{"id":273696,"date":"2025-04-09T11:14:41","date_gmt":"2025-04-09T11:14:41","guid":{"rendered":"https:\/\/michigandigitalnews.com\/index.php\/2025\/04\/09\/micro-becomes-macro-and-macro-financial-interactions\/"},"modified":"2025-06-25T17:08:55","modified_gmt":"2025-06-25T17:08:55","slug":"micro-becomes-macro-and-macro-financial-interactions","status":"publish","type":"post","link":"https:\/\/michigandigitalnews.com\/index.php\/2025\/04\/09\/micro-becomes-macro-and-macro-financial-interactions\/","title":{"rendered":"*Micro* becomes *Macro* and Macro-Financial Interactions"},"content":{"rendered":"<p> [ad_1]<br \/>\n<\/p>\n<p><a href=\"https:\/\/gianlucabenigno.substack.com\/p\/tariffs-as-a-financial-event\">Gianluca Benigno<\/a> points out that large and pervasive tariffs will have macro implications that spur deleveraging and a decline in R** in a pernicious (my word) feedback loop.<\/p>\n<p><span id=\"more-56288\"><\/span><\/p>\n<p><a href=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/04\/gbenigno_loop.png\"><img fetchpriority=\"high\" decoding=\"async\" class=\"alignnone size-full wp-image-56289\" src=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/04\/gbenigno_loop.png\" alt=\"\" width=\"844\" height=\"556\" \/><\/a><\/p>\n<p>Source: <a href=\"https:\/\/gianlucabenigno.substack.com\/p\/tariffs-as-a-financial-event\">G. Benigno (2025)<\/a>.<\/p>\n<p>The 10 year yield is surging, so some spreads are steepening.<\/p>\n<p><a href=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/04\/termspread_vix25o.png\"><img decoding=\"async\" class=\"alignnone size-full wp-image-56280\" src=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/04\/termspread_vix25o.png\" alt=\"\" width=\"1008\" height=\"576\" \/><\/a><\/p>\n<p><em><strong>Figure 1:<\/strong>\u00a010yr-3mo Treasury term spread (blue, left scale), 10yr-2yr Treasury term spread (red, left scale), 1yr-Fed funds (light green), all in %,\u00a0 VIX at close (green, right scale). Source: Treasury, CBOE\u00a0 via FRED.\u00a0<\/em><\/p>\n<p>And the VIX is rising, as measured policy uncertainty is rising.<\/p>\n<p><a href=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/04\/epu_vix_pix9.png\"><img decoding=\"async\" class=\"alignnone size-full wp-image-56290\" src=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/04\/epu_vix_pix9.png\" alt=\"\" width=\"864\" height=\"561\" \/><\/a><\/p>\n<p><em><strong>Figure 2:<\/strong>\u00a0EPU (blue, left scale), and centered 7 day moving average (red, left scale), VIX (green, right scale). Source: policyuncertainty.com, CBOE via FRED, and author\u2019s calculations.<\/em><\/p>\n<p>Interpreting uncertainty shocks as negative demand shocks means that the <a href=\"https:\/\/econbrowser.com\/archives\/2025\/02\/a-trade-war-interpreted-in-a-blanchard-is-lm-model\">model I used for analyzing the trade war<\/a> is missing a piece. The IS curve shifts inward, on net, adding in depressed investment and consumption on top of retaliation effects.<\/p>\n<p>With the dollar losing safe haven status, even if limited, the dollar will depreciate rather than appreciate (as I had expected).<\/p>\n<p><a href=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/04\/dxy_9apr25.png\"><img loading=\"lazy\" decoding=\"async\" loading=\"lazy\" class=\"alignnone size-full wp-image-56291\" src=\"https:\/\/econbrowser.com\/wp-content\/uploads\/2025\/04\/dxy_9apr25.png\" alt=\"\" width=\"1200\" height=\"832\" \/><\/a><\/p>\n<p>This should place additional upward pressure on import prices (both inclusive and exclusive of tariffs).<\/p>\n<p>In short, we are moving toward a financial disruption on top of a macro hit. Where it will all end up is a big question mark, bigger than I thought just a week ago.<\/p>\n<p>Kalshi records recession odds at 66% right now, up 23 percentage points from just a week ago.<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>[ad_2]<br \/>\n<br \/><a href=\"https:\/\/econbrowser.com\/archives\/2025\/04\/micro-becomes-macro-and-financial-interactions\">Source link <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>[ad_1] Gianluca Benigno points out that large and pervasive tariffs will have macro implications that spur deleveraging and a decline in R** in a pernicious<\/p>\n","protected":false},"author":1,"featured_media":273697,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"footnotes":""},"categories":[155],"tags":[],"_links":{"self":[{"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/posts\/273696"}],"collection":[{"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/comments?post=273696"}],"version-history":[{"count":0,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/posts\/273696\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/media\/273697"}],"wp:attachment":[{"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/media?parent=273696"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/categories?post=273696"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/michigandigitalnews.com\/index.php\/wp-json\/wp\/v2\/tags?post=273696"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}