SOTU: ECON Index

 

Notes

SOTU ECON Measurement Model

ECON Codes

World Measurement Model

SOTU AIC Statistics

What's the Difference Between Liberalism and Neoliberalism?

 

Notes

ChatGPT

Feature	Liberalism	Neoliberalism
Time period	18th-19th century origins	Late 20th century
Primary goal	Broad individual freedom	Market efficiency & competition
View of the state	Limited but essential for rights	Minimal, facilitator of markets
Markets	Useful but not absolute	Central organizing principle
Social policy	Some support for welfare	Shrink welfare; use market mechanisms
Freedom	Civil and political freedom	Freedom as market choice
Attitude toward inequality	Liberties more important, but some thinkers favor moderation	Often accepts inequality as necessary

The State of the Union Address (SOTU)

February 24, 2026 President Donald Trump gave the State of the Union (SOTU) address for the first time in his Second Term. It was awful. In Google AI's summary:

This is not to say that Modern SOTUs have been much better. 

From the standpoint of Systems Theory, the state of a system has many meanings depending on the system being studied. In Political Science, the "State" is the geographic area controlled by a central government--a non-variable.  In Systems Theory, I like the following definition better:

The State of a system is the minimal collection of independent variables that explain the past and future path of the system.

As a place to start defining the State of the Union,  I asked chatGPT to describe what topics should be included in the SOTU:

It is too much to expect that any President would be able to address all the topics above and the ones omitted are most likely the ones where the Administration is failing!

My proposal would be for some entity outside of government to take each of the chatGPT topics separately, and focus on defining and reporting on the state of each subsystem (Economic, National Security, Domestic Policy, Democracy-Governance, and Social Issues) and then forecast the state variables for the Future Vision. The graphic above does this for US1, a summary Economic-Environmental state variable from the USL20 Model (see the full description here and in the Notes below).  

Notice that there are alternative futures based on alternative Geopolitical Alignments. Business-as-Usual (BAU) with the US continuing as the World Hegemonic leader produce unending exponential growth. Again, using Google AI:

Since the Trump II Administration seems to be stepping away from the Rules-Based World Order (RBO) there should be a democratic debate about the Trump II Administration's unilateral change in US Geopolitical Alignments. Instead, it is presented as a one-line "America First" slogan in the SOTU without prior Congressional debate or public input. 

For example, the forecast above shows that Geopolitical Alignment with the World System (W) would produce a Steady-State Economy in the US after 2050. Given the Environmental consequences (if not complete impossibility) of unending exponential growth,  the more reasonable idea of Limits to Growth should be debated with wide-spread public input. It is a Future Vision for the US and the World System!

I future posts, I will take each of the SOTU topics and develop a Measurement Model for each that allows the state variables to be forecast. The Measurement Model for the USL20 model is presented below and it should be scaled back to provide a reasonable SOTU Economy Index.

P.S. The Trump II Administration may actually be taking the US on a Random Walk, in which case the future is unpredictable.

Notes

You can run the R-code for the USL20 Model here.

USL20 Measurement Model

There are three component state variables in the USL20 model explain 90% of the variation in the indicator variables: US1 = (Growth - X - DPR - EPR - Q.OIL - O.BANKS - CAPU). 

USL20 State Indicator Codes

 

Data Sources: Mostly US Historical Statistics.

 

Inside Colombia's Cocaine Empire

 

Notes

For more information about Colombia

For more information of Mexico, see the Blog Roll here. For information on data sources and how the state space models were constructed, see the Boiler Plate. Code for the MXL20 Model can be run here.

The Geopolitics of Cartels in Mexico

 

Feb 27, 2026 The video above argues that the growth of powerful cartels in Mexico is the result of Geopolitical Conflict between China and the US. Recently, EL Mencho a Mexican Drug Kingpin, was murdered by Mexican authorities with intelligence help from the US. The cartels have taken to the streets in a wave of violence that is just now subsiding.

In this post, a look specifically at how Geopolitical Linkages with China would (or would not) benefit Mexico. Short answer: Geopolitical Linkage with China is the worst possible future for Mexico.

The graphic above shows three alternative futures for growth of the Mexican Economy (MX1) from the MXL20 model. The best future is Business-as-Usual (BAU) that is, no Geopolitical Linkages. The worst future, by far, is Geopolitical Linkage with China (CN) which leads to growth collapse. Continued entrenchment of Cartels in addition to other Chinese Economic Exploitation would damage the country well past the distant future in 2100. 

Since it does not seem that either the US or China will leave Mexico alone to find it's own future (BAU), a reasonable strategy or the Medium-term would be a Random Walk (RW), that is, responding randomly to alternating pressure from the US and Chia. The execution of El Mencho may well be one such random response.

Notes

For more information of Mexico, see the Blog Roll here. For information on data sources and how the state space models were constructed, see the Boiler Plate. Code for the MXL20 Model can be run here.

Why Does the World Bank Think It is Failing?

 

The Economic Institutions formed after the Bretton Woods Conference in 1944 are the International Monetary Fund (IMF), the World Trade Organization (WTO) and the World Bank (WDB).*** These three global organizations were the economic basis of the Rules-Based World Order (RBO). Commentators are now saying (here) the the RBO is finished.

To understand the future of the RBO (or it's replacement, if anything) it would be useful to look at the goals of the underlying institutions and how well they achieved their objectives. The post starts with the World Bank (or World Development Bank, WDB, as it should be named).

Since the 2024 Poverty, Prosperity and Planet Report: Pathways Out of the PolyCrisis, the WDB has been involved in some soul-searching, particularly with regard to Extreme Poverty.

Using Figure 1 above, the WDB argues that extreme poverty has stagnated.

Using my own data and models

Notes

*** The  World Bank does not have an agreed-upon acronym possibly because it is not a "bank" in the usual use of the term. It does not accept deposits, invest member funds and return interest. It is actually a World Development Bank (WDB) that is tasked with helping Developing Countries increase economic growth. The actual goals, according to Google AI are:

 

Input Indicators Codes

Input Measurement Model

Input Time Plot

Output Measurement Model

Output Time Plot

WL20 Hardship Indicators

Predicting and Controlling HyperInflation in Venezuela

In a prior post (here) I presented one measure of Inflation in Venezuela (NY.GDP.DEFL.KD.ZG from the World Development Indicators) with an attractor path and 98% Bootstrap Prediction Intervals.** The graphic above shows that there were two periods (the 1970s Energy Crisis and the 1994 Caldera Banking Crisis) where inflation spiked well above the upper 98% prediction interval. Interestingly enough, during the Chavez Period, inflation was well below the lower 98% prediction interval. What might we expect for the period after Hugo Chavez died in 2013 and his predecessor Nicolas Maduro came to power?

In the graphic above, I extend the Inflation data (using another GDP Deflator** from the World Development Indicators). For most of Maduro's reign, inflation seemed under control. Then in 2020 it started to take off and went exponential around 2025. Maduro was removed from power as a result of a US Invasion on Jan 3, 2026.

President Trump has said that, possibly for years, the US will run Venezuela. One of the most pressing problems is to get hyperinflation under control. It will not be easy. ChatGPT concludes:

Any prediction about what might happen to the Venezuelan economy in the future will be very uncertain.

Notes

** Inflation is usually presented as percentage changes in the GDP Deflator. For technical reasons, I do not use the conventional measure in statistical estimation. Change scores, Q(t) + E(t) - Q(t-1) - E(T-1), contain error, E. In time series data, the errors are unlikely to cancel and are typically not normally distributed and will not cancel in probability. The regression coefficient, B,  for a time series model of the deflator, DEFL(t) = a + B DEFL(t-1) + E(t-1) is better estimate of deflation and is free of error,  E(t-1).

Maduro Removed from Power