US Political Discussion: Biden/Harris Edition (Rules in OP)

[narad]

Except that it is. It literally is. It IS a computer, or bunch of computers, running some software. It's a machine. It's not a brain, it doesn't "think" in the way a person thinks, it doesn't feel or reason - it's literally a set of instructions and weights and patterns being carried out by a machine, albeit a very complicated set of instructions.

That doesn't mean it won't have an impact, that jobs won't be lost, but I remain unconvinced that the general public have a solid grasp of what AI is now or will become later - and what its limitations are and will be.

Take as an example - the one that comes up often: graphic design. AI is really good at generating anything at all given a prompt. But what it can't do is understand what a client wants to convey and come up with something novel or clever to serve that purpose. Like the "hidden" arrow in the fedex logo: an AI could not have done that. You still need people for stuff like that. I'd be willing to believe that AI will take over the "I only care about this enough to pay someone on fiver for it" segment of graphic design, and the "I need something like a texture that's been done 100 times before but needs to be just unique enough" segment of art (which is a large segment, granted). But there's no data set for innovation, there's no data set for novelty.

I mean, I don't know how to really get into this further but from my pov you are in the dangerous position of having enough knowledge of AI to feel comfortable forming a fact-based opinion but not enough familiarity with AI to have a good intuition of what it can/can't do and why. I see this a lot in the talk of AI being creative, because people think of creativity as like some sort of spark that's really closely linked to their sense of active thought. And you point out that AI is analyzing patterns and making predictions based on them, and that's supposed to somehow be at odds with generating creative outputs. But when you view creativity as a search problem through the space of the things that could be, suddenly novel "creative" generations become a lot less magical sounding. Like I'm generating a sequence of words, and the model assigns a probability distribution over each word, and I can choose to be sampling closer to the empirical distribution, or deviating into less likely words and phrases, and I can actually have another model to help choose how to deviate from the empirical distribution in ways that might be more interesting to the user and be more "creative" from their pov.

For instance with the Fedex logo, you think you couldn't ask an AI what symbols might be most associated with a parcel delivery company, and then ask another way in which imagery is typically incorporated into logo text, and then to ask another AI to generate logos which incorporate these symbols into text in those ways? And then generate a thousand logos in an instant to sort through and find something that does a sufficiently good job at coming up with something "clever"? If we're not there now, we're there soon.

And the other example that keeps coming up for some reason is HR. AI HR would suck more than HR already sucks. HR serves two purposes: protecting a company from its employees, and resolving inter-human problems. Sure, an AI can point you at the right form if that's all you need. What happens when you're raising a complaint or an issue that needs to be investigated? What happens when someone is harassed, or you need to ask for a raise or time off? Given HRs first purpose of protecting the company there's WAY too much risk to allow AI to answer all of those with boilerplate answers. Having an AI "front desk" to direct you to the right forms and to the right people for more complex issues make sense - but HR as a whole remains a very human job.

HR in my company spends most of the time scheduling meetings and interviews, then cancelling them, emailing us to update software, summarizing some corporate fluff, or clarifying company policy. Of course people will need to deal with human conflict situations. It's just clear there are many HR roles that don't deal with infighting quite so much.

And many people who don't know what they're talking about think it'll make programmers obsolete - which it can't. What it can do is mimic existing code, generate a lot of boilerplate, and solve some basic (aka already solved) problems - but it can't architect larger systems or do any meaningful debugging. Say a weird rare bug pops up that only happens on Tuesdays for people using out-of-date Macs but only if they're on a VPN. There's no training data for that. The best an AI can do is generate generic troubleshooting steps, recommend testing for better coverage, etc - but it doesn't understand the codebase well enough, or have a picture of the typical use-cases or the contexts the software might be used in, in order to intuit why the bug might be happening and to propose a solution.

Yea, hard disagree there.

We also don't know that AI isn't going to have some kind of giant push-back kind of like the art community had. Just because it exists doesn't mean everyone will embrace it. It's a complicated enough tool that comes with enough risk and complexity that I'd be fully willing to bet that some industries will skip it entirely, for reasons of fear, for moral reasons, for not knowing what to do with it, for not having the desire or time to invest into training models on their specific needs, etc etc. We're not at the "push a button and it solves all our problems" stage yet.

The art community is pushing back because it's going to decimate them, in the traditional sense of the word. And of course some companies will be slow to adopt or try to sidestep for moral grounds, but they're just going to get outdone by companies with more streamlined automation. I'm sure some people pushed back in some "horses forever!" clique when people starting driving automobiles. Nothing stops them from trying, but basic capitalism stops them from surviving.

 

[TedEH]

I think we'll have to agree to disagree. You can't really get into "is AI creative" etc without getting into semantic games about "what is creative in the first place?" etc etc. Like to get the fedex logo from your example, you'd have to have already known what you wanted and gone through three prompts and then still sort through the results afterwards, and then still likely need a human designer to finalize it. All of the creative elements of that process were done by a person who knew what they wanted and prompted for it. The AI didn't go "hey wouldn't it be cool if we hid a little arrow in the logo? Cause we move stuff? It symbolizes motion or something".

But anyway, I think the only sure-thing is that it's disruptive. How much so is yet to be seen.

 

[Randy]

I think the term "creative" can be applied to AI art, absolutely. Most art is derivative anyway. Yeah, AI art draws from pool of existing art but so do all artists.

The most creative stuff, IMO, usually comes from either outsider art or, errr... chemical influences. Art will always be derivative but the random filter of either of those two usually generates something distinguishable and unique from the source material.

That might be the one place AI may lag behind in the creative department. AI can do random, AI can do specific criteria. I'm not sure if AI can do the balance of both with the same 'touch' as person. It could absolutely kill corporate graphic design but can AI make Black Sabbath before Black Sabbath existed? I dunno.

Anyway, traditional art and artists will persist. Yeah, AI can just blast out derivative album covers (sup Bernth?) but to actual artists and people who appreciate, they might prefer the touch of a living artist. I know I do.

 

[Drew]

I think at some point you gotta split the baby on this one, though.

If the science indicate a significant amount of evidence points to a trend with a rapidly approaching tipping point that ends with the eradication of mankind, there's a responsibility to take action. Even expensive action. Even invasive actions.

While we do that, we can keep refining the hypothesis. Maybe we confirm the action we took, maybe we say it was too much, maybe we decide it wasn't enough, maybe we decide the solution is a totally different thing. The fear of any of those outcomes should never stop you from first trying to stop the asteroid from hitting earth.

Man. This.

@lost_horizon, the gist of your argument is that, while we knew CFCs were depleting the ozone layer, we didn't have the model explaining how it was happening exactly right, so the relationship and direction of the impact was sound but the magnitude might not have been exactly what our first pass thought it was. And, therefore, you're concluding, the whole thing is bunk, and not worth solving. That's a perfect analog for the arguments that "climate change science is wrong because we haven't exactly modeled how climates will respond to increases in greenhouse gasses, and while we know warming is occuring in aggregate, we haven't nailed down exactly how much on a macro level, and are still working out how best to model localized change at the micro level. Therefore, throw the baby out with the bathwater because we don't have it modeled 100% perfectly yet."

That's insane. If my house is on fire, I'm not going to sit tight because I don't know exactly how long I have before the stairs are aflame, or can't say with prefect confidence what temperature the exact seat I'm in in my living room will reach. I'm going to take stock of the situation, and decide that perfect modeling precision isn't required to know I want to be outside of my house, ASAP.

How many democrats voted for the Green New Deal authored by AOC and sponsored by Kamala Harris? Zero. What did they do for 2 years where they controlled House and Senate? They are not serious.

220 of them voted for the Inflation Reduction Act, which despite its name nominally referencing inflation, was the single biggest environmental bill in the history of this country.

(Missed these earlier, until one of my earlier comments got liked and I saw I missed an entire tangent)

 

[Drew]

I don't know, looks like a drop off to me.

Notice: Data not available: U.S. Bureau of Labor Statistics

data.bls.gov

My dates might not be exact, it was some time ago. But pretty much every facility I've been to, every industry, headcounts have gotten much, much lower and it's usually due to newer automated equipment.

Yeah, that was the exact same data I shared, though I cited FRED rather than BLS directly. Bounce that off your dates, though - if automation didn't really take hold until the 80s, and the 90s were when you think atomation started costing jobs, then why was employment basically flat from 1990-2001, and it was only after 2001 where we saw a sharp drop-off in manufacturing employment?

There may have been changes in composition of jobs, but the overall level of employment didn't really budge, and honestly had - despite some cyclicality - remained pretty stable from the mid-60s through 2000. So, if trigger for job losses was something that happened in the late 80s, then my question is why did it take more than a decade before it led to widespread job losses in the early 2000s? The timing doesn't work. To me, that suggests something else was the trigger, unless you can explain why the effect should have occurred on a 10-15 year lag.

BLS data doesn't go back far enough, but we settled on the 40 hour workweek in the early days of assembly line manufacturing:

Hours of Work in U.S. History

eh.net

 

[Drew]

So, the debt ceiling...

I've been answering a LOT of questions on this lately, and here are some of the quick-hit observations I think a lot of people are missing or getting wrong.

*The US will not default, if we breach "X-date." Instead, the Treasury will begin proritizing outlays. Interest and principal payments on debt will be made; social security payments, federal wages, and military wages will not. This is primarily because - unlike 2011, when S&P had an analyst go rogue - the agencies are being clear that only a missed payment on a security issued by the US government will be considered a default, and indirectly because this will radically up the pressure on politicians to get a deal done.

*McCarthy and Biden have agreed to take a backseat on negotiations; they have four negotiators they have mutually agreed on to handle negotiations. Two things can be gleaned from this - first, their public posturing is red meat for their base, not active negotiation, and can be tuned out. Second, if you look at the slate of negotiators, three have ties to the White House, and one is a relatively bipartisan Republican representative. McCarthy knows he can't win this fight, or he wouldn't have agreed to this slate.

*the Treasury bill due 5/30, before the earliest estimation of X-date, is getting bid up by the market like crazy, and while early June maturities are weakening and widening, most of the spread between these two (3.33 percentage pioints at the moment) is due to people buying the 5/30, not selling the 6/8. The 7/5 is starting to get bought up too, though not to the same degree. To me, this pretty clearly signals the markets expect volatility, but also ultimately are not worried about getting repaid on their Treasuries.

*there's a LOT of corporate tax payments hitting the Treasury account on 6/15. Yellen is probably being conservative saying we have until 6/1, but it's also a pretty safe bet that we can't make it to 6/15 without action, otherwise she wouldn't be risking her credibility on 6/1, because if we hit 6/15, we've probably got a couple months before we're going to breach again.

*simplistic game theory look at the possible outcomes; McCarthy is at a disadvantage now (razor thin grasp on his coalition), he loses leverage once we breach X date (short version - if the Dems are usually at a disadvantage because they have to convince America government can be a solution, while the GOP just needs to convince people it would be nice if we paid less taxes, once the government actually stops working it becomes pretty obvious that the government IS a solution for much of this country), importantly he KNOWS he'll lose leverage, and he needs to pass something, NOW, that will pass the Senate. The Democrats know all of this, and know he needs to do this too. Hence, very aggressive public position, but a negotiating team that's stacked in favor of the White House (and it was NOT easy to confim identities in the media, which I thnk is important here). He's very likely to get House GOP defections, so he's going to need Democratic votes, not just to pass a bill, but to survive a no confidence vote. Sure enough, a group of 10 moderate Democrats has emerged that quietly are prepared to back him if the right concessions are made, to stave off a revolt from Boebert, MTG, and Gaetz.

*A 2 year deal, closer to the Democrats' negotiating position than the House's, is the most likely outcome, to send this past the election. Second is a short term deal, a clean bill with no concessions to raise it by enough to buy a couple weeks, which will get us past 6/15 and likely get us past the FY24 budget negotiations, and allow this to be settled as part of the budgetary process. Third most likely outcome is we breach X-date, the Treasury stops all non-debt cash outlays, we get a week of rage directed at the GOP, the corporate tax receipts pull us back below the limit and negotiations continue, but with the GOP negotiating from a badly-damaged place.

Would love some other perspectives here, but that's my take. We get a deal, both sides claim victory but when all's said and done McCarthy is the one who gives the most.

 

[profwoot]

My take is that the debt ceiling is unconstitutional, both because it prevents the US from paying its debts, which is disallowed by the 14th amendment, and because it allows the house to unilaterally negate prior spending authorizations, which is in breach of the separation of powers as described in the constitution. It is a massive fuckup that Biden hasn't been arguing for this since the beginning. It's also a massive fuckup that he hasn't been bringing up at every opportunity how the republicans gave Trump clean increases of the debt ceiling 3 different times while the deficit skyrocketed due to his corporate giveaways. There is no way to win this negotiation, which is why you don't negotiate with terrorists to begin with.

 

[USMarine75]

I think we'll have to agree to disagree. You can't really get into "is AI creative" etc without getting into semantic games about "what is creative in the first place?" etc etc. Like to get the fedex logo from your example, you'd have to have already known what you wanted and gone through three prompts and then still sort through the results afterwards, and then still likely need a human designer to finalize it. All of the creative elements of that process were done by a person who knew what they wanted and prompted for it. The AI didn't go "hey wouldn't it be cool if we hid a little arrow in the logo? Cause we move stuff? It symbolizes motion or something".

But anyway, I think the only sure-thing is that it's disruptive. How much so is yet to be seen.

Regardless of "creative", AI can be predictive. "Predictive analytics is the process of using data to forecast future outcomes. The process uses data analysis, machine learning, artificial intelligence, and statistical models to find patterns that might predict future behavior."

Once one AI program defines a need, another can be tasked with solving that need.

Also, you're limiting your definition of AI to ANI and AGI. Task oriented. But with the onrush of advances how long will it be before they reach the goal of ASI (Artificial Super Intelligence).

Artificial General intelligence is the capability of a machine to perform the same intellectual tasks as a human to the same standard as humans. This line of AI is also known as “Strong AI” or “Human Level AI”. In contrast to Narrow AI – AGI encompasses the general capabilities of humans, not specific narrow tasks. There has been some debate about what intelligence actually is, and what AGI should actually represent. A wide consensus was formed around 6 core values for what human-level AI would be:​

1. The ability to reason, solve problems, use strategy and make decisions under uncertainty.
2. Represent knowledge.
3. The ability to plan.
4. The capability to learn.
5. The ability to communicate in a natural language.
6. Integrate all of the above towards a common goal.

Steve Wozniak, the co-founder of Apple, has an interesting test for confirming AGI, dubbed The Coffee Test. “A machine is required to enter an average American home and figure out how to make coffee: find the coffee machine, find the coffee, add water, find a mug, and brew the coffee by pushing the proper buttons.”

Artificial Superintelligence (ASI)​

ASI is a super intelligent computer that can possess an intelligence that far surpasses that of the brightest and most gifted human minds. Researchers disagree on how this can be achieved (if it can be), with some arguing that AI development will result in reasoning systems that lack human limitations; others believe humans will evolve or directly modify ourselves to incorporate ASI and achieve radically improved cognitive and physical abilities. In reality, ASI is not as far-fetched as you may think, an AI system with the capability to reprogram and improve itself infinitely, could, in theory, do so in a rapidly increasing cycle – resulting in an intelligence explosion that would not be limited by our own genetic restrictions.

 

[USMarine75]

My take is that the debt ceiling is unconstitutional, both because it prevents the US from paying its debts, which is disallowed by the 14th amendment, and because it allows the house to unilaterally negate prior spending authorizations, which is in breach of the separation of powers as described in the constitution. It is a massive fuckup that Biden hasn't been arguing for this since the beginning. It's also a massive fuckup that he hasn't been bringing up at every opportunity how the republicans gave Trump clean increases of the debt ceiling 3 different times while the deficit skyrocketed due to his corporate giveaways. There is no way to win this negotiation, which is why you don't negotiate with terrorists to begin with.

The Debt Ceiling and the 14th Amendment: The Jury Is Still Out

Section 4 of the 14th Amendment to the U.S. Constitution, known as the public debt clause, has been in the news lately as a possible avenue of recourse for President Joe Biden should Congress fail to resolve the debt ceiling issue. U.S. Treasury Secretary Janet Yellen has predicted that the...

www.ncsl.org

And no, that's not why we don't negotiate with terrorists lol.

 

[Drew]

My take is that the debt ceiling is unconstitutional, both because it prevents the US from paying its debts, which is disallowed by the 14th amendment, and because it allows the house to unilaterally negate prior spending authorizations, which is in breach of the separation of powers as described in the constitution. It is a massive fuckup that Biden hasn't been arguing for this since the beginning. It's also a massive fuckup that he hasn't been bringing up at every opportunity how the republicans gave Trump clean increases of the debt ceiling 3 different times while the deficit skyrocketed due to his corporate giveaways. There is no way to win this negotiation, which is why you don't negotiate with terrorists to begin with.

Declaring the 14th as a way out of this, and Biden has pointedly left it on the table as an option, is at best a negotiating tactic and at worst a way to buy a couple weeks while it works through the courts while negotiating a more permanent fix. The 14th merely states that the validity of debts should not be questioned; it doesn't actually state that the Treasury cannot default on them (at which point the debt is still valid, we're just not paying it and we're in default), and while in a different time the courts might be sympathetic to this argument, the current composition is going to take a hard line here thanks to the Supreme Court's hard right-wards shift. Ditto with a platinum $1B coin. It won't stand up to Supreme Court scrutiny, because even a neutral court would likely rule against it, and this isn't a neutral court.

But, again, if we get to a point where Biden is invoking the 14th to allow the Treasury to ignore the debt ceiling, because payment prioritization has already begun, the plitical pressure on the GOP to get a deal done is going to be overwhelming, and at that point I think the risk of McCarthy losing a no confidence vote, and a couple Republicans crossing the aisle to name a Democratic Speaker just to pass a bit, is something we have to take seriously.

EDIT - also, while some of the Trump deficit was the Tax Cuts and Jobs Act, intellectual fairness also requires us to note that Covid DID require rather a lot of deficit spending we wouldn't have expected otherwise.

 

[MaxOfMetal]

There may have been changes in composition of jobs,

Which still puts people out of work, which can be devastating.

So, if trigger for job losses was something that happened in the late 80s, then my question is why did it take more than a decade before it led to widespread job losses in the early 2000s?

Because this isn't flipping a switch.

It takes years to validate a new piece of equipment, and it's usually done at a single facility. They don't just order a dozen new Pack-O-Tron 5000s and hope for the best. It's a solid year to actually build and assemble, another to ramp up, and then usually another year or two to decide if it's worth further investment.

Hardware to software conversion takes forever too. It's taken almost a decade to switch from manual panels running Modicon to A-B and more automated D3 and ProLeit/Brewmaxx. It's still not 100% done.

Not to mention most union shops are running on 3 and 5 year contracts, it's almost impossible to really cut jobs unless it's a contract year.

So the right project at the right time can take 5, 10, 15 years to have significant impact. Though you're also talking whole industries.

I mean, this isn't conjecture. I've seen it happen, multiple times, first hand. New piece of equipment with further automation comes in, jobs get reduced.

I'm not against progress. A lot of these improvements have made the jobs easier and safer, but I know of many, many workers who weren't given more than a foot in the ass, often at ages where you're not prepared for a career change and prospects are minimal.

 

[PuckishGuitar]

So, the debt ceiling...

I've been answering a LOT of questions on this lately, and here are some of the quick-hit observations I think a lot of people are missing or getting wrong.

*The US will not default, if we breach "X-date." Instead, the Treasury will begin proritizing outlays. Interest and principal payments on debt will be made; social security payments, federal wages, and military wages will not. This is primarily because - unlike 2011, when S&P had an analyst go rogue - the agencies are being clear that only a missed payment on a security issued by the US government will be considered a default, and indirectly because this will radically up the pressure on politicians to get a deal done.

*McCarthy and Biden have agreed to take a backseat on negotiations; they have four negotiators they have mutually agreed on to handle negotiations. Two things can be gleaned from this - first, their public posturing is red meat for their base, not active negotiation, and can be tuned out. Second, if you look at the slate of negotiators, three have ties to the White House, and one is a relatively bipartisan Republican representative. McCarthy knows he can't win this fight, or he wouldn't have agreed to this slate.

*the Treasury bill due 5/30, before the earliest estimation of X-date, is getting bid up by the market like crazy, and while early June maturities are weakening and widening, most of the spread between these two (3.33 percentage pioints at the moment) is due to people buying the 5/30, not selling the 6/8. The 7/5 is starting to get bought up too, though not to the same degree. To me, this pretty clearly signals the markets expect volatility, but also ultimately are not worried about getting repaid on their Treasuries.

*there's a LOT of corporate tax payments hitting the Treasury account on 6/15. Yellen is probably being conservative saying we have until 6/1, but it's also a pretty safe bet that we can't make it to 6/15 without action, otherwise she wouldn't be risking her credibility on 6/1, because if we hit 6/15, we've probably got a couple months before we're going to breach again.

*simplistic game theory look at the possible outcomes; McCarthy is at a disadvantage now (razor thin grasp on his coalition), he loses leverage once we breach X date (short version - if the Dems are usually at a disadvantage because they have to convince America government can be a solution, while the GOP just needs to convince people it would be nice if we paid less taxes, once the government actually stops working it becomes pretty obvious that the government IS a solution for much of this country), importantly he KNOWS he'll lose leverage, and he needs to pass something, NOW, that will pass the Senate. The Democrats know all of this, and know he needs to do this too. Hence, very aggressive public position, but a negotiating team that's stacked in favor of the White House (and it was NOT easy to confim identities in the media, which I thnk is important here). He's very likely to get House GOP defections, so he's going to need Democratic votes, not just to pass a bill, but to survive a no confidence vote. Sure enough, a group of 10 moderate Democrats has emerged that quietly are prepared to back him if the right concessions are made, to stave off a revolt from Boebert, MTG, and Gaetz.

*A 2 year deal, closer to the Democrats' negotiating position than the House's, is the most likely outcome, to send this past the election. Second is a short term deal, a clean bill with no concessions to raise it by enough to buy a couple weeks, which will get us past 6/15 and likely get us past the FY24 budget negotiations, and allow this to be settled as part of the budgetary process. Third most likely outcome is we breach X-date, the Treasury stops all non-debt cash outlays, we get a week of rage directed at the GOP, the corporate tax receipts pull us back below the limit and negotiations continue, but with the GOP negotiating from a badly-damaged place.

Would love some other perspectives here, but that's my take. We get a deal, both sides claim victory but when all's said and done McCarthy is the one who gives the most.

I mostly agree with this. I think the biggest new thing to me is that a technical default of not meeting all obligations would not trigger a downgrade by the ratings agencies, only if securities interest was missed. It makes me want to look back at projections of unemployment due to borrowing cost increases since many I saw were immediate downgrades, and having to issue new bonds at higher rates to pay the principle of mature bonds would exacerbate the pain. As far as if this puts Dems in stronger position or not by having government payments missed to citizens, I would not underestimate how Americans can be whipped into a frenzy into thinking that the side that represents maintaining your benefits in all of this, are also the ones responsible for having them skipped over by not agreeing to cuts from the other side.

Question for you since I can’t find a clear answer: if there is a downgrade, how would this impact the Fed’s interest rate setting? Will it cause a pause in the rate hikes, reversal even? Are the interest rate increases from a default even comparable to the Fed’s hikes, or am I way off base in this?

 

[Drew]

Which still puts people out of work, which can be devastating.

This I don't disagree with at all. It creates turmoil. And, AI will do the same in white collar jobs, as well, changing composition rather than overall level of employment.

But, if there's one hill I'm going to die on here, it's that automation didn't create "massive job losses in manufacturing in the 90s," at a minimim on a net basis. The significant decline in US manufacturing sector employment didn't occur until 2001.

 

[MaxOfMetal]

This I don't disagree with at all. It creates turmoil. And, AI will do the same in white collar jobs, as well, changing composition rather than overall level of employment.

But, if there's one hill I'm going to die on here, it's that automation didn't create "massive job losses in manufacturing in the 90s," at a minimim on a net basis. The significant decline in US manufacturing sector employment didn't occur until 2001.

You might want to reread my original post.

There's a lot of nuance missing here.

Modicon, originally proprietary to GM, didn't become cheap and scalable till the mid 80's, but it wasn't until the 90's where it really started taking jobs. By then A-B got cheaper too.

In the late 90's/early 00's D3 and ProLeit made operator control easier and less specialized. It was around then that GPI brought out their Quick Flex packing equipment which was entirely computer controlled, not just cycle timed. Kronos came out with their own competing equipment and thus began the packer arms race.

Any industry involved in bottling, canning, and carton encasement felt these changes big time. Those industries especially tend to stay fairly close to where the product will be sold and marketed.

Once automation got cheap and reliable, headcount quickly dropped.

Like I've been saying, the cause started in the 90's, but didn't follow through till the early 00's.

Not sure where the disconnect is.

 

[Drew]

I mostly agree with this. I think the biggest new thing to me is that a technical default of not meeting all obligations would not trigger a downgrade by the ratings agencies, only if securities interest was missed. It makes me want to look back at projections of unemployment due to borrowing cost increases since many I saw were immediate downgrades, and having to issue new bonds at higher rates to pay the principle of mature bonds would exacerbate the pain. As far as if this puts Dems in stronger position or not by having government payments missed to citizens, I would not underestimate how Americans can be whipped into a frenzy into thinking that the side that represents maintaining your benefits in all of this, are also the ones responsible for having them skipped over by not agreeing to cuts from the other side.

Question for you since I can’t find a clear answer: if there is a downgrade, how would this impact the Fed’s interest rate setting? Will it cause a pause in the rate hikes, reversal even? Are the interest rate increases from a default even comparable to the Fed’s hikes, or am I way off base in this?

To be fair, that was Fitch's and Moody's interpretation in 2011, as well - it was only S&P where one analyst (who is no longer with the firm) broadened it to missing any obligation, and then downgraded US sovereign debt to AA+ from AAA, and then when the Treasury department pointed out that the analysis contained a $4 trillion dollar math error, inconceivably still stood by their downgrade even after fixing the analysis.

So... good question, on the Fed. The Fed Funds rate is the overnight interest rate banks can borrow at, and by raising it, they indirectly increase the cost of capital for the broader economy by increasing the cost of funds to banks, and in turn the rates at which they can profitably lend. The Fed is raising that rate now to fight inflation from an overheated, supply-constrained economy, with too much money chasing too few goods, and making it more expensive to borrow should decrease demand. So, with all of that as background...

...if we breach X-date, and even conceivably if we get close enough that the market gets spooked, that's going to have an effect on risk appetite, not just in the "I want to buy risky stocks" sense that we'll see in the stock markets, but in the "I want to borrow and invest in my business" sense, How MUCH of an effect that will have is tough to say though. At a minimum, if markets get rattled enough, that makes further rate increases less likely (my current outlook is probably 1-2 more this year, and I think an ugly showdown here should shave at least one of those increases off). A pause in June is possible, likely even probable if we don't have a debt ceiling resolution. But, if we pause, unless all hell breaks loose, the next move is still much more likely to be another hike than a cut, and futures pricing suggests the market is finally coming around to my thinking, with a hike by July now more likely than not, and only one cut by year end, down from three as recently as two weeks ago (I think they hold, and don't cut before 2024).

Working out how a debt ceiling showdown/breach will interact with short term/overnight rates isn't easy because it's hard to really conceive of how the markets would respond to the Treasury halting Social Security payments to preserve cash for debt service (and one possible reaction is to not react at all, just keep the market's head in the sand and hope this all blows over before antyhing bad can happen). But, the most i can say with confidence is that there's less of a relationship than you might think between the FOMC overnight rate, and the 10yr Treasury rate, and if the market freaks the fuck out when we hit X date and stocks roll over, Treasuries rallying and long dated treasury yields falling is a pretty real possibility, even as the market is starting to come to terms with the possibility, however remote, of a Treasury default on short term debt.

Fun stuff, huh?

 

[Drew]

Modicon, originally proprietary to GM, didn't become cheap and scalable till the mid 80's, but it wasn't until the 90's where it really started taking jobs.

Here, I think.

 

[MaxOfMetal]

Here, I think.

Well yeah, it started in the late 90's when the stuff ordered and built in the early 90's went online, and subsequently you have the fallout we see in the graphs we keep posting.

If we really want to get pedantic, here's 90' to 05':



The ramp up from about 92' to 98' was about when this stuff was being installed, brought online, and that very end of the decade is the decline beginning, and then being further realized by 01'.

So sure, if you want to consider 98'/99' as regular fluctuation, then yeah.

But like I said, this wasn't an overnight change.

I mean, what's the more likely scenario: new technology that requires fewer workers to operate and maintain leads to a drop in headcount, or that "something" that just so happens to coincide with industry changing systems happened in the span of about a year?

But whatever. This argument ain't bringing the jobs back and it certainly isn't making my day reminiscing about it.

You win.

Though, could you please concede that I never actually said that there were "massive job losses in the 90's."

 

[Drew]

But whatever. This argument ain't bringing the jobs back and it certainly isn't making my day reminiscing about it.

You win.

Though, could you please concede that I never actually said that there were "massive job losses in the 90's."

I happily concede that "massive job losses" was misremembered hyperbolic, or both. Sorry if this is drudging up unpleasant memories. If it's any consolation, if you're right, I'm next up.

 

[MaxOfMetal]

I happily concede that "massive job losses" was misremembered hyperbolic, or both. Sorry if this is drudging up unpleasant memories. If it's any consolation, if you're right, I'm next up.

It's all good, dude.

Hopefully we'll both be retired by the time of the next great shakeup.

 

[Drew]

It's all good, dude.

Hopefully we'll both be retired by the time of the next great shakeup.

Tell me about it. I already feel too old for this shit.

I read a good article the other day that was encouraging from an "even if I'm wrong about AI" standpoint - that the problem isn't AI getting better, it's the market is getting too "dumb" and will get dumber still if we begin to rely even more heavily on automated algorithmic trading strategies as "active" strategies to compete with "dumb"-by design passive index replication strategies. The Vanguard "passively buy the whole market at massive weights" index replication model, paradoxically, depends on other market participants making active trading decisions and trying to find active value, to ensure fair valuation and to make holding the market at market weights a viable strategy (for equities - it's idiotic for bonds, but that's a rant for another time).

So, tl;dr - for passive investment to make sense, you kind of, paradoxically, need a bunch of active managers out there trying to arbitrage away any inefficiencies, and if all those avtive managers start following algorithmic trading models, that's going to create a lot of opportunity for fundamental bottom up research-driven management.

Myself, I'm doing that on the bond side today, but I'm also trying to build out the macroeconomic strategist side of my role because, in case somehow no one noticed, I actually like researching shit, forming opinions, and writing about them.