4 ms·

This is why it's crazy the Fed is trying to tank the economy the same time Congress is trying to do a CHIPS act. Crazy! If you are trying to do industrial poli

This is why it's crazy the Fed is trying to tank the economy the same time Congress is trying to do a CHIPS act. Crazy! If you are trying to do industrial policy you want to run the economy hot, more demand means less need to subsidize, and all the administrative and conflict-of-interest headaches that come with that.

pertymcpert 4y ago
Some things are more important than the CHIPS act.
- Ericson2314 4y ago
  There is little evidence inflation below a huge 40% or whatever causes any serious problems.
silisili 4y ago
Controlling persistent high inflation is way more important to the nation than homegrown chips right now.
- PaulHoule 4y ago
  Hard to say. I am seeing the service economy wracked by a failure to invest in people, process and technology. Go to a restaurant, hair salon, pharmacy, or attempt to ride the bus (the one I ride in the morning has been canceled) and it is right in front of you. I know just enough process science to be dangerous, but something I see in all of these cases is very long queues which themselves become a source of disruption and chaos. People seem to think that being willing to wait in line is a sign of maturity, but it is reduced to practice people seem to almost universally not understand that your doctor can't see more patients by making them wait longer. I was at a Dunkin Donuts the other day and rather shocked that, because of a lack of hash browns, the kitchen was unable to serve any customers waiting in the drive through for almost 30 minutes. The anti-inflationist would say the problem is that people have money in their pockets to order hash browns that the restaurant can't serve and if we crashed the economy hard enough demand would collapse below supply. My fear is that, without the capital being there to invest in people, process and technology, supply will collapse and we'll be stuck with an economy where "nothing works" but the level of demand keeps dropping.
  - supertrope 4y ago
    Customers are generally more forgiving of long lines and quality decrease than price increases. The value of time is subjective and often not purely rationally weighed. People will run a red light to save 35 sec. but then lay on their couch for two hours.
    - 1123581321 4y ago
      To me both of those examples seem like a preference to not change inertia/vector. I see your main point.
    - PaulHoule 4y ago
      It is not the latency which is killing that Dunkin Dounts, but the throughput. It could be the customers think waiting in the drive through line is a great use of their time but the workers who could be serving customers who don't want hash browns are left twiddling their thumbs because the drive-through is serialized.
      - supertrope 4y ago
        Drive through service is inherently inefficient. Barking your order into a speakerphone a meter or more away or through a window. Cars idle and form a line that can backup into a road. I wish more people would park and walk in.
        PaulHoule 4y ago
        You've got to see the McDonalds near the Ithaca Mall. They split the line into two streams to take your order, have a single window for payment and they will send you to an alternative pickup window or one of three parking spaces if your order is not ready at the main pickup window. The people there have an espirit de corps I've never seen at a fast food restaurant. But seriously, there is no excuse for inefficient businesses. If a business is inefficient the customers, owners and employees are paying for it. Sometimes it takes very bad business conditions for people to stop making excuses, unfortunately it also takes the bankruptcy court too often.
- Ericson2314 4y ago
  There is no evidence that inflation under 40% poses serious economic problems. There is no evidence that the current inflation is caught in something inertial like a wage-price spiral.
vanviegen 4y ago
It seems perfectly reasonable to do both. One may want to cool the economy as a whole to fight inflation, while boosting the local semiconductor industry to gain some digital independence.
- Ericson2314 4y ago
  The reason we have a chip shortage in the first place is that slow growth has rationalized underinvestment. I suppose we can have a reshored chips industry by handing out electronics coupons in a recession, but that is a really blunt instrument with high distortion risk. It's not like all chips are fungible or whatever, there is a real risk of subsidizing the "wrong thing" without a broader macroeconomic story (which could be planned in theory, but won't be in the US so we must rely on markets) to validate the "end use values" --- ensure the downstream benefits are extent to discipline the upstream chip production why also incentivize it. The good thing about finding bottlenecks in a high pressure economy is those are the actual problems to be solved. But problems shift --- the goalposts actually aren't fixed --- so better to keep things high pressure the whole time.
Vt71fcAqt7 4y ago
Demand is largley irrelivant here as these fabs will not be opening in the short term. As long as rates drop when the fabs are completed it will be fine. Besides DoD have almost ulimited funding, and they want this. Remeber the $10B they gave to MS for those useless helmets?
- Ericson2314 4y ago
  Monetary policy acts on aggregate demand with long and variable lags. This is the consensus position. The latencies are comparable, with plenty of uncertainty about each. If you are the Fed in one hand, and CHIPs in the other hand, it is like being in a pool of molasses trying to make a waves in a long jump rope that don't interfere once they meet in the middle.
KVFinn 4y ago
>This is why it's crazy the Fed is trying to tank the economy the same time Congress is trying to do a CHIPS act. Crazy! Aren't these on wildly different timelines? Anything created in the CHIPS act won't be cranking out chips for 5 or even 10 years, right? But inflation corrections can happen in a year or two. The CHIPS act is almost like insurance, in my opinion. If everything goes great in the future we don't need the CHIPS act and it retroactively feel kind of silly. But if something goes wrong (not necessarily human made decisions, an earthquake in the right place...) we'll be glad we could have a softer landing.
- Ericson2314 4y ago
  > But inflation corrections can happen in a year or two. Monetary policy sucks, there is little evidence of it ever creating a soft landing. (As opposed to regular market forces incentivizing more supply and fixing the issues on its own.) Also, the consensus view is it takes up to 2 years just to come in effect! The Fed is probably creating a 2023-24 recession right now just as the Ukraine war and other sources of supply disruption stop being a problem!

pertymcpert 4y ago

Some things are more important than the CHIPS act.

Ericson2314 4y ago
There is little evidence inflation below a huge 40% or whatever causes any serious problems.

silisili 4y ago

Controlling persistent high inflation is way more important to the nation than homegrown chips right now.

PaulHoule 4y ago
Hard to say. I am seeing the service economy wracked by a failure to invest in people, process and technology. Go to a restaurant, hair salon, pharmacy, or attempt to ride the bus (the one I ride in the morning has been canceled) and it is right in front of you. I know just enough process science to be dangerous, but something I see in all of these cases is very long queues which themselves become a source of disruption and chaos. People seem to think that being willing to wait in line is a sign of maturity, but it is reduced to practice people seem to almost universally not understand that your doctor can't see more patients by making them wait longer. I was at a Dunkin Donuts the other day and rather shocked that, because of a lack of hash browns, the kitchen was unable to serve any customers waiting in the drive through for almost 30 minutes. The anti-inflationist would say the problem is that people have money in their pockets to order hash browns that the restaurant can't serve and if we crashed the economy hard enough demand would collapse below supply. My fear is that, without the capital being there to invest in people, process and technology, supply will collapse and we'll be stuck with an economy where "nothing works" but the level of demand keeps dropping.
- supertrope 4y ago
  Customers are generally more forgiving of long lines and quality decrease than price increases. The value of time is subjective and often not purely rationally weighed. People will run a red light to save 35 sec. but then lay on their couch for two hours.
  - 1123581321 4y ago
    To me both of those examples seem like a preference to not change inertia/vector. I see your main point.
  - PaulHoule 4y ago
    It is not the latency which is killing that Dunkin Dounts, but the throughput. It could be the customers think waiting in the drive through line is a great use of their time but the workers who could be serving customers who don't want hash browns are left twiddling their thumbs because the drive-through is serialized.
    - supertrope 4y ago
      Drive through service is inherently inefficient. Barking your order into a speakerphone a meter or more away or through a window. Cars idle and form a line that can backup into a road. I wish more people would park and walk in.
      - PaulHoule 4y ago
        You've got to see the McDonalds near the Ithaca Mall. They split the line into two streams to take your order, have a single window for payment and they will send you to an alternative pickup window or one of three parking spaces if your order is not ready at the main pickup window. The people there have an espirit de corps I've never seen at a fast food restaurant. But seriously, there is no excuse for inefficient businesses. If a business is inefficient the customers, owners and employees are paying for it. Sometimes it takes very bad business conditions for people to stop making excuses, unfortunately it also takes the bankruptcy court too often.
Ericson2314 4y ago
There is no evidence that inflation under 40% poses serious economic problems. There is no evidence that the current inflation is caught in something inertial like a wage-price spiral.

vanviegen 4y ago

It seems perfectly reasonable to do both. One may want to cool the economy as a whole to fight inflation, while boosting the local semiconductor industry to gain some digital independence.

Ericson2314 4y ago
The reason we have a chip shortage in the first place is that slow growth has rationalized underinvestment. I suppose we can have a reshored chips industry by handing out electronics coupons in a recession, but that is a really blunt instrument with high distortion risk. It's not like all chips are fungible or whatever, there is a real risk of subsidizing the "wrong thing" without a broader macroeconomic story (which could be planned in theory, but won't be in the US so we must rely on markets) to validate the "end use values" --- ensure the downstream benefits are extent to discipline the upstream chip production why also incentivize it. The good thing about finding bottlenecks in a high pressure economy is those are the actual problems to be solved. But problems shift --- the goalposts actually aren't fixed --- so better to keep things high pressure the whole time.

Vt71fcAqt7 4y ago

Demand is largley irrelivant here as these fabs will not be opening in the short term. As long as rates drop when the fabs are completed it will be fine. Besides DoD have almost ulimited funding, and they want this. Remeber the $10B they gave to MS for those useless helmets?

Ericson2314 4y ago
Monetary policy acts on aggregate demand with long and variable lags. This is the consensus position. The latencies are comparable, with plenty of uncertainty about each. If you are the Fed in one hand, and CHIPs in the other hand, it is like being in a pool of molasses trying to make a waves in a long jump rope that don't interfere once they meet in the middle.

KVFinn 4y ago

>This is why it's crazy the Fed is trying to tank the economy the same time Congress is trying to do a CHIPS act. Crazy! Aren't these on wildly different timelines? Anything created in the CHIPS act won't be cranking out chips for 5 or even 10 years, right? But inflation corrections can happen in a year or two. The CHIPS act is almost like insurance, in my opinion. If everything goes great in the future we don't need the CHIPS act and it retroactively feel kind of silly. But if something goes wrong (not necessarily human made decisions, an earthquake in the right place...) we'll be glad we could have a softer landing.

Ericson2314 4y ago
> But inflation corrections can happen in a year or two. Monetary policy sucks, there is little evidence of it ever creating a soft landing. (As opposed to regular market forces incentivizing more supply and fixing the issues on its own.) Also, the consensus view is it takes up to 2 years just to come in effect! The Fed is probably creating a 2023-24 recession right now just as the Ukraine war and other sources of supply disruption stop being a problem!