Friday, September 28, 2012

Friday Thought

Hello all! I am still alive and very well. Work is going great and about my only complaints are the Patriots and the beginning of Fall (which leads to the evil winter). Hope you are all well. Saw a great piece today and it inspired some thoughts.

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.

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.