Classical forum hall with golden accents

Gabaix

2 essays in the Forum tagged "Gabaix".

← All essays
Series One Extension

The Account Your Child Did Not Open: Trump Accounts, Mandated Bids, and Choosing Among Constraints

Section 70204 of the One Big Beautiful Bill Act created a new Internal Revenue Code section 530A, establishing what the statute calls Trump Accounts. Every United States citizen born between January 1, 2025 and December 31, 2028 is eligible for a one-time federal contribution of one thousand dollars. Families may add up to five thousand dollars a year. The money cannot be withdrawn until the child turns eighteen. And it must be invested in a mutual fund or exchange traded fund tracking the S&P 500 or a comparable broad index of primarily United States equities, with fees capped at one tenth of one percent, no leverage, no sector funds, no individual securities, and no self-directed alternative of any kind. That last provision is the subject of this essay. Article 53 of this catalog argued that the enormous price-insensitive bid in American equity markets requires no conspiracy because it is produced by mandates — public, uncoordinated, disclosed, and larger than any concealed scheme could be. Trump Accounts are that argument written into statute and applied to newborns. The essay works through the mechanics, estimates the scale of the flow, sets the program against the alternatives available to a self-employed parent, examines the 529 plan against the actual enrollment data rather than the rhetoric, and arrives at a position the framework states plainly: there is no unconstrained vehicle, the choice is among constraints, and the right method is to name the threat model before selecting the instrument.

Trump AccountsIRC 530Aindex fundsmandated bidGabaixKoijen529 planRoth IRAcustodychildrenframework extension
Watching the Cracks

You Don't Need a Conspiracy When You Have Mandates

Two claims have circulated in hard-money circles for decades: that precious metals prices are systematically suppressed, and that a government body known informally as the Plunge Protection Team intervenes to support equity prices. This essay examines both against the documentary record and finds the first partially vindicated in a form that does not support the thesis it is offered for, and the second unsupported in its operative element. Manipulation of precious metals markets is proven, prosecuted, and admitted — JPMorgan paid 920.2 million dollars in 2020, the largest monetary relief in the history of the Commodity Futures Trading Commission, for conduct spanning at least eight years and hundreds of thousands of spoof orders. But prosecutors established that the traders moved prices up and down for trading profit, which is bidirectional and tactical rather than unidirectional and strategic. The Working Group on Financial Markets, established by Executive Order 12631 in March 1988, exists exactly as described, with four named members and a stated mandate — and no appropriation, no trading desk, and no documented authority to purchase securities. The essay then argues that the manipulation frame has cost the hard-money literature enormously, because it searches for secrecy and therefore misses scale. Gabaix and Koijen, in work published by the National Bureau of Economic Research, measured what happens when the marginal buyer of equities operates under a mandate rather than a judgment: every dollar invested in the stock market raises aggregate market value by approximately five dollars, against a price elasticity of demand near negative 0.2 where theory predicts something closer to negative 20. Before publishing, they surveyed 102 academic economists; just over half predicted no price effect whatsoever. The framework's conclusion is that the enormous, price-insensitive, calendar-driven bid that hard-money writers intuit is real, larger than the criminal conduct they point to, and entirely disclosed — and that Menger's account of price formation explains precisely why that is the more serious condition.

Mengermarket manipulationspoofingJPMorganPlunge Protection TeamExecutive Order 12631GabaixKoijeninelastic marketspassive flowsWatching the Cracks