Deflationary Forces of Automation/Robotics vs. Never Ending Fed Printing
"Mish" Shedlock had a post up today that I could relate to. Regular readers will know the topic well:
Can the Fed Fight Droids and Win? Apple's SIRI, Driverless Trucks, What's Next? Riveting Video: Are Droids Taking Our Jobs?
As always Mish does a great job. A snippet:
The Fed cannot defeat droids. Unfortunately, the Fed does not understand it is exacerbating the problem. Sadly, the Fed does not even understand the nature of the forces it is fighting.
Read the whole thing.
Now because I have worked in an ultra competitive industry (biotech/pharma) I know the move towards automation is happening. It is accelerating. It is something that WILL happen, not may.
But let's back off a minute and say it MAY happen.
The US Fed is ready, willing, and able for the moment to spend maybe upwards of 2 Trillion dollars to lower the unemployment rate by 2-3% over the next.......well, we will see I guess. Never got a real number from them. To do this and really believe it the Fed must:
1.) Think the lack of jobs is still due to demand side issues, even though spending has not dropped among consumers and rejects the structural idea of job losses going forward
2.) Is not really concerned with jobs as their primary motivation for unlimited QE
For a perspective, consider:
Two Trillion dollars is 2,000,000,000,000 which would create for 1 year 40,000,000 (Forty Million) $50k a year jobs or 4 million of them for a decade time span!
Mind boggling.
Ben Bernanke is willing to spend that kind of money in the face of something he likely cannot control and only influence on the margin.
Think about it.
Have a good night.
11 comments:
Welcome back and congrats on the Patriots great start!
One point I'd like to make regarding the $2 trillion (or whatever figure that may be). This is different than the Fed spending it on things such as creating random jobs at $50k / year (that would be fiscal stimulus, which the Fed can’t do, and there is no appetite for politically). It’s simply an asset swap… in return for $2 trillion of paper, they will have $2 trillion in mortgage bonds (and other assets). It's a way of putting cash, instead of securities, in people's hands.
The benefits can be argued. If those jobs aren't there any longer (and replaced by robots), then jobs aren't coming back regardless how low this pushes interest rates without structural reform. However, if robots are really replacing people, that should mean that overall productivity and growth potential remains... just done by robots vs. these individuals. This does cause a shift in who owns the wealth from those replaced jobs… it now accrues to the robot makers and businesses with the robots at the expense of the now unemployed, but the overall wealth should be the same. The issue is that this will cause a drag to the broader economy as other businesses rely on these now unemployed people to participate in society (i.e. if those now unemployed and without money used to be the buyers of low price housing, sellers of low price housing need to find a new buyer). Not to mention the drag that rioting and social unrest will cause (i.e. look at Greece).
Not sure the above is english (writing from an iPhone where I couldn't see it all at once). Hope it at least makes some sense.
Hey Jake! As always great points and for a short write up I could not cover everything. The shift in wealth as robots take jobs and functions wont be to the middle class I think we could agree. I understand the 2 trillion is not actually put out there but swapped, the example is to get people thinking. Great to see you!
Oh yeah thanks for the Patriots kind words....good luck with the 49ers this weekend.
Welcome back, GYC. We missed your acerbic wit.
As far as this whole automation debate goes, yeah, well, everyone was saying the same thing when the automobile replaced the horse-drawn carriage.
It's a debate that's been going on since the Industrial Revolution. And remember, Frankenstein is not the name of the monster; it's the name of the mad scientist.
My favorite commercial of late is for Progressive, when Flo thinks Flobot is going to take her job away. "She's pretty good. . . . Uh, oh. Flobot is broken." She pulls the plug on the bot. Now, that's progress.
Technology advances, and people change jobs. What else is new?
The job of the future is, apparently, robot repairman.
"Deflationary Forces of Automation/Robotics vs. Never Ending Fed Printing"
Time for a cage fight!
"GawainsGhost said...
As far as this whole automation debate goes, yeah, well, everyone was saying the same thing when the automobile replaced the horse-drawn carriage."
I saw a documentary recently about the textile riots in the early 1800s as mechanized looms were putting loom workers out of a job.
Imagine if the loom workers won, and we here in 2012 had people spending ungodly amounts of time making clothes tee shirts for $400 a piece...
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