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Why Robots Mean Interest Rates Could Go Even Lower In The Future -- Bloomberg
The argument goes like this: As machines become more and more advanced, many workers will lose their jobs and others will see their wages fall. New technology will also increase the chances of a 1990s-style jump in productivity. Those forces will combine to restrain prices across the world economy, meaning that the era of slow inflation now challenging central bankers may only prove a sign of things to come.
Robotics has more to do with the reshuffling of the job market and less to do with the credit market.
Robots will replace dangerous and repetitive jobs with machines that can complete these jobs safely and accurately and over longer periods of time without a break (though even a robot needs a repair/maintenance break).
What's interesting about business minds concerning robotics is a value and mindset centered around credit. These business leaders should be interested and responsible for encouraging robotics where human capital can be re-positioned into higher valued (better paying) non-robotic jobs (education, healthcare, engineering, Human Resources, etc.).
Higher paying jobs and a better natural world should be the net effect of mechanization (today's age calls it automation and robotics), not low interest rates for out of work spot welders who were never retooled into higher paying / higher valued careers.
Article seems misguided to focus on the credit benefits for humans kicked off the assembly line.
How about this...
"Robots provide a mechanism to finally unleash the human potential to create, design and care for a world long ignored due, in part, to the human slavery of previous industrial eras."
-Thoughts from a former Industrial Arts/Tech Ed/STEM Teacher (of which I taught CAD, CAM and Robotics)
The reality is somewhere between Bloomberg and @bee.
Bloomberg is pointing to the worst case scenario of robot displaced workers not being employed or being underemployed and hence wage pressures which contributes most to inflation being subdued enough to keep interest rates low. Teetering on recession/deflation may become the new norm.
@bee points to the best case scenario of the displaced workers being able to more elsewhere or better than the mechanical work and so robots not affecting wage pressures on inflation.
The reality is that except in the most unusual cases the people displaced from repetitive or unsafe jobs will not be the same people who will be "unleashing human potential". A permanent semi-employed semi-skilled underclass is the most likely result.
"Robots provide a mechanism to finally unleash the human potential to create, design and care for a world long ignored due, in part, to the human slavery of previous industrial eras."
-Thoughts from a former Industrial Arts/Tech Ed/STEM Teacher (of which I taught CAD, CAM and Robotics)
And what do all these newly freed people do for money to pay for oh little things like food, clothing, shelter and their painting supplies?
The argument goes like this: As machines become more and more advanced, many workers will lose their jobs and others will see their wages fall. New technology will also increase the chances of a 1990s-style jump in productivity. Those forces will combine to restrain prices across the world economy, meaning that the era of slow inflation now challenging central bankers may only prove a sign of things to come.
That's true. But it is happening now with small robotic penetration into the marketplace. Also, as as prices decline for products that should add to deflation.
The inflation can come from gov'ts providing welfare to the unemployed (and not having the revenue to pay for it) thereby debasing their currency.
Some gov't like Egypt subsidize energy and food for the nation. This can not realistically last forever.
And what do all these newly freed people do for money to pay for oh little things like food, clothing, shelter and their painting supplies?
Just because I landed a great paying job at the Stanley Works (where I found gainful employment in the 1970's) didn't guarantee me squat in terms of food, shelter, and clothing going forward. Workers should always create options for themselves.
In the 1980's, I saw the writing on the wall, so I took advantage of their employee educational benefits and went to school nights. When they finally moved oversea in the mid 1980's I had a degree in Education and a future outside the vacuum the company left behind. Many of my co-workers weren't willing to plan for their future. They had house and car payments, no savings and few options when the factory shut down. Not planning is a plan and a choice in my opinion. It is always a choice.
I agree that someone closing in on retirement has less interest or energy in retooling themselves, but anyone under 50 should have a plan b.
Excercise their constitutional rights to carry a gun and go and shoot the people who write such science fiction if it isn't the reality or the politicians if it turns out to be the reality. Just the possibility of that scenario happening is what creates the impetus to avoid things getting that bad with regulation, incentives and support nets. When companies employing robots and AI to throw millions out of work find out their market of people who can buy what they are producing is shrinking, they are going stop buying robots and ai systems and growing so the capital from the people who have them then flows to where the governments afraid of a mass unrest have started to create employment without a guarantee of short term return like for example in infrastructure.
That is pretty much what the Chinese who will be producing and using more robots than anybody else while they have the largest population that they need to keep employed has already been doing to some extent.
Excercise their constitutional rights to carry a gun and go and shoot the people who write such science fiction if it isn't the reality or the politicians if it turns out to be the reality. Just the possibility of that scenario happening is what creates the impetus to avoid things getting that bad with regulation, incentives and support nets. When companies employing robots and AI to throw millions out of work find out their market of people who can buy what they are producing is shrinking, they are going stop buying robots and ai systems and growing so the capital from the people who have them then flows to where the governments afraid of a mass unrest have started to create employment without a guarantee of short term return like for example in infrastructure.
That is pretty much
what the Chinese who will be producing and using more robots than anybody else while they have the largest population that they need to keep employed has already been doing to some extent.
The China that exists beyond some googling for articles. China that struggled to keep up with export demand in labor and deployed robots as you found in these articles and now finds companies laying off people (even Foxconn which pressured Apple stock even) but not going to get rid of robots but going to increase for the next economic cycle to be prepared. China that has spent huge amounts of money in the past down economic cycles to keep people employed through recessions like the last one in 2008-2009 where about $600B went into infrastructure projects and social welfare programs rather than into propping up banks. China that understands economic cycles better than people who extrapolate to logical extremes of any current stage of the cycle. China that is proactively preparing to generate local demand to prepare for the likelihood that external demand will not be sufficient in the future to sustain the growth it needs which is proportional to the size of the population and so trying to stimulate service economy within.
There are a lot of things wrong with China politically and economically but trying to do things pro-actively to prevent mass unrest is their top agenda primarily brcause their dictatorial rule can only be sustained as long as the masses don't get too restless. And with that much of a population, steering it is worse than steering a Titanic.
But if things start to get bad in the US far before what doomers predict, US politicians will find the same pressure too to stimulate. Especally when the number of unemployed cuts through both political parties so you cannot maintain illusions of ideology during that time. It is actually easier to do these constructive things in the US given the resources and the relatively smaller size of the population when the politics and ideology didn't get in the way. That is why I believe the US will come through just fine through this transition obviously after some amount of pain but nothing compared to the Great Depression that we have come through. There are better tools now to fight that level of problems.
What will happen with the Chinese experiment? Who knows with that much of population to contend with. There has never been a precedent.
China that has spent huge amounts of money in the past down economic cycles to keep people employed through recessions like the last one in 2008-2009 where about $600B went into infrastructure projects and social welfare programs
That is just another name for welfare and does not address the systemic issue. But it does point out the issue. Artificial intelligence and robots will create a large number of unemployed. There is no way around this and no Pollyanna, Little Orphan Anne 'The Sun Will Come Out Tomorrow' hoping will change that. Robots and AI will exasperate income inequality also.
What does a nation of unemployed workers do when plan b ... z is taken by a robot or artificial intelligence?
Robots don't design themselves or their interface with other mechanized movements. Robots break down quite often - daily, and you need skilled mechanics to repair either their brains, or more often the machining hardware or sensors they are communicating with. You still need operators to work with these machines. Robots don't make brand change-overs or resupply themselves with cartons or parts being assembled.
Dex, have you ever worked in a mechanized, computer driven manufacturing environment? Do you know of what you comment on. The jobs needed in today's industries are hard to fill with competent, trained, skilled people. But good the jobs exist. It is much to the point of what Bee was saying, if you are young and have years to work, have a plan B to get up to speed with today's technology. Schools have to teach kids work skills needed in today's environment.
What does a nation of unemployed workers do when plan b ... z is taken by a robot or artificial intelligence?
Robots don't design themselves or their interface with other mechanized movements. Robots break down quite often - daily, and you need skilled mechanics to repair either their brains, or more often the machining hardware or sensors they are communicating with. You still need operators to work with these machines. Robots don't make brand change-overs or resupply themselves with cartons or parts being assembled.
Dex, have you ever worked in a mechanized, computer driven manufacturing environment? Do you know of what you comment on. The jobs needed in today's industries are hard to fill with competent, trained, skilled people. But good the jobs exist. It is much to the point of what Bee was saying, if you are young and have years to work, have a plan B to get up to speed with today's technology. Schools have to teach kids work skills needed in today's environment.
That is all true on one level. What is not in step with this conversation is that robots and artificial intelligence displace more workers then they create. Or are you saying robots and AI create more jobs and higher paying jobs then they eliminate?
MikeM, have you ever studied micro and macro economics?
You can believe whatever doomsday scenario you want instead doing the same logical extrapolation of current trend to extreme. Doesn't make it any more valid.
Economic cycles create hardships and you need a net to get people through it whether it is to get people through it or the banks through it. Call it whatever you want. It is next leg up of the economic cycle that creates the opportunities for growth which has to be greater than the last one from the investments you made in the lower part of the cycle.
I am surprised that investors don't see the parallel between this and market cycles and volatility. We can argue that people are doomed at the bottom of every market cycle especially when some 30-40% of wealth has been destroyed. Buf it comes back up and all the doomsayers just shut up.
Even the most ardent vegan when stranded on an island with no vegetables in sight will kill the next boar that comes along. So it will be with welfare when it is really needed by the same people that called it welfare with disdain when they didn't need it. Label won't matter at that time when you are crying for the government to do something.
Just like my favorite analogy - baseball fans. When their team is winning, they look at all the teams that are spending money go acquire players and are proud that they aren't spending as much on the players because it is never about how much you spend on players. And in the next stage of the cycle when their team starts to lose, the same people start screaming at the greed of the owners who will not spend to get top players.
Baseball as an organized commercial sport is the best there is to understand how US, its businesses and its population thinks and works as an aggregate - both good and bad.
Economic cycles create hardships and you need a net to get people through it whether it is to get people through it or the banks through it. Call it whatever you want. It is next leg up of the economic cycle that creates the opportunities for growth which has to be greater than the last one from the investments you made in the lower part of the cycle.
The USA lost the war on poverty. I'd give you a google link but, I think that is also beyond google for you.
Yes, I much prefer that someone posted their insights than just links.
We may have lost a few battles on poverty not the war. When the poverty spreads to a level where the ideological blindfolds come off to require proof and pudding in the improvements of standard of living than promises of trickle up or down, the war will be won by people who do something about it even if to take pitchforks at the ones holding them down with false promises.
We may have to go through the five stages of grief at things that have changed. One camp is in depression and trying to bargain while the other camp is still in denial and anger.
There's more going on in this one thread then most political debates and nightly news casts I've turned off. Hope others feel the same. Thanks for all the points of view.
Common ground is usually hard to find and often preciously small.
When our drains backed up last Friday evening the answering service said that "a technician would call us in the morning". He did, and informed us that a weekend call was $300+. When he arrived and cleared the drains he was amused when I informed him that while he had thought that he was a plumber he had been "upgraded" to a "technician". We got along just fine, and he informed me that while his conscience didn't bother him at all about the $300 for 15 minutes work, he wasn't sure about his boss, the company owner, but he rather doubted that his conscience would be a problem either.
The research, done by Citi with the University of Oxford, went further into its research that found 47% of U.S. jobs are at risk of being replaced by automation.
Probably too early in the day for me, for this; but after digging through the "marketwatch" article linked above, I did find the original Bank of England presentation. I "guess" this is part of what the "marketwatch" story is about, eh? IMO, if the "marketwatch" article was presented into the local high school economics class for study and discussion, some other departments would have to become involved as to how this story was presented or written.
Perhaps it is just me in this early morning, cold and snowy Michigan mood.........but what the hell is going on with this writer of the article. I want some strong backup data as to how and why Grand Rapids, Michigan is going to get the big whack from the technology revolution. Perhaps an email to the author would reveal something. For the sake of the writer, hoping no high school english department teachers read his story for a critique; although the document would likely present an opportunity for study and learning.
Headed back to the coffee pot for a "fill it up" moment as I now read that caffeine from coffee is "not" going to be worse for me and my heart than all of the other evil things that I have done in my life.
Hey, let me know if I need a brain scan................K ???
I wonder if replacing the word "job" with the word "task" might help in this discussion about robotics. Robotics (automation) allows humans to move onto more important "tasks" as part of their occupation. An occupation (job) is full of different tasks and some of these tasks are better suited to machines.
No one complained when we replaced the "task of traffic cop" with an automated signal system (traffic lights). In this case, automation freed up the officer to focus on more important safety "tasks" and if anything more "jobs" have been created than destroyed in this field (law enforcement).
Robotics and automation allow society the opportunity to redefine the time value of human resources. I don't believe it lessens the value of humans, but rather, like the innovation of the washing machine, momentarily frees humans to attend to other tasks.
I wonder if replacing the word "job" with the word "task" might help in this discussion about robotics. Robotics (automation) allows humans to move onto more important "tasks" as part of their occupation. An occupation (job) is full of different tasks and some of these tasks are better suited to machines.
No one complained when we replaced the "task of traffic cop" with an automated signal system (traffic lights). In this case, automation freed up the officer to focus on more important safety "tasks" and if anything more "jobs" have been created than destroyed in this field (law enforcement).
Robotics and automation allow society the opportunity to redefine the time value of human resources. I don't believe it lessens the value of humans, but rather, like the innovation of the washing machine, momentarily frees humans to attend to other tasks.
Let me reply with an excellent post by me below.
And ... what task will 10,000 automobile assembly line workers move onto? You say potato ... I say potato.
"Robots provide a mechanism to finally unleash the human potential to create, design and care for a world long ignored due, in part, to the human slavery of previous industrial eras."
-Thoughts from a former Industrial Arts/Tech Ed/STEM Teacher (of which I taught CAD, CAM and Robotics)
And what do all these newly freed people do for money to pay for oh little things like food, clothing, shelter and their painting supplies?
And ... what task will 10,000 automobile assembly line workers move onto? You say potato ... I say potato.
I'll be the last to advocate for unemployment or underemployment or the demise of manufacturing in this country.
Machines will do some, not all the tasks once done by man. Some of these changes will disrupt the job market. What challenges did 10,000 farm workers face when they were no longer needed in the fields? Some hit hard times...most adapted to the new opportunities in the city. Society evolves. Where we're headed is a less tragic than you make it out to be.
That said, I hope our country never forgets the importance of a strong manufacturing base for national security. Manufacturing jobs not only put food on the table (as Dex points out), but they helped us to out produced the likes of Germany and Japan in WWII.
Machines will do some, not all the tasks once done by man. Some of these changes will disrupt the job market. What challenges did 10,000 farm workers face when they were no longer needed in the fields? Some hit hard times...most adapted to the new opportunities in the city. Society evolves. Where we're headed is a less tragic than you make it out to be.
They went into the factories of WWII and after.
Where will they go after the robots and AI take there jobs? (FYI, one concern of AI is that it will be able to debug programs - eliminating many jobs. AI and the singularity could eliminate many of the 'thinking' jobs.)
To that simple question you and others should easily be able to provide a very good answer. That you can not speaks volumes. If you can not answer it, how are the millions of displaced workers?
It is easy to say "Where we're headed is a less tragic than you make it out to be." then it is to refute it.
Summing up: I don't think you and others are addressing all the factors - robots, AI, offshoring of jobs, free flow of capital, free trade, moving jobs to lower costs areas, population growth aging population ...
Too many of you are thinking that robots will only replace menial and repetitive manufacturing jobs. Already doctors, lawyers, accountants and insurance agents are seeing impacts. Can mutual fund writers and reviewers be far behind?
Interesting points ... sort of like those who are in favor of illegal immigration. They are OK with it as long as the illegal immigrants take jobs and keep wages low for manual labor. But, if those same illegal immigrants were taking college professor jobs they would scream bloody murder.
No one has yet addressed what these people would do once robots/AI etc has liberated the worker from their jobs.
To get there, China has a two-pronged strategy. President Xi Jinping’s government wants local industrial robotics makers like E-Deodar Robot Equipment Co., Anhui Efort Intelligent Equipment Co., and Siasun Robot & Automation Co. to take on foreign players including Japan’s Fanuc Corp. or California-based Adept Technology Inc. for leadership in the $11 billion market. Chinese corporate demand is expected to power double-digit demand for factory bots, according to Gudrun Litzenberger, General Secretary of the International Federation of Robotics. In 2016, China installed 90,000 new robots. That’s one-third of the world total and 30 percent more than the year before.
Comments
Robots will replace dangerous and repetitive jobs with machines that can complete these jobs safely and accurately and over longer periods of time without a break (though even a robot needs a repair/maintenance break).
What's interesting about business minds concerning robotics is a value and mindset centered around credit. These business leaders should be interested and responsible for encouraging robotics where human capital can be re-positioned into higher valued (better paying) non-robotic jobs (education, healthcare, engineering, Human Resources, etc.).
Higher paying jobs and a better natural world should be the net effect of mechanization (today's age calls it automation and robotics), not low interest rates for out of work spot welders who were never retooled into higher paying / higher valued careers.
Article seems misguided to focus on the credit benefits for humans kicked off the assembly line.
How about this...
"Robots provide a mechanism to finally unleash the human potential to create, design and care for a world long ignored due, in part, to the human slavery of previous industrial eras."
-Thoughts from a former Industrial Arts/Tech Ed/STEM Teacher (of which I taught CAD, CAM and Robotics)
Bloomberg is pointing to the worst case scenario of robot displaced workers not being employed or being underemployed and hence wage pressures which contributes most to inflation being subdued enough to keep interest rates low. Teetering on recession/deflation may become the new norm.
@bee points to the best case scenario of the displaced workers being able to more elsewhere or better than the mechanical work and so robots not affecting wage pressures on inflation.
The inflation can come from gov'ts providing welfare to the unemployed (and not having the revenue to pay for it) thereby debasing their currency.
Some gov't like Egypt subsidize energy and food for the nation. This can not realistically last forever.
In the 1980's, I saw the writing on the wall, so I took advantage of their employee educational benefits and went to school nights. When they finally moved oversea in the mid 1980's I had a degree in Education and a future outside the vacuum the company left behind. Many of my co-workers weren't willing to plan for their future. They had house and car payments, no savings and few options when the factory shut down. Not planning is a plan and a choice in my opinion. It is always a choice.
I agree that someone closing in on retirement has less interest or energy in retooling themselves, but anyone under 50 should have a plan b.
That is pretty much what the Chinese who will be producing and using more robots than anybody else while they have the largest population that they need to keep employed has already been doing to some extent.
http://www.nytimes.com/2015/04/25/technology/robotica-cheaper-robots-fewer-workers.html?_r=0
http://www.techrepublic.com/article/chinese-factory-replaces-90-of-humans-with-robots-production-soars/
There are a lot of things wrong with China politically and economically but trying to do things pro-actively to prevent mass unrest is their top agenda primarily brcause their dictatorial rule can only be sustained as long as the masses don't get too restless. And with that much of a population, steering it is worse than steering a Titanic.
But if things start to get bad in the US far before what doomers predict, US politicians will find the same pressure too to stimulate. Especally when the number of unemployed cuts through both political parties so you cannot maintain illusions of ideology during that time. It is actually easier to do these constructive things in the US given the resources and the relatively smaller size of the population when the politics and ideology didn't get in the way. That is why I believe the US will come through just fine through this transition obviously after some amount of pain but nothing compared to the Great Depression that we have come through. There are better tools now to fight that level of problems.
What will happen with the Chinese experiment? Who knows with that much of population to contend with. There has never been a precedent.
Dex, have you ever worked in a mechanized, computer driven manufacturing environment? Do you know of what you comment on. The jobs needed in today's industries are hard to fill with competent, trained, skilled people. But good the jobs exist. It is much to the point of what Bee was saying, if you are young and have years to work, have a plan B to get up to speed with today's technology. Schools have to teach kids work skills needed in today's environment.
MikeM, have you ever studied micro and macro economics?
Economic cycles create hardships and you need a net to get people through it whether it is to get people through it or the banks through it. Call it whatever you want. It is next leg up of the economic cycle that creates the opportunities for growth which has to be greater than the last one from the investments you made in the lower part of the cycle.
I am surprised that investors don't see the parallel between this and market cycles and volatility. We can argue that people are doomed at the bottom of every market cycle especially when some 30-40% of wealth has been destroyed. Buf it comes back up and all the doomsayers just shut up.
Even the most ardent vegan when stranded on an island with no vegetables in sight will kill the next boar that comes along. So it will be with welfare when it is really needed by the same people that called it welfare with disdain when they didn't need it. Label won't matter at that time when you are crying for the government to do something.
Just like my favorite analogy - baseball fans. When their team is winning, they look at all the teams that are spending money go acquire players and are proud that they aren't spending as much on the players because it is never about how much you spend on players. And in the next stage of the cycle when their team starts to lose, the same people start screaming at the greed of the owners who will not spend to get top players.
Baseball as an organized commercial sport is the best there is to understand how US, its businesses and its population thinks and works as an aggregate - both good and bad.
We may have lost a few battles on poverty not the war. When the poverty spreads to a level where the ideological blindfolds come off to require proof and pudding in the improvements of standard of living than promises of trickle up or down, the war will be won by people who do something about it even if to take pitchforks at the ones holding them down with false promises.
We may have to go through the five stages of grief at things that have changed. One camp is in depression and trying to bargain while the other camp is still in denial and anger.
There's more going on in this one thread then most political debates and nightly news casts I've turned off. Hope others feel the same. Thanks for all the points of view.
Common ground is usually hard to find and often preciously small.
http://www.marketwatch.com/story/boston-dc-are-cities-with-jobs-least-likely-to-be-taken-away-by-robots-2016-01-26
IMO, if the "marketwatch" article was presented into the local high school economics class for study and discussion, some other departments would have to become involved as to how this story was presented or written.
Perhaps it is just me in this early morning, cold and snowy Michigan mood.........but what the hell is going on with this writer of the article. I want some strong backup data as to how and why Grand Rapids, Michigan is going to get the big whack from the technology revolution.
Perhaps an email to the author would reveal something.
For the sake of the writer, hoping no high school english department teachers read his story for a critique; although the document would likely present an opportunity for study and learning.
http://www.bankofengland.co.uk/publications/Pages/speeches/2015/864.aspx
Headed back to the coffee pot for a "fill it up" moment as I now read that caffeine from coffee is "not" going to be worse for me and my heart than all of the other evil things that I have done in my life.
Hey, let me know if I need a brain scan................K ???
Catch
No one complained when we replaced the "task of traffic cop" with an automated signal system (traffic lights). In this case, automation freed up the officer to focus on more important safety "tasks" and if anything more "jobs" have been created than destroyed in this field (law enforcement).
Robotics and automation allow society the opportunity to redefine the time value of human resources. I don't believe it lessens the value of humans, but rather, like the innovation of the washing machine, momentarily frees humans to attend to other tasks.
And ... what task will 10,000 automobile assembly line workers move onto? You say potato ... I say potato.
Machines will do some, not all the tasks once done by man. Some of these changes will disrupt the job market. What challenges did 10,000 farm workers face when they were no longer needed in the fields? Some hit hard times...most adapted to the new opportunities in the city. Society evolves. Where we're headed is a less tragic than you make it out to be.
That said, I hope our country never forgets the importance of a strong manufacturing base for national security. Manufacturing jobs not only put food on the table (as Dex points out), but they helped us to out produced the likes of Germany and Japan in WWII.
Where will they go after the robots and AI take there jobs? (FYI, one concern of AI is that it will be able to debug programs - eliminating many jobs. AI and the singularity could eliminate many of the 'thinking' jobs.)
To that simple question you and others should easily be able to provide a very good answer. That you can not speaks volumes. If you can not answer it, how are the millions of displaced workers?
It is easy to say "Where we're headed is a less tragic than you make it out to be." then it is to refute it.
Summing up: I don't think you and others are addressing all the factors - robots, AI, offshoring of jobs, free flow of capital, free trade, moving jobs to lower costs areas, population growth aging population ...
No one has yet addressed what these people would do once robots/AI etc has liberated the worker from their jobs.
Resistance is Futile - China's Conquest Plan for Robot Industry