annualized volatility, up 30 basis points from 8.80% in the 2026 report. * **EUR-Denominated Returns:** 8.60% unhedged (9.65% arithmetic, 15.32% volatility) and 7.60% currency-hedged (9.07% arithmetic, 18.09% volatility). * **GBP-Denominated Returns:** 8.80% unhedged (9.73% arithmetic, 14.40% volatility) and 7.80% currency-hedged (9.28% arithmetic, 18.19% volatility). * **Corporate Governance Transformation:** Capital rewiring across East Asia is directly altering corporate balance sheets. In Japan, persistent regulatory and exchange pressure on companies trading below book value ($P/B < 1.0$) is actively forcing management teams to unlock shareholder value, streamline unwieldy capital bases, and divest unprofitable business segments. * **Broader Capex Foundation:** Unlike cyclical Asian peers heavily concentrated in pure-play semiconductor fabrication, Japan’s domestic capex recovery is spread broadly across multiple industries, providing more resilient aggregate corporate profit margins. ## 6. AI Adoption and Structural Bottlenecks * **High Incentive vs. Cultural Inertia:** Japan possesses arguably the strongest structural imperative to embrace artificial intelligence and automation in order to offset demographic contraction. * **Diffusion Obstacles:** While Japan ranks comfortably high on task exposure (approximately 73%–74% of work tasks exposed to AI) and readiness (an IMF AI Preparedness Index score of approximately 73), long-tenure corporate employment norms could slow actual workplace diffusion compared to more flexible labor markets. ## 7. Portfolio Allocation: Japanese Equities Earn an Overweight Stance * **Mean-Variance Optimization:** In stylized multi-asset portfolio optimizations based on 2027 LTCMA estimates, Japanese equities are explicitly selected for an **overweight allocation** alongside long-duration fixed income, private core real estate, transportation, and hedge funds, while European and emerging market equities are underweighted. * **Idiosyncratic Diversification:** Because Japanese equities are tied to domestic corporate balance sheet restructuring and local investment rather than solely reflecting global mega-cap tech mania, they exhibit lower susceptibility to AI capex digestion shocks and serve as an effective diversifier in global portfolios. * * * IMF Regional Economic Outlook for Asia and PacificThe IMF's October 2026 Regional Economic Outlook for Asia and the Pacific arrives at a critical juncture for the global economy. As global activity navigates severe, compounding external shocks—including acute geopolitical escalation in the Middle East, persistent US tariff barriers, tightening monetary stances across major monetary authorities, andJapan FinTech ObserverNorbert Gehrke
wfrost
@wfrost.bsky.social

“An election result may be impacted by voter confusion if: (1) Senator Sullivan does not win the election; and (2) had all votes cast for Daniel J. Sullivan been cast instead for Senator Sullivan and Alaska's rank-choice process played out accordingly, Senator Sullivan would have won the election”

abc7.comTrump told DOJ to sue to block Alaska Senate results if Republican narrowly losesThe Trump administration has preemptively filed a lawsuit to block the certification of the Alaska Senate race, citing name confusion among the candidates.
wfrost
@wfrost.bsky.social

Honestly #2 does seem like it might be worthy of a runoff. It’s potentially a real problem. The issue here is #1. They put #1 as #1 for a reason.

wfrost
@wfrost.bsky.social

And as a follow-up: does a per capita lens change your answer?

Bentley Allan@bentleyallan.bsky.social

A fun International Relations theory exam question might be, what does this graph mean for the past, present, and future of US-China relations?

wfrost
@wfrost.bsky.social

The right framing for talking about affordability. It doesn’t have to be like this.

Headquarters@headquartersnews.bsky.social

Abdul El-Sayed: In the richest, most powerful country in the history of the world, it shouldn't be this hard to afford a second bag of groceries. Shouldn't be this hard to fill up your tank. Shouldn't be this hard to pay your rent or your mortgage. Shouldn't be this hard to see a doctor.

wfrost
@wfrost.bsky.social

🙌

Steve Roth@steveroth.bsky.social

Just came across this 👀 Hayek quotation (while interrogating the hell out of Hal). Grudging, just tacked on at the end of this chapter, and not pursued, but ‼️ archive.org/embed/in.ern...

wfrost
@wfrost.bsky.social

Another side effect of undermining trust in the election process Are there legit reasons for DOJ to get involved in elections? Sure, like prosecuting a federal official for paying people to vote MAGA. The comment is mostly a nothing burger. The context is the problem, and it’s a big one

The New Republic@newrepublic.com

Attorney General Todd Blanche is open to blocking states from certifying the November midterm elections. trib.al/hNjoMiP

trib.alTodd Blanche Floats Chilling Likelihood of Trump Election InterferenceDonald Trump may try to steal the election—again.

wfrost reposted

Bloomberg News
@bloomberg.com

The best explanation for Trump's ultra-low approval ratings on inflation may be the simplest one: He's responsible (via Bloomberg Opinion)

bloom.bgTrump Deserves the Political Blowback for InflationOf all the factors dragging down Republicans’ odds of success in the coming midterms, inflation seems to be the most important. According to the Real Clear Politics aggregation of polling results, 70.1% of Americans disapprove of President Donald Trump’s handling of inflation, and just 27.3% approve. Inflation also consistently ranks as one of the top two or three issues on voters’ minds.

wfrost reposted

Julia Coronado
@jc-econ.bsky.social

The wealth effect is doing a lot of work holding up consumption growth and arguably even inflation as the cosnumers feeling wealthy and spending are not pushing back on higher prices for travel, goods, entertainment--not a wage/price spiral but an S&P500/price spiral

Steve Rattner@steverattner.bsky.social

Real wages are shrinking year-over-year for the sixth month in a row. The Iran War brought an end to three years of real wage growth.

wfrost reposted

Steve Roth
@steveroth.bsky.social

Wealth growth and wealth concentration are self-perpetuating. Income growth is not. Asset holders get more assets — unearned income — just for having assets. Year-in and year-out, across lifetimes, generations, and dynasties.

wfrost
@wfrost.bsky.social

Wow.

The New Republic@newrepublic.com

If you’re a Democrat with an email address or a phone, you get these pleas: A candidate needs your dollars. Democracy needs your dollars. It doesn’t have to be much—but it can’t be nothing. But where does your donation actually go? trib.al/skt74iy

trib.alHow the Consulting Class Is Eating the Democratic PartyFundraising costs gobble up most of the funds raised. Billions are spent on TV ads that have virtually no impact. Candidates may win or lose—but the consulting class always wins.
wfrost
@wfrost.bsky.social

I 100% support higher taxation on capital and billionaires. But this distrust is partly why the taxation -> redistribution is less elegant than allowing productivity growth to express as deflation. The latter would be a silent dividend to households, therefore similar distributional impacts

wfrost
@wfrost.bsky.social

I think this is half of it: “The question is not whether our wages are outpacing inflation, but whether we have enough confidence in our economic futures to trust that we can afford the lives we expect for ourselves and our families.” The other half? Relative financial performance.

Judah Grunstein@judah-grunstein.bsky.social

I think this explains in the language of econ what @tressiemcphd.bsky.social has been arguing in the language of sociology, but which many people deny because it doesn't show up in the charts. People grasp how vulnerable they are to life's vagaries, even if the lexicon they use is affordability.

nytimes.comOpinion | The Affordability Crisis Isn’t About Affordability. It’s About Something Much Bigger. (Gift Article)Whatever you call it, we can all agree this doesn’t feel good.

wfrost reposted

G Elliott Morris
@gelliottmorris.com

Here’s a piece from me out this AM for MS NOW as part of their partnership with FiftyPlusOne. Trump’s net approval rating is the worst ever for a president heading into a midterm, and the GOP has lost its advantage on handling the economy and immigration www.ms.now/opinion/trum...

wfrost reposted

Zach Weinersmith
@zachweinersmith.bsky.social

Not an ai apocalypse doomer or whatever, but entering a world where the normal operation of cybersecurity is vast swarms of hacker bots battling vast swarms of defender bots 24/7 at a scale beyond human comprehension doesn't seem like a *great* path forward.

wfrost
@wfrost.bsky.social

Good thread on why we’ve got a big problem if AI productivity growth does *not* express as a deflationary force Continued competition is critical

Zach Weinersmith@zachweinersmith.bsky.social

Consumer surplus just means the difference between what they'd be willing to pay and what they end up paying. In a monopoly situation, the company is expected to charge right up to the consumer's maximum price. In competition, they can't.

wfrost
@wfrost.bsky.social

Thoughts on the Anthropic news: 1. Watch OCF/FCF. Q3 cash flow reportedly turned positive—huge if true, but which measure? 2. Profit is "adjusted" and we don't know how yet 3. 518bn (!) of compute commitments, ~80% non-cancelable (incl $161bn Broadcom leases). Mostly off balance sheet for now

Quantian@quantian.bsky.social

Reminder that the $80bn Anthropic net loss figure is going to be 95% driven by warrant liability accounting, an economically meaningless non-cash charge, BUT you can safely flag anyone reporting on it *as if it were real* as not understanding GAAP and whose other accounting takes should be ignored.

wfrost
@wfrost.bsky.social

Generally the business seems fairly healthy, as long as revenue keeps growing; it needs roughly 1.5x from today's run-rate to carry the compute bill. Nothing in the headlines is particularly problematic from a biz fundamentals POV. But again, we've got to see what was "adjusted."

wfrost
@wfrost.bsky.social

Uhhhhhhh panic?

John David Pressman@jdp.extropian.net

This is actually a much worse scenario than if someone had broken in and stolen the key, because at least only that blackhat group would be able to stage the man in the middle attack. Due to the nature of the fuckup LITERALLY EVERY SYSADMIN OF A MIDDLE NODE KNOWS THE KEY AND CAN STAGE AN ATTACK.

wfrost reposted

Kate from Kharkiv
@kateinkharkiv.bsky.social

Trump: "We've given more money to Ukraine than almost anybody over the years, hundreds of billions of dollars. We've got nothing back other than high diesel. American taxpayers are tired of it." The US hasn't provided aid to Ukraine since Trump took office. Instead, they SELL military equipment to

wfrost
@wfrost.bsky.social

Japan is a cautionary tale of what happens when you set a 2% inflation target in an economy whose population, and therefore sustainable nominal growth, is shrinking

The Japan Times@japantimes.co.jp

Commentary: In 2012, when Japan was dealing with chronic deflation, policymakers were right to embrace monetary easing, including lower interest rates. Today, however, the country faces the opposite problem.

ebx.shJapan needs higher interest ratesA weak yen, combined with higher interest rates in the US, calls for a much tighter monetary policy.
wfrost
@wfrost.bsky.social

Beneath the "spectre of deflation," Japan was doing fine. From 2000–2012 real GDP per working-age adult grew faster than in the US, unemployment sat near 4%, and prices fell at roughly the rate of productivity. There was a mild nominal shortfall, largely b/c demographics, not a disease

wfrost
@wfrost.bsky.social

Japan is a cautionary tale of what happens when you set a 2% inflation target in an economy whose population, and therefore sustainable nominal growth, is shrinking

The Japan Times@japantimes.co.jp

Commentary: In 2012, when Japan was dealing with chronic deflation, policymakers were right to embrace monetary easing, including lower interest rates. Today, however, the country faces the opposite problem.

ebx.shJapan needs higher interest ratesA weak yen, combined with higher interest rates in the US, calls for a much tighter monetary policy.
wfrost
@wfrost.bsky.social

Beneath the "spectre of deflation," Japan was doing fine. From 2000–2012 real GDP per working-age adult grew faster than in the US, unemployment sat near 4%, and prices fell at roughly the rate of productivity. There was a mild nominal shortfall, largely b/c demographics, not a disease

wfrost
@wfrost.bsky.social

Abenomics mistook falling prices for a depression. Result: a mountain of liquidity and no impact on productivity. When velocity turned in 2022, it fueled inflation without growth. Real wages declined An inflation target can't tell demand from supply shocks, or see through to core demographic trends

wfrost
@wfrost.bsky.social

Either we tax proactively and progressively, or we tax via inflation, that is to say, regressively

Will Stancil@whstancil.bsky.social

I’ve talked a lot about the way that leaning on “affordability” too hard might backfire on progressives, and here’s a real manifestation of it: voters insisting homeownership is unaffordable, and thus we must cut or eliminate property taxes. Meanwhile their home equity has risen 88% in six years.