Are We Heading into a Chip War?

September 2, 2022

We need to use oil and gas in the short term
because otherwise civilization will crumble.
– Elon Musk at Norway energy conference

THOUGHTS FROM DOUG

In today’s economically challenged world, which countries are growing wealthy? It’s the ones with natural resources. How is this any different over the long history of humanity?

Productivity keeps falling and wages keep rising. This means company profits will fall, layoffs are coming, or both.

From one of my dailies: “Finally, current electricity rates for new customers from our current electricity provider in Houston/Dallas are 26.9c/25.9c per KWh (KH’s current plan through 01/24: 13.8c/KWh). Should rates in the mid-20s represent a new baseline (and not some temporal aberration), the implications would be positive for resi solar in TX in coming years.”

These electricity rates, as well as gasoline prices, are an enormous burden on the majority of Americans. What do higher energy costs mean for our economic future?

The IRS is going to hire 87,000 new agents to collect taxes from 735 billionaires and 8,600 centi-millionaires. That’s 87,000 new employees to collect more taxes from 9,335 very wealthy taxpayers. Just saying.

Singapore’s sovereign wealth fund just made a bet on suburban office space. The theory is that workers will go back to the office if they don’t have to sit in traffic. But can they go to work in their jammies?

Are we missing an obvious geopolitical transition? Iran and North Korea are aligned with Russia. China is also supporting Russia, and, it hopes, avoiding Western wrath. China is significantly expanding its influence in Africa. They’re also working to do the same in the Middle East. Russia is working to gain Africa’s support. India is non-stop buying Russian oil.

Europe and the US are working hard to implement dramatic climate policies that will increase our cost of energy and likely keep prices for goods and services high. Meanwhile, Russia and China are working toward a new global alignment. Do Western countries have their heads in the sand?

Wouldn’t it be nice if we found our heroes in neighborhoods and communities rather than in professional sports and media?

THE ECONOMIC VIEW

Payrolls up 315,000 in August
This likely doesn’t stop QT.

Time to think about holiday shopping season
Will consumers stay in their turtle shells?
Sales are rising at the big liquidation chains
Even the wealthy are pinching more pennies
Retailer Bed, Bath & Beyond in trouble again
Freight demand is slowing

Home values declined 0.1% in July
The first value decline in 20 years
The start of a new trend?

Consumers trade down during a recession
Chicago’s Booth School provides insight.

THE INFLATION BOGEYMAN

22% inflation in the UK
Could happen next year.
Striking UK workers want higher pay

The US has another year or two of inflation
Suggests an IMF economist.

The Fed can’t fix fiscal stimulus inflation
So suggests a paper from Jackson Hole.

THE LABOR VIEW

Hiring is slowing down fast
Are more layoffs around the corner?