> Higher interest rates generally reduce inflation by reducing spending, which in turn slows the economy and can lead to mass unemployment.
> One of the people who denounced Volcker’s moves was then-Senate Majority Leader Robert Byrd, who declared after Volcker announced his new effort in October 1979, “Attempting to control inflation or protect the dollar by throwing legions of people out of work and shutting down shifts in our factories and mines is a hopeless policy.“
The question is if the recession can be structured to disproportionately hit financialized and knowledge industries while sparing manufacturing.
But higher interest rates aren't what the Whitehouse wants.
The White House wants to reduce prices without raising interest rates. So you need some other way of slowing down the economy. There’s lots of ways to do that, such as laying off federal workers.
Higher interest rates are about shifting investment priorities and loan rates. It increases the cost of lending, which results in people making choices about taking on risk and debt.
The reduction in loans being written, and the increase in interest being paid means that people start moving their money into savings, reducing the velocity of Money.
Laying off people from the government reduces the amount of money being used productively, but doesn’t do a thing to stop loans being written or money being printed.
It destroys the ability of the system to be efficient, resulting in more waste, and with more risk appetite + weaker regulators it results in the ability for people to break laws with impunity, resulting in captured or rent seeking markets.
This results in a recession, and a failed economy.
To be fair to them (even if they're likely unaware), that was effectively a thing back in the 1800s: https://en.wikipedia.org/wiki/United_States_Revenue_Cutter_S...
> The federal government desperately needed revenue, and determined to raise it chiefly from tariffs on imports. Strong enforcement of tariff laws could blunt rampant smuggling. Urged on by Secretary of the Treasury Alexander Hamilton, the United States Congress on 4 August 1790 established the Revenue-Marine, later renamed the Revenue Cutter Service by act of 31 July 1894 (28 Stat. 171)
and that was just to curry favor as well as get in front of the tariff plans
we'll see if they follow through, but those count as American entrepreneurs too
if there are disruptions on smaller scales, some people will take the risk, and there will be winners and losers as with everything else.
There’s an issue of raw materials supply as well and I’m curious if this is more of an “assembled in USA” type of thing or the whole chain will move. Time will tell.
Manufacturing is now increasingly automated, so it doesn’t employ as many people anymore. This is an issue India faces as does every developing economy. Economic growth is increasingly dependent on service sector growth.
Moving supply chains also requires weaker labor laws, and lower salaries for workers, than minimum wage, to be competitive.
OSHA is a problem for factory owners, because it increases costs with the tradeoff of higher worker safety. In contrast, there are suicide nets around factories in China.
The American populace doesn’t want to work jobs at lower wages. The price for competitive goods requires firms to be cheap.
You are going to be subsidizing people to work in factories, for decades, if not a full century. All the while people will take aim at the subsidy, and then blame minimum wages and people who support labor laws. Ad infinitum.
In this specific sector, the entire industry including retail has shown they will pay many multiples of a higher price for GPUs and cloud services. So if a US grown supply already cost that much out the gate, there is already examples of the market being able to bare that.
There is definitely an unserved market. Even now, there’s many people who want to purchase the service and can’t afford to.
However, even if we concede your point in its strongest sense - the revenue is a different beast from the profit margins.
Higher labor and compliance costs mean that making things in america is more expensive.
The solution is usually to not pay people that much
In the end a company is measured by its stock performance. Their incentive is to maximize profit.
If the solution is to pay people less, most voters balk.
I say take it a step further - not everyone is excited by sitting in front of a computer and doing intellectual exercises. People like different things and are suited to doing different things as well.
But if there is only one way forward, which is Engineering, Medicine and Law - then you have essentially recreated 1970s India and China.
But this is 2025 - not only do we have automation we have GenAI, which threatens to take away tons of low level service work. Education is something that takes years to result in blooms. Decades of nurturing.
(Hey - thats a useful analogy. Societies plant and harvest crops of trained professionals.)
Can people discuss these difficult topics? Nope. Besides, if you do - people start becoming more “liberal”, “disconnected” from ground reality. Code for people not voting the way leadership would like.