My new podcast, China's chip struggles, where Americans are moving, strategies for growing exports, urban design, the IRA's effects, and Larry Summers' predictions
Thanks a ton for highlighting my piece on the chips sanctions Noah! I have been super pleased with the response to that article, and am looking at writing a lot more on the topic in the future!
Has anyone done any theorizing about why the interest rate hikes haven't produced higher unemployment? They're clearly having an effect on the economy - ask any of my friends looking to buy a house or a car right now - but I wonder why unemployment hasn't risen with them. Perhaps there's still latent heat in the economy and unemployment is just being a lagging indicator, or maybe something strange going on with definitions given the general decline in working age population? Noah, do you have any hypotheses?
Great collection of information/insights. Thank you.
Re: Interest rates. The biggest transmission to the economy may be the eventual effect on the stock market. A steep decline could also be a decisive factor in the 2024 election, unfortunately in favor of the Republican nominee. I think this is an under appreciated risk. As is the rollback of all the Covid era programs.
And I think people don't appreciate how linked our economy has become to the stock market from a behavioral point of view
Nice Podcast. One observation... the dramatic impact of technology driven productivity is not really included in the conversation. Not surprising...economists generally miss the non-linear impact of technology. The story of the last 50 years is often framed in political terms, but most of the big changes have been driven by technology/innovation driven shifts.
Summers is, in my opinion, the worst applied economist of his generation. It’s not enough to be smart. Very serious smart people can inflict financial and work-career damage on millions of Americans. You can sweep just so many things under the carpet. If you sweep Summers’ policy performance under the carpet, you won’t be able to walk out of the room:
Remember when random Coeur d'Alene Idaho became the hottest housing market in the whole country, and right there in the WSJ article they had to admit a big reason was mask-free schools?
Or when explicitly anti-Mandate Ron DeSantis won an enormous gubernatorial victory "despite" a huge, recent influx of Floridians from bluer states?
But I am sure all this movement from lockdown/mandate states to free states during a time period that includes 2020-2022 was all for generic pre-Covid reasons like cheaper land.
(Although, there is plenty of very cheap land in Buffalo.)
I think we need both second street density, which seems like a great idea, and big thoroughfare density. The second streets preserve the appeal of local neighborhood commercial strips. In addition, the big streets already have lots of traffic and not much charm, so there's no harm in building density there as well.
To use San Francisco examples, build higher one block off of Clement Street so that Burma Superstar doesn't get replaced by a parking structure, but also build higher on Geary and California, which in this case happen to be one block away from Clement anyway.
Re #6: Summers is clearly wrong, but it's not the specific amount of people he thinks we need to lay off, it's his entire analysis of the problem.
We had a global pandemic, a war in Ukraine, and energy prices shooting up. All of these things which so clearly affected prices and economists are sitting there going no, don't believe your eyes, it's workers making too much money that's the problem. Even while real wages are lower than pre-pandemic.
Japanese zoning (http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html) is of course a lot more sensible than American Euclidean zoning, but I can't help thinking that it was only possible in Japan because it is an ethnically homogenous country.
A quick comment on cities. Staying right now for some extended time in NE Spain (Girona). And in that city and others that we visited - the walkability is so much higher. Part of it is that these have older cores with narrow streets, alleys, multiple 2nd and 3rd back streets. Part of it is density and compactness. Mostly just saying how different it is than most American cities that are so centered around autos (especially in the West, but a lot of the rest of the country as well).
Density really can work well when done right (whether intentionally or historically or just lucky)
“Dutch export control rules will forbid ASML from maintaining, repairing and providing spare parts for controlled equipment without government approval, people familiar with the matter said.” -- Bloomberg
This is significant, more for China than ASML. Clients are dependent on ASML to repair/maintain the high-end machines. While an important revenue stream for ASML, the damaged is limited and eclipsed by a huge backlog and ever-increasing demand for its high-end machines. Because of ASML’s product quality and excellent support/repair, 90% of ASML machines are still working. In fact, there is a resale market for ASML machines.
Would be interesting to know how much of this population movement is short-distance/ within m-state rural to urban county movement versus moving from one metro to another. Especially considering the midwest and southern triangles, which,based on intuition, seem to be more driven by people moving from rural/exurb to cities.
Thanks a ton for highlighting my piece on the chips sanctions Noah! I have been super pleased with the response to that article, and am looking at writing a lot more on the topic in the future!
Love these Noah
Has anyone done any theorizing about why the interest rate hikes haven't produced higher unemployment? They're clearly having an effect on the economy - ask any of my friends looking to buy a house or a car right now - but I wonder why unemployment hasn't risen with them. Perhaps there's still latent heat in the economy and unemployment is just being a lagging indicator, or maybe something strange going on with definitions given the general decline in working age population? Noah, do you have any hypotheses?
I'd love your take on this.
https://wapo.st/3DaPTBF
https://open.substack.com/pub/exponentialview/p/q2-3-months-in-ai-in-6-charts?r=dvwlc&utm_medium=ios&utm_campaign=post
Great collection of information/insights. Thank you.
Re: Interest rates. The biggest transmission to the economy may be the eventual effect on the stock market. A steep decline could also be a decisive factor in the 2024 election, unfortunately in favor of the Republican nominee. I think this is an under appreciated risk. As is the rollback of all the Covid era programs.
And I think people don't appreciate how linked our economy has become to the stock market from a behavioral point of view
Below is my analysis (with a Disney World motif)
https://robertsdavidn.substack.com/p/warning-there-be-squalls-ahead-the
Nice Podcast. One observation... the dramatic impact of technology driven productivity is not really included in the conversation. Not surprising...economists generally miss the non-linear impact of technology. The story of the last 50 years is often framed in political terms, but most of the big changes have been driven by technology/innovation driven shifts.
Summers is, in my opinion, the worst applied economist of his generation. It’s not enough to be smart. Very serious smart people can inflict financial and work-career damage on millions of Americans. You can sweep just so many things under the carpet. If you sweep Summers’ policy performance under the carpet, you won’t be able to walk out of the room:
https://ritholtz.com/2021/06/why-does-anyone-care-what-lawrence-summers-thinks/
https://www.nytimes.com/2021/06/25/business/economy/larry-summers-washington.html
Remember when random Coeur d'Alene Idaho became the hottest housing market in the whole country, and right there in the WSJ article they had to admit a big reason was mask-free schools?
https://www.wsj.com/articles/why-is-coeur-dalene-americas-hottest-housing-market-11619644273
Or when explicitly anti-Mandate Ron DeSantis won an enormous gubernatorial victory "despite" a huge, recent influx of Floridians from bluer states?
But I am sure all this movement from lockdown/mandate states to free states during a time period that includes 2020-2022 was all for generic pre-Covid reasons like cheaper land.
(Although, there is plenty of very cheap land in Buffalo.)
I continue to be amazed at how well the Fed's smooth landing appears to be going (and no, I don't believe in jinxes). I hope it continues!
I think we need both second street density, which seems like a great idea, and big thoroughfare density. The second streets preserve the appeal of local neighborhood commercial strips. In addition, the big streets already have lots of traffic and not much charm, so there's no harm in building density there as well.
To use San Francisco examples, build higher one block off of Clement Street so that Burma Superstar doesn't get replaced by a parking structure, but also build higher on Geary and California, which in this case happen to be one block away from Clement anyway.
Re #6: Summers is clearly wrong, but it's not the specific amount of people he thinks we need to lay off, it's his entire analysis of the problem.
We had a global pandemic, a war in Ukraine, and energy prices shooting up. All of these things which so clearly affected prices and economists are sitting there going no, don't believe your eyes, it's workers making too much money that's the problem. Even while real wages are lower than pre-pandemic.
https://fred.stlouisfed.org/series/COMPRNFB
https://fred.stlouisfed.org/series/LES1252881600Q
Japanese zoning (http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html) is of course a lot more sensible than American Euclidean zoning, but I can't help thinking that it was only possible in Japan because it is an ethnically homogenous country.
A quick comment on cities. Staying right now for some extended time in NE Spain (Girona). And in that city and others that we visited - the walkability is so much higher. Part of it is that these have older cores with narrow streets, alleys, multiple 2nd and 3rd back streets. Part of it is density and compactness. Mostly just saying how different it is than most American cities that are so centered around autos (especially in the West, but a lot of the rest of the country as well).
Density really can work well when done right (whether intentionally or historically or just lucky)
“Dutch export control rules will forbid ASML from maintaining, repairing and providing spare parts for controlled equipment without government approval, people familiar with the matter said.” -- Bloomberg
This is significant, more for China than ASML. Clients are dependent on ASML to repair/maintain the high-end machines. While an important revenue stream for ASML, the damaged is limited and eclipsed by a huge backlog and ever-increasing demand for its high-end machines. Because of ASML’s product quality and excellent support/repair, 90% of ASML machines are still working. In fact, there is a resale market for ASML machines.
Would be interesting to know how much of this population movement is short-distance/ within m-state rural to urban county movement versus moving from one metro to another. Especially considering the midwest and southern triangles, which,based on intuition, seem to be more driven by people moving from rural/exurb to cities.