North, South, and chaos

              Protests in Suwayda. Photo credits: CBS News; Leys El-Cebel/Anadolu Agency/Getty

The tensions this week in the north and south of Syria show off its eternally Byzantine politics.

 

In the southwestern city of Suwayda, hundreds of the Druze continued to call for the overthrow of President Bashar Assad, as they have for more than two weeks. They ripped up posters of his father and preceding president, replacing them with posters of nationalist leaders who revolted early in the 20th century against the French masters of the colony. This protest has the blessing of the spiritual leader of the Druze, Sheikh Hikmat al-Hidjiri. Earlier, some spiritual leaders had been careful not to endorse Assad’s overthrow. 

 

A tiny but educated minority in Syria, most of the Druze had stayed out of the civil war in exchange for exemption from military services. Now they’re in the thick of the nationwide protest. It began with demonstrations against a sudden near-250% increase in fuel prices in August. But it now invokes the calls for democracy that led to the civil war in 2011, during the Arab Spring. Even Assad’s sect, the Alawites, the core of his military and political support, is stirring.    

 

The fighting in northwestern Syria is probably a typical feint.  First, some background.   

 

Turkey wants a buffer in Syria to keep terrorist Kurds from establishing a base for attacks on Turkey and to keep out Syrian migrants. In 2019, the US had agreed to patrol the northwest and eject the Turkish terrorists, the YPG (the People’s Protection Units, if you really want to know). But President Donald Trump got cold feet, his chronic condition in foreign policy.  So the US withdrew to the oilfields in the northeast, allegedly to protect them from the Islamic State. The US Army left the northwest to its Kurdish allies, the Syrian Democratic Forces. These are not associated with the YPG. 

 

But in reality, the northwest is controlled by Turkish troops and by Hayat Tahrir al-Sham, whose leader was a power in al-Qaeda but now claims to be a Syrian nationalist.

 

The Syrians in Afrin a northwestern city, are divided between the Turkish troops and Hayat Tahrir al-Sham for religious reasons. (Some regard the HTS as blasphemous because it doesn't adhere to Sharia law.) They have been fighting each other. 

 

The Syrian Democratic Forces attacked these factions...reportedly backed by munitions from Damascus! The Syrian Democratic Forces are supposed to be leading the charge against Damascus. At least 13 died in the fighting.

 

Well, some things are clear. Damascus gains from these attacks, because they push out the Turks and make room for Assad to move in. Iran also gains, because anything that extends Assad's influence also extends Tehran's. So I would wonder if the munitions backing the attack of the Syrian Democratic Forces on the Afrin factions really came from Tehran. I don't think that Damascus has much control over its army these days, aside from the unit controlled by Assad’s brother that is busy making Captogan, the “poor man’s cocaine,” for fun and family profit.

 

The other thing that's clear is that the US is out to lunch. The Syrian Democratic Forces are supposed to work for the Americans, not subvert their interests, as they have been in deadly attacks for two weeks.

 

 I don't know who's making American policy for Syria these days -- State, Defense, or Central Command. But whoever it is, it isn't working. And the White House has washed its hands of the mess.

 

Elsewhere in the region, the US is practicing with Saudi Arabia shooting down drones. And it's talking about a system for all of Central Command, so I guess it worries about potential Iranian drone attacks on the US Army in Syria, not to mention on Israel.

 

Iranian officials were at the Kremlin a few days ago. I presume that they compared notes on the performance of Iranian drones in Ukraine. 

 

The head of Central Command, General Erik Kurilla, told the House in March that Iran was stronger in offensive weapons than five years ago, despite the ongoing talks to relax sanctions on Tehran in exchange for a supposed commitment not to develop nukes.

 

It looks like Iran is filling the power vacuum created by the reduction of US troops in the Middle East to 30,000 to fight China instead. Israel won't be shy to step up to bat, given US aid. (And where are the Republicans?)

 

Now Assad is heading to Beijing. Apparently, as Russia concentrates on its war on Ukraine, China will fill its shoes as Assad’s ally. China certainly has enough dollars to give the Syrian central bank to prop up the vanishing Syrian pound as well as to rebuild much of the country’s infrastructure, which has been destroyed by war and neglect. This all fits China’s strategy to extend its influence in the Middle East, not to mention in Central Asia, at the expense of the Kremlin.

 

Moral of this convoluted story: In Syrian intrigues, there is never a shortage of players. Or pundits!  – Leon Taylor, Baltimore tayloralmaty@gmail.com

Notes

I thank Annabel Benson for useful comments.

References

Agence France-Presse. Anti-government protests take hold in southern Syria - Al-Monitor: Independent, trusted coverage of the Middle East.  August 25, 2023.

Albert Aji and Bassem Mroue. Syria's Assad will visit China as Beijing boosts its reach in the Middle East | AP News.  September 19, 2023.

George Baghdadi and Tucker Reals. Syria protests gain steam, challenging Bashar Assad as he tries to put the civil war behind him - CBS News.  September 20, 2023.

Beatrice Farhat.  Kurdish forces kill 14 pro-Turkey fighters in north Syria attack - Al-Monitor: Independent, trusted coverage of the Middle East.  September 19, 2023.99999

Ghaith al-Sayed. Attack on Turkish-backed opposition fighters in Syria kills 13 of the militants, activists say | AP News. September 18, 2023.

 

  

The Syrian thief

                                 So, when does your flight depart?  Photo source: FIKRA Forum
 

The Syrian Democratic Forces—the Kurds in Syria, fighting the dictatorial President Bashar al-Assad—last week bounced their liaison to the Arab tribes, Abu Khawla, head of the military council of Deir al Zor, the northeast province with most of Syria’s oil and water. The Kurds arrested him for a lot of things, including running drugs. But their real complaint is that he’s working with Assad. Now they've been attacking Khawla's tribal allies. More than 90 have died.

Khawla is a thief. He began his career by stealing motorbikes. But he's our thief: The Americans used him as a surrogate.  So the Kurds are basically turning on the Americans. Undoubtedly the Iranians are fomenting the Kurdish revulsion of Khawla to distract from the growing national rebellion against Assad.  The protest began against Assad’s witless doubling of fuel prices this summer but now also calls for democracy and therefore Assad’s ouster. Thanks to Russian support, Assad had been winning the 12-year civil war. But now he is even on the verge of losing his own ethnic group of Alawites, on the western coast. The Alawites were his loyal military core.   

Khawla’s loss of power bodes ill for the Americans. US troops control the oilfields of northeast Syria, ostensibly to keep them out of the hands of the Islamic State. Fighting Daesh is why a few hundred US soldiers are still in Syria. But the Arab tribes like the Akidat have long complained that US limits on oil exports out of Deir al-Zor province are robbing them—at a time when the Syrian economy is already collapsing, due to Western sanctions and the central bank’s bungling of the supply of Syrian pound, which lost two-thirds of its dollar value overnight. More than 90% of Syrians live on less than $2 per day. It would take little to turn the tribes against the Americans for good. Then there will be real trouble, and not just in the northeast.

What is the White House doing? Nothing. The National Security Council has no Syrian strategy. (The official name is “laissez faire.”) You may recall that it had no Afghanistani strategy, either. But Biden is focused on Ukraine.

So that leaves the US Army to make policy in Syria. General Matthew McFarlane, who headed the fight against Daesh, is out, to the obligatory praises of the head of Central Command, General Erik Kurilla.  Kurilla and several Republican senators visited the Syrian Democratic Forces recently, presumably to try something new. But now the Kurds are acting on their own.  In a press conference last month, McFarlane said the number of Daesh attacks in the region had dropped two-thirds over the year; that the last major attack, on Ghwaryan Prison, was in January 2022.  But observers perceive growing Daesh activity in Syria.  

The Arab tribes in the northwest of Syria were revolting against the Kurds, as they did in the northeast. What was weird was that the Russians bombed the Arabs.  It was if the Russians were siding with the Syrian Democratic Forces, even though the SDF leads the opposition to Assad, Russia's nominal ally. Perhaps the Russians figured that the Americans were organizing through the Arabs an overthrow of Assad, and they wanted to bog down the US to get concessions in Ukraine.

As of today, the Americans seemed finally to have gotten a grip on the situation in Deir al Zor, since the Syrian Democratic Forces and the Arab tribes have stopped fighting.  But the fact remains that the Russians and Iranians outmaneuvered the Americans. I don't doubt that they will try again to eject US troops.

But no matter how skillfully they exploit tensions, Assad will find a way to gum up the works. Damascus now plans to cancel subsidies of food on top of those of fuel. This will drive Syrians into a frenzy. I suspect that Tehran and Moscow can dispense with his services.

 The prospect of starving will drive many Syrians to try to flee. But the European Court of Justice has just backed Greece in deporting a Syrian refugee. The Syrians are bottled up, and an explosion is nigh. Syria remains the textbook example of a country destroyed by fraud, incompetence, and international indifference.

 Possible steps towards a solution:

 (1)   The World Food Program of the United Nations is the world’s largest food donor, unfortunately. It could develop a serious statistical program enabling it to track where to spend money and how it is spent. In exchange, the United States could restore funding of the Program, which has seen its funds fall 40% in the past year. At present, no one quite knows where the Program’s money or food goes in countries like Syria.

(2)   The central bank of Syria could publish monetary data so that investors and donors would know how many dollars it needed to prop up the vanishing Syrian pound…and the extent to which the bank truly controls the money supply.  Hyperinflation makes eating expensive for Syrians.

(3)   The United Nations could compel Damascus to lift barriers to aid in opposition areas and to re-establish subsidies of fuel and food. Of course, in principle, such subsidies are a bad idea, because they lower prices below cost at the margin, ensuring over-consumption. But this is not the time to worry about principles. Syrian families rely on the subsidies to survive.  –Leon Taylor, Baltimore tayloralmaty@gmail.com

 

 Notes

 For useful comments, I thank Annabel Benson and Mark Kennet.

 I learn a lot about Syria from Al Monitor. The New York Times is as clueless as the White House...oddly enough, since The Times broke the story about the Assad family's control of the "poor man's cocaine," Captagon, in 2021. The US media in general, except for CBS News, is out to lunch. At McFarlane’s press conference, the only question from a Western reporter was from the propaganda agency Voice of America.

 

References

Edith M. Lederer. UN says it's forced to cut food aid to millions globally because of a funding crisis | AP News . July 28, 2023.

Special Online Briefing with Major General Matthew McFarlane, Commander, Combined Joint Task Force-Operation Inherent Resolve - United States Department of State

Jared Szuba.  Syria’s Kurds struggle to contain backlash after detaining allied Arab militia leader - Al-Monitor: Independent, trusted coverage of the Middle East . September 2, 2023.

No way out now

                                           A new Arab Spring?  Photo source: The Syrian Observer 

Renewed civil war beckons in Syria, unnoticed by the American news media.

The central bank no longer has US dollars to defend the Syrian pound, which has plummeted to 15,000 pounds per dollar. Prices are more than doubling every year, and the pace is accelerating. Well more than 90% of the population is poor even by the World Bank standard of $2.15 per day (using 2017 prices).

Under the dictatorial President Bashar Assad, Damascus has responded to the hyperinflation by nearly doubling fuel prices and cutting back on military salaries. Public salaries have dropped to as little as $7 to $10 per month, and the government in most of the country is at a standstill. The only remaining domestic supporters of Assad, the elite, are revolting. Organizing via Facebook, the students in al-Aswayda Province have shut down the schools. Youth protests are also mounting in the southern province of Daraa. The Druze lead protests in certain areas.

Assad long was supported, and instructed in the art of brutality, by the Russians, who enabled Assad to dominate the civil war that broke out in the pro-democratic Arab Spring of 2011. The Russians are still bombing the opposition in the northeast, among more than 450 Russian raids this year, according to the White Helmets, a Syrian rescue group. But the most effective Russian forces in Syria were the Wagner group, now in disarray after the assassinations of their two leaders in a plane crash near Moscow this week. That leaves Iran as Assad’s only real ally. For weeks he has been edging towards Tehran, which gives him oil and dollars (the latter through joint banks). Will they insist on giving him military support as well?

Israel wouldn’t condone an expanded Iranian presence without a fight. It already bombs Syrian airports with some regularity, interfering with a few humanitarian routes into the country. So…where are the Americans?

Close to the thick of the fight. The head of Central Command, General Michael Kurilla, this week visited two major refugee camps in northeast Syria, an opposition area, to express solidarity and to meet with the 100,000-member Syrian Democratic Forces, largely Kurdish. Ostensibly, the main American goal is to thwart Daesh (the Arabic acronym for the Islamic State) by working with the terrorists’ Kurdish foes -- to the dismay of Turkey, which regards Kurdish nationalists as terrorists itself. Confused by the complex conflict, and perhaps making a gift of Middle Eastern power to his friend in the Kremlin, former President Donald Trump had ordered withdrawal from Syria.  But he countermanded this command after the military recommended "guarding" the Syrian oilfields in the northeast. "Oil" is the magic word to Trump. Now reportedly the Americans are quietly organizing opposition to Assad through tribal groups in Syria.

One of two outcomes seems likely. Most probable, I think, is that Iran will take charge in Damascus. Regional conflict and perhaps regional war will follow, pitching Iranian Shiites against Sunnis in neighboring countries like Saudi Arabia. Most of the 19 million Syrians would likely starve in the resulting neglect.

The other possibility is that Assad will see the light and work with the Arab League to settle differences with the opposition to the extent that he can remain in power. This would mean cooperating more genuinely with the United Nations on humanitarian aid; restoring fuel subsidies and military salaries; and extending aid to non-opposition Syrians who, according to the UN humanitarian agency, already cannot afford much food, especially in the wake of Russian blockage of Ukrainian wheat exports.

These salutary measures would require a credible dollar reserve at the Syrian central bank, which has bungled monetary policy for more than a decade; and foreign aid, superficially perhaps through the Arab League -- but really from Saudi Arabia and even the US and Israel, none of whom want to see Iran become the major player in the Middle East. – Leon Taylor, Baltimore tayloralmaty@gmail.com

 

Notes

I thank Nick Baigent, Annabel Benson, Mark Kennet, and Forest Weld for helpful comments.

 

References

The Syrian Observer.   Various issues.  Main - The Syrian Observer

The Syria Report. Various issues.  Syria Report – Economy, Business and Finance – Syria and the Middle East (syria-report.com)

The Prigozhin effect

 

                                            Forgot the flight insurance.  Photo source: Reuters.

 The apparent assassination this week of Vladimir Putin’s chef and rival, Yevgeny Prigozhin, who led a mutiny against the Kremlin two months ago, strengthened the Russian President’s grip on power. Presumably, this will stabilize Russia politics for the nonce. So one would expect the ruble to gain value relative to other currencies.  For example, Russian investors looking for somewhere to park their funds may reinvest in Russia, raising the demand for rubles.

And indeed the exchange rate of rubles per dollar fell sharply on the news yesterday of Prigozhin’s plane crash, from about 95 rubles per dollar to 94. Since then, it has recovered to 94.5: The plane crash was a big deal, but not that big. 

And curiously, most of the movement in the ruble occurred several hours before the plane crash was widely known in the US or Europe.  Prigozhin's plane left Moscow about noon UTC Wednesday and crashed shortly thereafter.  The ruble began climbing about 12 hours later and slowed down by 3am UTC, about an hour before Reuters reported the crash. Hmm…

But although the ruble gained in dollars, it lost in tenge.  It fell from 4.9129 tenge at 12:30 UTC to 4.8286 at 3am August 24. (The table below gives the equivalent times in Washington and Almaty.) The ruble strengthened to 4.8806 tenge at about 6am August 25. But it remained below the value that prevailed before news of the plane crash.

Event	UTC	EDT	Almaty time
Ruble rises in $	12:30, August 24	8:30pm, August 23	6:30am, August 24
Ruble rise ends	3:00am, August 24	11pm, August 23	9am, August 24
Most recent report	6am, August 25	2am, August 25	Noon, August 25

 

This is intriguing. It is not likely to be due to intervention by the National Bank of Kazakhstan in the foreign exchange market.   The Bank does not release statistics of interventions until after a month, but this is probably not the sort of event that would trigger its interference.  In fact, the Bank reports no purchases or sales in the domestic forex market since December 2022 at least, in its commitment since 2015 to keeping its mitts off the tenge exchange rates. So the reason for the weakening of the ruble vis-à-vis the tenge must lie elsewhere.

One possibility, if I may speculate, is that the consolidation of Putin’s position makes more possible that Putin’s War will continue. Another draft may be in the works. Especially with the loss of Prigozhin’s Wagner group, which had recruited prisoners, such a draft may call up young, educated Russians. Anticipating this, they would flee to Kazakhstan, selling rubles in exchange for tenge. The ruble would weaken in terms of tenge.

These curious shifts come in the wake of the desperate attempt August 21 by the central bank of Russia to shore up the ruble by jacking up the interest rate by 3.5 percentage points to 12%. Western sanctions and softening oil prices had undermined the Russian currency. The higher interest rates in Russia did indeed boost demand for the ruble, so the exchange rate of tenge per ruble rose a few days ago.

Now the ruble is falling in tenge. This might be in part an adjustment to the over-reaction to Moscow’s hike of its interest rate, which the National Bank of Kazakhstan, with its eye on the long run, sensibly refused to follow. In fact, the National Bank has cut the base rate by a quarter-point to 16.5%, effective Monday, August 28, as inflation in Kazakhstan keeps falling. The tenge is already weakening noticeably in dollars, from 461.81 Wednesday to 464.84 at 11:19am Friday UTC. Zowie! One reason is that an investor will sell tenge and buy other currencies as their relative rate of return rises due to the fall in Kazakhstani interest rates. – Leon Taylor, Baltimore tayloralmaty@gmail.com

Notes

For useful comments, I thank Dmitriy Belyanin.

  

References

Google Finance. The exchange rate of rubles to dollar. https://g.co/finance/USD-RUB?window=5D

Google Finance.  The exchange rate of tenge to ruble.  https://g.co/finance/RUB-KZT?window=5D

Google Finance. The exchange rate of tenge to dollar.  https://g.co/kgs/NGii4J

National Bank of Kazakhstan.  Data on interventions of the NBK | National Bank of Kazakhstan

Reuters. Wagner boss Yevgeny Prigozhin listed in Russian plane crash with no survivors | Reuters

Can Bidenomics pay off?

 

                      Master of Bidenomics...or mastered by it?  Photo source: White House

The Fitch ratings agency downgraded US government bonds last week, saying Uncle Sam was not as reliable a borrower as he once was. The downgrade may raise the cost to the government of borrowing, because creditors may demand a higher rate of return -- that is, a higher interest rate -- to compensate for the loss of credibility.  Well, maybe. Treasury bonds are still highly credible.  The burning question is whether Fitch was right to say that the government has taken on too much debt. 

The White House scoffs that public debt does not harm the economy. Such investments as roads and universities enable us to produce more than before, argues the Biden Administration. They don’t drag down the economy; they accelerate it.

Of course, some public investments do pay off. We couldn’t have an economy without the protection of the military. The question raised by Fitch was whether most public investments pay, where “investment” refers to anything that the government finances by borrowing. The largest categories in Uncle Sam’s spending are Medicare and Social Security. Medicare invests in health; Social Security, in the quality of retired life. Undoubtedly such investments help us live better. But do they grow the economy?

 

A simple way to answer this question is to look at the ratio of public debt to GDP over the long run. If public investments pay off, they should raise output by more than is necessary to pay off the loans. The ratio of debt to GDP should fall over time.

 

In the figure below, the debt share of GDP has risen fairly steadily since the early 1980s, in the Reagan years, when Congress borrowed heavily to fight a severe recession. The debt share falls in the late Nineties, when the economy computerized and the federal budget went into surplus in the late Clinton years.  But it has risen ever since -- save after 2020, when the government stopped spending so heavily to fight the pandemic recession. Yes, MAGA Republicans, the debt share actually fell in the Biden years.

 

But in general, there is no evidence here that public investment has saved the economy. To the contrary.

 

Of course, public investment is not the only factor immediately affecting GDP. Business cycles, wars, immigration, demographics, and serendipitous innovations all play a role. But if the federal government eventually responds to these challenges with useful projects, then the debt share should fall over the course of decades. And it clearly does not. – Leon Taylor, Baltimore tayloralmaty@gmail.com

 

     

     

  Source of graph: St. Louis Fed

Reference

Spencer Jakab. The Scary Math Behind the World’s Safest Assets - WSJ. Wall Street Journal. August 1, 2023.

Hard heads, soft landings

                                            Photo: Getty Images

Is the US economy headed for a soft landing – that is, for an easing of inflation (the average rate of increase in prices) without more unemployment?

Former US Treasury Secretary Lawrence Summers doubts it. "The idea that bringing down inflation has nothing to do with increasing unemployment runs different from all conventional macroeconomic assessments.”

Well, let’s see. In the usual model, there is indeed a tradeoff between unemployment and inflation, given the inflation that people expect. If inflation is higher than expected, then workers will demand pay hikes to cover the higher cost of living. Employers will resist with layoffs.

But if expectations of inflation fall, the whole relationship between inflation and unemployment changes. Every rate of unemployment can occur with lower inflation than before.  This is because workers no longer expect such steep increases in the cost of living, so they don’t demand such high pay hikes. Employers are willing to accommodate their moderate demands.

The upshot is that in principle, the labor market can continue to clear but at lower inflation, with no change in unemployment. In theory, a soft landing is perfectly possible.  The Fed "just" needs to lower expectations of inflation.

But today those expectations are stubbornly high. The Survey of Consumer Expectations at the New York Fed indicates that people have been anticipating about 4% inflation for a year, double their expectations in 2020.  True, expectations have fallen for three months, but only slightly.

Another bit of discouraging news is that, unusually, long-term interest rates have fallen below short-term rates.  This usually signals a recession. The idea is that investors expect a recession to cut spending and thus cut the demand to hold money.  This would lower the price of borrowing money, which is the interest rate. This may occur because investors expect the Fed to try to cut expectations of inflation by raising interest rates now (as indeed it is doing) and lowering them later when unemployment rises. This would explain the pattern that we observe today: High interest rates today, expectations that low rates would occur years later.

But the matter is not so clear. Expectations of higher unemployment haven't changed much for a year. Only about 40% of survey respondents expect unemployment to rise, and the share is dropping slightly, according to the New York Fed. This doesn’t suggest that the typical person expects a recession.

As always with the national economy, any prognostication is a judgment call.  I wouldn't rule out a spike in unemployment in 2024. But neither would I expect it, as long as the Fed continues to signal that it won't let inflation rise. The Fed’s sudden if belated boosts in interest rates have been accompanied by a halving of inflation in a year. I think it’s succeeding.

The key is that the wage, adjusted for inflation, is rising while job gains are falling. The labor market is heating up, and the resulting clamor for pay hikes causes employers to think twice about creating jobs. But this need not cause unemployment to skyrocket. It's a natural adjustment of the labor market to a rise in labor demand.

The informal forecast of an unemployment spike usually draws upon our awful experience in the Seventies and early Eighties, when annual inflation hit 13.5%. The Fed had not been in the habit of controlling the money supply, and expectations of inflation spiraled out of control. To cope, the new Fed governor, Paul Volcker, jacked up interest rates to record levels, engineering a deep recession. This convinced people that the Fed meant business, and expectations of inflation fell. 

Today, thanks partly to Volcker, neither inflation nor expectations of it are nearly as high as before. It need not be the case that cutting inflation to 2% now will require a major recession.  People have already seen what the Fed is capable of doing.  

I suspect that as long as the Fed is careful, we can have a soft landing.  But I’ve been wrong before.  After all, I’m a journalist. -- Leon Taylor, Baltimore tayloralmaty@gmail.com

 

References

Jeff Stein. Larry Summers was Biden’s biggest inflation critic. Was he wrong? - The Washington Post

Survey of Consumer Expectations - FEDERAL RESERVE BANK of NEW YORK (newyorkfed.org)

 

Don't keep on truckin'

                                            Yellow retires its wheels. Photo source: AP

The business reporters, with their usual charming innocence, tell us that the reasons for Yellow Trucking's demise can be found in Yellow and union press releases. The union killed us, says Yellow. Mismanagement, says the union. 

Yellow's problem is that it cannot pay off debts and workers. It can't find investors to cough up the cash. Granted, this may be because Yellow executives need a clue or the Teamsters went too far.  But the truth is probably simpler: Trucking has been on the skids for four years. 

Figure 1 shows the ratio of the freight index, which measures freight volume, and which trucking dominates, to gross domestic product, which measures the value of US output. The freight share of GDP has fallen steadily since the beginning of 2019.  The New York Times suggests that trucking has increased, especially small truck firms. But what matters is the relative demand for trucking, since investors will look for the industry that gives them the best return to their moolah. The relative demand for trucking is shown by Figure 1. It has been falling since even before the 2020 recession. 

Now suppose that the relative demand for the segment of the trucking industry that includes Yellow is rising.  Also suppose that investors think that this segment can withstand the overall decline in trucking in years to come.  And yet they pass on investing. Then the case for feckless executives or union leaders strengthens. But one must first check out the "supposings." 

In fact, relative demand for freight has risen over 17 years.  As a function of quarters, relative demand since 2007 follows the regression equation .9008 + .0006 Quarter. That is, over 10 quarters, relative demand rises by three-fifths of a percentage point. The chances that there is really no time trend are virtually nil. (Note for stat fiends: The P-value for the Quarter coefficient is .0009.)

Why do people demand more freight over time? One reason may be that they are growing richer, so their time becomes more valuable. We have only 24 hours a day but may have any amount of money. To save time, people may order online rather than drive to the stores. And the growing convenience of online shopping may induce us to shop more.

Yes, a lot more is going on here than just the passage of time, which accounts for only a seventh of the fluctuation that occurs in relative demand from quarter to quarter. As we'll see, the business cycle matters. Still, there is no obvious reason here to dismiss freight as a good investment to hold for years. Since investors passed up this opportunity, they either are mesmerized by short-run returns or worried about clueless business leaders.

Figure 2, from the US Bureau of Economic Analysis, shows that freight suffers more than most industries from recession (depicted by the gray columns). Yellow borrowed $700 million (million, New York Times, not billion) in the pandemic of 2020 but never recovered. Yet another bailout success story to warm the heart, and one that strengthens the suspicion of incompetence in the swank offices of Yellow or the Teamsters.

Finding the basic data for this analysis took all of 90 seconds. 

When a firm or union knows that a story about it will hit the headlines, it will take advantage of this to make political points of its own. But not even the stenographers of The New York Times have to lap it up. They can do the numbers. -- Leon Taylor, Baltimore, tayloralmaty@gmail.com 

Data source: US Bureau of Economic Analysis

Data source: US BEA

Reference

Peter Eavis. Trucking Giant Yellow Is Bankrupt, and Finger-Pointing Begins - The New York Times (nytimes.com)  August 7, 2023.