"For the past few days we have been witnessing a remarkable Ukrainian offensive in Kharkiv. We have the spectacle of a bedraggled army in retreat - remnants of a smashed-up convoy, abandoned vehicles, positions left in a hurry, with scattered kit and uneaten food, miserable prisoners, and local people cheering on the Ukrainian forces as they drive through their villages. The speed of advance has been impressive, as tens of square kilometres turn into hundreds and then thousands, and from a handful of villages and towns liberated to dozens. Even as I have been writing this post paragraphs keep on getting overtaken by events."
That's according to Lawrence Freedman covering the recent Ukrainian offensive. Officially Russia is withdrawing troops from Kharkiv "in order to achieve the stated goals of the special military operation to liberate Donbas", but the reality certainly seems to be quite different. According to Britain's Defence Ministry:
"Russian forces were likely taken by surprise. The sector was only lightly held and Ukrainian units have captured or surrounded several towns."
Freedman warns that "Russia is losing but it has not yet lost" and there are risks of "extrapolating too far ahead". Putin's "delusional recent utterances" also mean he's not about to "acknowledge the position into which he has led his country", so "prudence therefore requires us to assume that this war will not be over soon".
You can read Freedman's full post here (~9 minute read).
Robert Barro, one of the founders of modern macroeconomics, attempted to pinpoint the causes of the recent US inflation:
"From March 2020 to March 2022, the US Federal Reserve kept short-term nominal interest rates at zero while also using quantitative easing to expand its balance sheet from $4 trillion to an eventual $9 trillion. It is now generally acknowledged that the Fed was way behind the curve after late 2020, if not earlier. Because it did not raise its policy rate until the spring of 2022, it failed to keep nominal interest rates ahead of inflation, and thus lost control."
That's all good but doesn't quite square with history – Barro notes that the Fed was similarly aggressive following the 2008 Great Recession yet inflation never materialised. But there was an "obvious difference" this time – "the dramatic fiscal expansion that began in the spring of 2020 in response to the COVID-related recession":
"Suppose the government does not plan to finance any of its additional spending by cutting other spending or raising taxes. If there is no formal default on Treasury bonds, 'revenue' must come from inflation above the normal or expected level, which in turn reduces the real (inflation-adjusted) value of outstanding government bonds. Specifically, the inflation above 2% per year since mid-2020 can be thought of as cumulating to an unexpected boost in the price level, and this accumulation of excess consumer price inflation from May 2020 to July 2022 turns out to be about 11%."
Australia's federal government spent a similar amount to the US government and the RBA reacted even later (remember 'no rate hikes until 2024?'), so it's no surprise that we also have an inflation problem. According to Barro, for the US government to pay off (default on) its pandemic debt it needs "9.4% inflation over one year, 5.7% average inflation over two years, or 3.5% average inflation over five years":
"So, a plausible argument is that the surge in federal spending triggered by the COVID-19 shock led to a permanent, unexpected rise in the price level by about 19%. This increase in the price level is a mechanism for financing the extra COVID-related spending... While the inflation rate eventually returns to 2%, the upward surge in the price level is permanent."
You can read Barro's full article here (~4 minute read).
3—Good thing we banned them
4—Open plan workplaces
"Oscar Wilde is said to have quipped that 'God, in creating man, somewhat overestimated his ability.' Our species is capable of folly on a grand scale. Exhibit No. 4,000 in this litany of woe is the continued existence of open plan workplaces.
For decades, research has found that open plan offices are bad for companies, bad for workers, bad for health and bad for morale. And yet they just won't die. Human beings, if they are to thrive, need a bit of privacy — walls and a door. And yet employers, decade after decade, neglect to give workers what they need, refuse to do what's in their own self-interest."
That's from David Brooks in the NYT, who cites studies showing that open plan workplaces actually result in fewer face-to-face interactions because "people can take only so much social interaction" (they put up a 'fourth wall'). Open plan workplaces also also lead workers to censor what they say on the phone, hurt morale and productivity and lead to "62 percent more days of sickness absence".
Separately, a new draft paper examined working from home after the pandemic, finding that it "triggered a large, lasting shift to work from home":
"Workers report that their employers plan an average of 0.7 work-from-home days per week after the pandemic ends. The paper cites several reasons why working from home ultimately will settle at higher levels than suggested by the survey, including separate U.S. data showing a steady rise in work-from-home plans since early 2021 and a surge in patent applications for technologies that support remote work."
If open plan workplaces persist, at least people might be able to work at home in their own space for a couple of days a week!
You can read David Brooks' NYT column here (~4 minute read).
🚪 Why do regions seek to secede? Identity, which "trumps income in determining a region's propensity to secede. Removing identity differences reduces the average support for secession from 7.5% to 0.6% of the population."
🚀 NASA's Artemis Moon launch was delayed again due to "a large hydrogen leak", and is now at best a few more weeks away from launch.
🌍 The latest annual Economic Freedom of the World report was released, showing "Hong Kong remaining in the top position, though its rating fell an additional 0.28 points. Singapore, once again, comes in second. The next highest-scoring nations are Switzerland, New Zealand, Denmark, Australia, United States, Estonia, Mauritius, and Ireland."