I’ve been sitting on this project for a while, but I’m finally ready to bring it above the fold. I’ve long wanted a straightforward overview of global debt levels—both public and private—and an easy way to compare them across countries, alongside their respective external dynamics. This is essential material for macro investors and researchers, yet it’s rare to find all the relevant information compiled in one place. The AS global debt chartbook is a first attempt at this. Like the LEI Chartbook, this project runs on Python code generated and compiled with the help of my trusty OpenAI assistant, with a few manual adjustments along the way. At the moment, it draws data from an Excel spreadsheet, but integrating APIs should be relatively straightforward down the line.
Read MoreThe BIS has a Bulletin out on the usefulness of AI and large language models. They’re not terribly impressed.
Read MoreWhen posed with a logical puzzle that demands reasoning about the knowledge of others and about counterfactuals, large language models (LLMs) display a distinctive and revealing pattern of failure.
The LLM performs flawlessly when presented with the original wording of the puzzle available on the internet but performs poorly when incidental details are changed, suggestive of a lack of true understanding of the underlying logic.
Our findings do not detract from the considerable progress in central bank applications of machine learning to data management, macro analysis and regulation/supervision. They do, however, suggest that caution should be exercised in deploying LLMs in contexts that demand rigorous reasoning in economic analysis.
The prevailing mood in global macro discussions seems to be as follows; inflation is past its peak, but it is set to remain a lot higher for a lot longer than initially anticipated, forcing central banks to continue hiking, keep rates higher for longer, or a combination of the two. The interest rate shock in the UK, as markets have adjusted their expectations for the BOE bank rate higher, and hawkish comments from the ECB are the two most obvious cases in point in developed markets. But a surprise hike by the Bank of Canada, and a larger-than-expected hike in Norway have added to the sentiment. We only really need the Fed to be forced into a hawkish turn to complete the narrative. This shift is important for investors. We are not just trying to calibrate when central banks will pause their hiking cycles—probably soon—but we’re also increasingly discussing, and pricing, how long rates will stay elevated, and whether central banks will have to resume hiking before they cut. Higher-for-longer, or #H4L, is already a trending hashtag on FinTwitter.
Read MoreThe flow of goods and capital across borders and between nations has featured in human storytelling and economic relations since the beginning of time. The biblical protagonists traveled and traded with each other, and often fought over the dominion of resources. The protagonists in modern historical tales of trade and war since the turn of the millennium continue the habit in similar ways. You would be hard-pressed to find a better historical account of that than in Ronald Findlay and Kevin H. O’Rourke’s Power and Plenty. The book is as much about the wars that divided empires and nations as it is about the exchange of goods and capital that bound them together, though it is reasonable to say that these two perspectives are joined at the hip. Economics plays a specific role in the study of global trade and empire-building. The exchange of goods, capital, and services across borders gives rise to transactions as the ownership of resources shifts. Over time, these processes lead to the accumulation of wealth and debt on the part of nations and economic actors—assets and liabilities, in the jargon of modern finance. It is the economist’s job to trace, identify, and record the nature and value of these transactions.
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