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At the 42-minute mark.

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Yep, capital intensity of the manufacturing sector had barely budged and equipment input growth had receded since then. That's likely turning around now. The value of constriction put in place for manufacturing facilities is surging, lifting with it workers in construction of industrial buildings. Given the tight labor market and perhaps a scarcity of skilled workers, the capital intensity of manufacturing is likely to increase. That is closely related to productivity growth. The manufacturing sector had dragged productivity down over the last decade. That may change, perhaps raising potential GDP growth. It may be too early to call it a new steady state, but the Fed better pay attention and re-think its long-term assumptions of growth (and whether the economy is above or below potential). My worry is that too restrictive a monetary policy may nip this positive outlook for manufacturing in the bud. And my hope is that (although prices should matter to relocation decisions) some of this is semi-autonomous, driven by geopolitical reasons and the hard lessons businesses learnt from the supply chain snarls over the past few years. Fingers crossed.

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We will see just what the marginal product of capita actually is...

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True. Fingers crossed.

Meanwhile, as of this morning, the modal value of the option-implied probability distribution (negatively skewed distribution) for rates is only a tad less than the Fed's terminal rate through Dec 2023. The Fed has neither "lost" the "narrative" nor the bond market, as some Very serious People keep reiterating (they did so again at an IMF panel that featured Ollivier Blanchard).

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Do tell. Is there a URL for the IMF panel?

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Brad, I just saw this from Bloomberg: "Bond Traders Are Less Gung-Ho for Fed Cuts Than Pricing Suggests." Talks about the let skew in the distribution that undermines the chatter about the Fed having lost the bond market.

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.... the left (not let) or negative skew ..

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Oh my, I practically forgot about the Cowboy Junkies! Thanks so much for the video, a favorite song of mine.

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One of the reasons why I subscribe to Grasping Reality is because you comb through Twitter and distill it to the interesting bits. Thank you. If Twitter is gone someday, oh well. Maybe we are migrating to the interesting bits of Substack? Fine by me.

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Hexapodia episode: The future of social media. I infer that you and Noah has some dealing and insight with Substack's exec's, you use Mastodon, and I see that you've backed up your Twitter. Also, what is the moral balance of staying on Twitter?

And if you can't fill out an hour with historical metaphors ... AI. And should AI be kept away from all social media lest it become a suicidal/genocidal?

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We don't do a lot of copy editing here, but it took me a moment to realize the "Bible administration" was the current one.

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Projecting virtù - that is to say, the manly and specifically the martial virtues - onto Ron DeSantis is hallucination worthy of ChatGPT.

When Northern Rock went down, I was shocked to learn that the UK's deposit insurance scheme covered 100% of only the first 2,000 pounds of a deposit; between 2,000 and the 33,000 pound cap, it only covered 90%. The low cap was a relatively minor problem with this policy; the bigger problem is that nobody wants to lose 10% of their money! It was an "insurance" scheme that was guaranteed not to meet its policy objective while simultaneously being exposed to the tail risk of recoveries below 90%, the worst of all worlds. In the end Northern Rock did the UK a favour by provoking them to fix this absurd state of affairs.

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I assume you’ve read Noah Smith’s worries about “check-ism”... The early news on progress siting fabs seems promising, but I worry the budgets will bloat, and that as you say, the reliance on a patchwork of less-established and potentially unreliable contractors will cause problems with scheduling, quality, and again costs. We need to learn how to build fabs on the kind of schedule, and at the kind of cost, they have in Taiwan. It’s not like they’re some third-world country!

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