Arithmetic Suffers from Trump Derangement Syndrome

At a conference in Naples, so no time for a full post. Just three notes.

First, the big news on U.S. foreign policy was that Trump announced that he was buying 300,000 tons of Russian diesel. He’s not allowed to do this: Sanctions preventing purchase of Russian oil are law, not a choice on Trump’s part. But under Trump laws are suggestions at most, so it might happen anyway. In any case, the main lesson here, as Phillips O’Brien explains, is that Trump isn’t even hiding the fact that he is supporting Putin’s war of aggression against Ukraine.

But being a nerdy economist, my first printable reaction to the announcement was, 300,000 tons??? That’s a bit over 2 million barrels. America consumes approximately 4 million barrels of distillates — diesel (mostly) and heating oil — every day.

So Trump is betraying an embattled democracy, demonstrating our faithlessness to the whole world, seriously damaging whatever is left of America’s leadership in the world, for the sake of maybe 12 hours’ worth of diesel. Really?

Of course, Trump and those around him don’t care about the national interest. But I would strongly guess that they didn’t do the math, that 300,000 tons sounded like a lot to them and that they had no idea that it was trivial for an economy the size of America’s. I might add that this is general issue with Trump: he often touts trivial policies as major achievement, and it often seems obvious that he has no idea how big America and the world are.

Arithmetic, I guess, suffers from Trump derangement syndrome.

In other news, remember how Scott Bessent was a highly qualified and credible choice as Treasury Secretary? Neither do I. In the latest news, he has now hired Judy Shelton as an adviser. Some readers may remember that in 2019 Trump tried to put Shelton on the Federal Reserve Board. He failed in the face of bipartisan opposition: Even Republican senators considered Shelton too extreme and incompetent for the job.

And now she will be advising Bessent — who, as I wrote recently, is becoming the Baghdad Bob of bonds — on currency policy.

On a completely different subject, last week I briefly noted that I found official numbers showing essentially no Italian productivity growth since 2000 implausible. Sergio De Nardis of LUISS sent me a paper arguing that there really is a measurement problem. Using national accounts data, Italy appears to have lagged far behind Germany and France since 2005; using purchasing power parity it hasn’t lagged at all:

This divergence isn’t an indication that any one nation’s statistical agencies are incompetent or dishonest. What it really tells us is that GDP may seem like a solid, hard number, but estimating that number actually involves a lot of educated guesswork — and different agencies may guess differently. In this case it appears that Italian statisticians are more cautious about “hedonic” adjustments — placing value on radically improved goods and entirely new products (no smartphones in 2005!) than their counterparts in other countries.

Meanwhile, the ceiling of the meeting hall is decorated with what I believe is a representation of the European parliament in session: