Month: May 2021

Charter-Hating Democrats Now Relying on Charter Schools To Service Families Reluctant To Go Back Into School Buildings


DeBlasio

On Monday, New York City Mayor Bill de Blasio followed the lead of states like New Jersey in announcing that public schools beginning in fall 2021 will no longer offer remote learning, and that teachers will no longer be granted COVID-19 medical waivers. No more hybrid, no more hair-trigger shutdowns, no more “Zoom in a room”—staff and students alike are expected to be inside school buildings five days a week.

This move in the nation’s largest school district, along with others like it around the country, comes as a tremendous relief to millions of parents who have been desperate for a predictable schedule these past 14 months while watching their kids suffer through learning loss and mental/emotional challenges. Even though details such as masking and distancing have yet to be solidified, taking the remote option off the table serves as a crowbar to force open school doors in a system where three out of five kids are still attending class from afar.

And as in all such uses of force, some people are less than thrilled about having their options curtailed.

“How could the city essentially force us back, force us to make a choice that is not acceptable to us?” Brooklyn mom Tazin Azad told The New York Times. Manhattan parent-of-five Lilah Mejia complained to Chalkbeat that, “De Blasio does not make the final say about what’s safe for me and my family….I am now thinking I need to possibly look at homeschooling options.”

For much of the pandemic, the school-choice analysis of how families would respond to the pace of reopening has mostly centered on parents like, well, me: comparatively affluent, pale in hue, unshy about advocating their educational preferences.

“As white parents increasingly insist on in-person school, leading them to enroll in private options or move to the suburbs, at the same time that many parents of color are reluctant to send their children back in person, it’s exacerbating the inequities that already plague urban public school systems,” wrote Lauren Camera for U.S. News & World Report this month, in a piece with the unsubtle headline “Angry White Parents vs. the Public School System.”

But the new developments flip that script. Now it is poorer families, in black and Latino communities, who are grasping for school options that better fit their desires. And what they can’t help but notice, particularly in the heavily Democratic, union-influenced cities where schools are most likely to be less than fully open, is that the local educational and political establishments have been systematically choking off what choices they have.

New York City parents who want their kids to learn remotely this fall now have three lanes: homeschooling, private instruction, or charter schools. But that latter option has been deliberately limited by teachers unions and their Democratic allies, who have successfully enforced a charter cap at the state level despite parents being overwhelmingly in favor of lifting it. De Blasio, during his calamitous run for president, declared that he “hate[d]” the charter schools that educate more than 10 percent of kids receiving a public education in his city.

(Fortunately, the three leading candidates to replace de Blasio, Andrew Yang, Kathryn Garcia, and Eric Adams, have all advocated increasing the number of charter schools.)

The Democratic Party, which receives 94 percent of teachers union political contributions, has devolved in recent years from charter-curiosity to charter-hostility, with once-supportive politicians like Sen. Cory Booker (D–N.J.) understanding that the price of national political ambition is to suppress what is now considered heresy. But this stance may put pols in a pickle as charters get deployed by otherwise remote-canceling districts as the safety valve for parents unwilling to send their kids into school buildings.

As J.D. Tuccille wrote in these pages last month, “Among the victims of the COVID-19 pandemic we can probably count Americans’ faith in government-dominated education.” The pandemic has exposed deep structural flaws in the monopolistic provision of K-12 instruction—the student-damaging political influence of teachers unions, the monomaniac focus on “systemic racism,” the fundamentally alienating one-size-fits-all approach. It’s no wonder that homeschooling has tripled, school choice laws are proliferating, and preliminary fall enrollment figures continue to plummet.

Government-run schools are awash in unprecedented amounts of federal dollars right when the public is turning away from them. This is the ideal moment to rethink the top-down model, acknowledge that one size just cannot ever hope to fit all, and allow whatever taxpayer dollars that are being spent on education to be directed by families exercising their choice, rather than by bureaucrats trying to close choice down.

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Charter-Hating Democrats Now Relying on Charter Schools To Service Families Reluctant To Go Back Into School Buildings


DeBlasio

On Monday, New York City Mayor Bill de Blasio followed the lead of states like New Jersey in announcing that public schools beginning in fall 2021 will no longer offer remote learning, and that teachers will no longer be granted COVID-19 medical waivers. No more hybrid, no more hair-trigger shutdowns, no more “Zoom in a room”—staff and students alike are expected to be inside school buildings five days a week.

This move in the nation’s largest school district, along with others like it around the country, comes as a tremendous relief to millions of parents who have been desperate for a predictable schedule these past 14 months while watching their kids suffer through learning loss and mental/emotional challenges. Even though details such as masking and distancing have yet to be solidified, taking the remote option off the table serves as a crowbar to force open school doors in a system where three out of five kids are still attending class from afar.

And as in all such uses of force, some people are less than thrilled about having their options curtailed.

“How could the city essentially force us back, force us to make a choice that is not acceptable to us?” Brooklyn mom Tazin Azad told The New York Times. Manhattan parent-of-five Lilah Mejia complained to Chalkbeat that, “De Blasio does not make the final say about what’s safe for me and my family….I am now thinking I need to possibly look at homeschooling options.”

For much of the pandemic, the school-choice analysis of how families would respond to the pace of reopening has mostly centered on parents like, well, me: comparatively affluent, pale in hue, unshy about advocating their educational preferences.

“As white parents increasingly insist on in-person school, leading them to enroll in private options or move to the suburbs, at the same time that many parents of color are reluctant to send their children back in person, it’s exacerbating the inequities that already plague urban public school systems,” wrote Lauren Camera for U.S. News & World Report this month, in a piece with the unsubtle headline “Angry White Parents vs. the Public School System.”

But the new developments flip that script. Now it is poorer families, in black and Latino communities, who are grasping for school options that better fit their desires. And what they can’t help but notice, particularly in the heavily Democratic, union-influenced cities where schools are most likely to be less than fully open, is that the local educational and political establishments have been systematically choking off what choices they have.

New York City parents who want their kids to learn remotely this fall now have three lanes: homeschooling, private instruction, or charter schools. But that latter option has been deliberately limited by teachers unions and their Democratic allies, who have successfully enforced a charter cap at the state level despite parents being overwhelmingly in favor of lifting it. De Blasio, during his calamitous run for president, declared that he “hate[d]” the charter schools that educate more than 10 percent of kids receiving a public education in his city.

(Fortunately, the three leading candidates to replace de Blasio, Andrew Yang, Kathryn Garcia, and Eric Adams, have all advocated increasing the number of charter schools.)

The Democratic Party, which receives 94 percent of teachers union political contributions, has devolved in recent years from charter-curiosity to charter-hostility, with once-supportive politicians like Sen. Cory Booker (D–N.J.) understanding that the price of national political ambition is to suppress what is now considered heresy. But this stance may put pols in a pickle as charters get deployed by otherwise remote-canceling districts as the safety valve for parents unwilling to send their kids into school buildings.

As J.D. Tuccille wrote in these pages last month, “Among the victims of the COVID-19 pandemic we can probably count Americans’ faith in government-dominated education.” The pandemic has exposed deep structural flaws in the monopolistic provision of K-12 instruction—the student-damaging political influence of teachers unions, the monomaniac focus on “systemic racism,” the fundamentally alienating one-size-fits-all approach. It’s no wonder that homeschooling has tripled, school choice laws are proliferating, and preliminary fall enrollment figures continue to plummet.

Government-run schools are awash in unprecedented amounts of federal dollars right when the public is turning away from them. This is the ideal moment to rethink the top-down model, acknowledge that one size just cannot ever hope to fit all, and allow whatever taxpayer dollars that are being spent on education to be directed by families exercising their choice, rather than by bureaucrats trying to close choice down.

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Two Profit Measures, Two Different Stories: GDP Profits Are Unchanged, While S&P Profits Soar

Two Profit Measures, Two Different Stories: GDP Profits Are Unchanged, While S&P Profits Soar

By Joseph Carson, former chief economist at Alliance Bernstein

In Q1, GDP-based operating profits for all US companies were unchanged from the fourth quarter of 2020 and posted a 12.7% gain from the comparable period one year ago. The reported profit performance of S&P 500 companies was markedly better. Q1 reported operating profits for S&P 500 companies jumped 25% over the Q4 level and were up 150% in the past year. ,

The GDP-based measure of profits and the reported figures by S&P 500 companies are not strictly comparable because of different accounting conventions. The GDP measure is based on a tax accounting framework and only reflects the income generated from current production. In contrast, S&P 500 companies use a financial accounting framework to report profits to shareholders.

Financial accounting allows companies to include non-operating profits and losses. The most significant non-operating items are capital gain income and losses. Capital gains and losses can result from trading activities, a revaluation, or the sale of an asset. GDP-based operating profits exclude swings in capital income because they result from mark-to-market changes in asset values and do not reflect earnings from new production or output.

Past studies by the Bureau of Economic Analysis (BEA) have found that capital gain income and losses can amount to hundreds of billions in any given year. By itself, it can explain much of the difference in the operating profit measures.

The significant divergence in the two profit series in the past year reflects substantial capital losses in 2020 and considerable market capital gains in 2021. For example, S&P reported operating profits plunged 50% in Q1 2020 over Q4 2109, reflecting the plunge in equity prices, whereas GDP profits fell one-fifth as much. That reversed in Q1 2021 as equity prices surged to record highs.

In Q1, the ratio of reported S&P 500 operating profits to GDP profits hit a new record of .70%, far above the previous high of .64% posted during the tech equity bubble of 2000.

That outperformance is a function of equity asset inflation and not a superior operational performance of S&P companies. In other words, an equity market correction would hit reported S&P reported profits doubly hard but will hardly move the needle on GDP profits.

Tyler Durden
Thu, 05/27/2021 – 12:39

via ZeroHedge News https://ift.tt/3fNISug Tyler Durden

DoJ Launches Criminal Investigation Into Archegos Blowup

DoJ Launches Criminal Investigation Into Archegos Blowup

Following earlier reports that investigators had been sniffing around the prime brokerages that extended credit to Archegos, along with some critical comments from top market regulators, Bloomberg reported late Wednesday that federal prosecutors in Manhattan have officially launched a criminal investigation into the Archegos blowup.

But according to Bloomberg, it appears the DoJ is now taking over after the SEC launched a preliminary investigation into Bill Hwang, the owner of Archegos, which operated as Hwang’s family office, back in March.

The Department of Justice is investigating the market-rattling meltdown of Bill Hwang’s Archegos Capital Management in March, a debacle that left big banks in Europe, Asia and the U.S. nursing more than $10 billion in losses.

Federal prosecutors in Manhattan sent requests for information to at least some of the banks that dealt with the firm, according to people with knowledge of the matter, who asked not to be identified discussing the confidential probe. It’s unclear what potential violations or entities authorities are examining.

A spokesperson for prosecutors declined to comment, a spokesperson for Archegos didn’t immediately respond to a request for comment.

Archegos’ prime brokers initially attempted to try and avoid a market panic by coordinating their sales of the massive blocks of shares their had accumulated on behalf of Archegos via a complicated series of swap arrangements. But when Goldman Sachs and Morgan Stanley broke ranks and opted to be the first out the door, Credit Suisse, which had the biggest exposure to Archegos, was ultimately left with more than half of the $10 billion+ in losses that banks were stuck with (while Hwang reportedly lost his entire 11-figure fortune).

Right now, it’s not exactly clear what laws prosecutors suspect Archegos and the prime brokers of breaking.

While authorities haven’t accused Archegos or its banks of breaking any laws in their dealings, the episode has drawn public criticism from regulators, as well as some inquiries behind the scenes from watchdogs around the world. The implosion shows Wall Street has grown too complacent about potential threats building up in the economy, Michael Hsu, the new acting chief of the Office of the Comptroller of the Currency, said last week.

But the DoJ isn’t the only agency poking around: Investigations are ongoing across the globe.

The Securities and Exchange Commission launched a preliminary investigation into Hwang in March, a person familiar with the matter said at the time. The agency has since explored how to increase transparency for the types of derivative bets that sank the firm.

And in the U.K., the Prudential Regulation Authority has been asking firms including Credit Suisse, Nomura and UBS Group AG to hand over information related to their lending to Archegos, people familiar with the matter have said.

While investigators will undoubtedly focus on what happened, some believe that the real concerns lie in current vulnerabilities in the world of equity finance. The team at Risky Finance recently calculated that some $3 trillion in hidden Archegos-style exposure is out there in the market, just waiting to explode if stocks sell off.

When the family office Archegos Capital abruptly imploded in late March, prompting $50 billion in block trades and $10 billion in losses at Credit Suisse, Nomura, UBS and Morgan Stanley, many bank analysts were taken by surprise. Last week, many of these analysts sounded frustrated listening to Credit Suisse’s earnings call in which senior management skirted round without giving any real detail about the disaster.

“Do you think it’s possible that this could produce a very fundamental reset in how your IRB credit risk models work?” wondered Stefan Stalmann of Autonomous Research. “I mean you have only CHF20 billion to CHF25 billion of counterparty credit risk-weighted assets on literally hundreds of billions of equity swaps and repos”.

Risky Finance shares Stalmann’s bewilderment. Expressed as a capital requirement, Credit Suisse was able to satisfy regulators with just $2 billion of capital for counterparty credit losses – the lowest among the G-SIFI banks tracked by Risky Finance. Months later it reported a loss of $4.7 billion.

It should serve as a warning. 14 years ago, obscure corners of banking businesses became hotbeds of regulatory arbitrage, speculation and leverage. The contagion of US subprime brought the financial system to its knees. Now, after years of low or negative interest rates, equity finance may have become a similar hotbed.

The business is much larger than published estimates – Risky Finance believes there are more than $3 trillion of exposures. And the pressure to grow equity finance is leading banks to exploit loopholes in Basel rules. As in 2007, this is masked by the complexity of the models that Credit Suisse and other banks used to allocate capital to their prime brokerage business.

In following articles we will try to unpick the way Archegos was so damaging, and we will give a broad brush picture of how the risk models are supposed to work. And we will showcase some new data that reveals why this business is bigger and riskier than many imagined. Lastly we will identify a list of fixes for regulators to work on.

Tyler Durden
Thu, 05/27/2021 – 12:20

via ZeroHedge News https://ift.tt/3fOhFb1 Tyler Durden

America’s Semiconductor Industry Doesn’t Need $52 Billion in New Subsidies To Stay Ahead of China


dreamstime_xl_137107962

Spooked by a recent but temporary shortage of semiconductors and by China’s plans to spend the equivalent of about $150 billion to bolster its own computer chip industry, the Senate is now considering a proposal to throw $52 billion in new subsidies at American semiconductor manufacturers to spur domestic production.

It’s an idea that dovetails nicely with President Joe Biden’s pivot toward China as the post-pandemic villain that will justify future expansions of government, as well as with the emerging nationalist economics and anti-China sentiment on the political right.

But what it really amounts to is a massive handout to a successful industry that doesn’t need government aid, delivered under the guise of a national security argument that doesn’t stand up to scrutiny. Rather than countering a perceived threat from China, lawmakers risk bogging down one of the most innovative and successful parts of the American economy with an industrial policy that will force chipmakers to care more about what makes Washington happy than what is best for their own businesses.

That perceived competition with China is fundamental to the United States Innovation and Competition Act of 2021, an omnibus bill that encompasses Senate Majority Leader Chuck Schumer’s (D–N.Y.) Endless Frontier Act and several other proposals from lawmakers on both sides of the aisle. The very first page of a fact sheet released last week by Senate Democrats points out that America’s share of global semiconductor manufacturing has fallen from 37 percent in 1990 to just 12 percent last year. Government action is necessary “to preserve our competitive edge,” the document argues, before going on to warn that nothing less than America’s “economic and national security” could be at risk if Congress doesn’t hand over $52 billion in taxpayer cash to a handful of successful, deep-pocketed chipmaking companies.

Companies that, by the way, admit they don’t need the cash to be competitive. Intel, one of the world’s biggest chipmaking companies, is in the process of building a $20 billion fabrication facility in Arizona. In March, CEO Pat Gelsinger said the project “would not depend on a penny of government support or state support.” (Though he immediately followed that comment by saying that “of course…we want incentives” and it appears that Congress is prepared to dutifully provide them.)

If there is some sort of problem with American semiconductor manufacturing—and there’s really not, as we’ll see shortly—it certainly isn’t a lack of money. The New York Times reported earlier this month that equity investors have “plowed more than $12 billion into 407 chip-related companies” during 2020, which is more than double what they invested in 2019. Revenue for global chip manufacturers was up 10 percent in 2020, despite a pandemic-induced slowdown in demand, the Times reported, and NXP Semiconductors, which makes chips for automobiles and industrial equipment, saw revenue climb by 27 percent.

Those numbers don’t suggest an industry in dire need of government aid.

Concerns about America’s share of global semiconductor manufacturing are similarly misplaced. According to the Semiconductor Industry Association, a trade group, American-based firms control 47 percent of the global share of the semiconductor industry—a far cry from congressional concerns about the U.S. losing its competitive edge.

The trick that lawmakers are trying to pull here is to focus on where semiconductors are made. But this doesn’t really matter. It’s true that a smaller share is manufactured in the U.S. today than 30 years ago, but that’s the result of natural shifts in the market, not evidence of a collapse in American technological prowess.

Indeed, American companies are still at the forefront of semiconductor development—earlier this month, American-based IBM announced a breakthrough in the development of the world’s first two-nanometer chip.

“It is true that America has slipped to a 12 percent market share in semiconductor manufacturing, but it doesn’t follow that firms need government help not to slip further,” wrote T.J. Rodgers, CEO of Cypress Semiconductor Corporation and a former chairman of the Semiconductor Industry Association, in The Wall Street Journal this week. “Around 60 years after the commercialization of the integrated circuit, most chips have become commodities with little strategic value, and their manufacturing has been pushed offshore by relentless demand for lower cost.”

Ah, but what about the recent supply chain issues that left automakers and tech companies without access to the semiconductors they need? “It is not an exaggeration to say at the moment that we have a crisis in our supply chain,” Commerce Secretary Gina Raimondo told the Senate Appropriations Committee in April.

Except, well, it kind of is. It takes a long time to make semiconductors—up to 26 weeks, in some cases—and production is still ramping up again in the wake of last year’s disruptive pandemic. This isn’t a nationalist issue in which some evil foreigners are cutting off America’s share of semiconductors, but a market-based issue that will be resolved as chipmakers increase production capacity to catch up to increasing demand.

But what about China? Yes, the Chinese government is investing heavily in semiconductor-making technology, but it remains far behind America in terms of technological know-how. A recent Nikkei report shows that China mostly manufactures nothing smaller than 14-nanometer chips, which are several generations behind the most advanced chips being made elsewhere—remember, IBM just announced plans for a two-nanometer chip. Closing that gap will be difficult now that America has banned the sale of semiconductor-manufacturing equipment to China (and enforced that ban even when the sale involved other countries).

If there is one major worry for the global supply chain of semiconductors, it is the island of Taiwan. The majority of the world’s semiconductors are made in Taiwan, which is home to the Taiwan Semiconductor Manufacturing Company, by far the world’s largest chipmaker. There are obviously many complicated geopolitical issues involving Taiwan that America and the world’s semiconductor industry will have to navigate in the coming years—but it is downright foolish to believe that $52 billion in subsidies will make a meaningful impact in that complex situation, or in a global market that was worth $425 billion last year alone.

No, the United States Innovation and Competition Act of 2021 won’t meaningfully change the fact that most of the world’s semiconductors will continue to be produced in one of the world’s biggest geopolitical hot spots. It won’t do anything to reconfigure global supply chains that major chipmakers and semiconductor consumers aren’t already doing—probably by copying the strategies that Toyota used to successfully weather the recent semiconductor shortage. It won’t provide a needed boost to American companies’ research and development efforts, which are already running at an all-time high. And it won’t do much to stop companies from trying to find the cheapest places to manufacture their goods, whether those goods are T-shirts or the world’s most advanced computer chips.

All it will do is shovel $52 billion of taxpayer money (some of it probably borrowed from China, ironically enough) to successful businesses flush with cash.

“We must invest in R&D, innovation, and manufacturing to ensure the U.S. continues to lead the world in science and technology,” says Schumer. But private companies are already doing that in record amounts, and America is the world’s leader in science and technology, no matter what the China hawks might want you to believe.

The semiconductor industry doesn’t need a $52 billion stimulus package to keep doing what it is doing. It mostly just needs the federal government to stay out of the way.

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US Mulls Leaving 600 Marines In Afghanistan To Guard Embassy

US Mulls Leaving 600 Marines In Afghanistan To Guard Embassy

Authored by Dave DeCamp via AntiWar.com,

Since President Biden ordered the withdrawal of troops out of Afghanistan, US officials have hinted that a small military presence could continue under the guise of protecting a diplomatic mission.

According to a report from The Sun, the US is considering keeping 600 Marines in Afghanistan to protect the US embassy. The report cited anonymous sources who also said the US wants Turkish troops to stay at the Kabul airport to protect it from the Taliban or other militant groups.

U.S. Embassy in Kabul, via PBS

There are currently several hundred Turkish troops guarding the Kabul airport. On Tuesday, The New York Times also reported that the US wants Turkey to continue protecting the airport. US officials believe Turkey is looking for concessions from Washington in order for them to stay.

Last week, Chairman of the Joint Chiefs of Staff Gen. Mark Milley said the US was working with some of its NATO allies on ways to secure the Kabul airport after the withdrawal so the US and other countries could keep embassies in Afghanistan.

Biden ordered the Afghanistan withdrawal to be completed by September 11th, but the Times report said the US and its coalition allies are on track to be done with the pullout by early to mid-July.

As the withdrawal is moving along, the Pentagon is scrambling for ways to maintain influence and assets in Afghanistan. Securing the Kabul airport to protect embassies could be the excuse the US military needs to keep personnel and equipment in the country.

Tyler Durden
Thu, 05/27/2021 – 12:00

via ZeroHedge News https://ift.tt/3frty7z Tyler Durden

That Didn’t Age Well: Wuhan Propaganda From MSM Laid Bare

That Didn’t Age Well: Wuhan Propaganda From MSM Laid Bare

For nearly 18 months, the mainstream media engaged in journalistic malpractice – quashing any suggestion that COVID-19 could have originated from the Wuhan Institute of Virology, because their arch-nemesis, former President Trump, dared promote this very logical conclusion. Let’s also not forget the deep ties Beijing has formed within the United States, which include universities, entertainment, sports leagues, and of course, Washington DC and its liberal surrogates.

So of course, once the lab-leak theory began to circulate in January, 2020, China’s ‘investments’ in the United States paid off, and the entire liberal media industrial complex furiously peddled the ‘natural origin’ theory, while boldly proclaiming the lab origin hypothesis a ‘debunked conspiracy theory.’ 

That was until the last two weeks, starting with Sen. Rand Paul (R-KY) shredding Anthony Fauci over the NIH funding US research within the Wuhan lab, followed by a Wall Street Journal report that three WIV lab workers were hospitalized in December 2019 with COVID-19 symptoms.

And with that, the lab-leak hypothesis was legitimized almost overnight – sending liberal outlets scrambling to quietly append their previous reporting. This flood of hypocrisy was compiled into an epic Twitter thread by journalist Drew Holden:

Meanwhile, a SUPERCUT!

Expect no apologies, of course.

Cover photo via Armstrong Economics

Tyler Durden
Thu, 05/27/2021 – 11:40

via ZeroHedge News https://ift.tt/3wAaqdm Tyler Durden

America’s Semiconductor Industry Doesn’t Need $52 Billion in New Subsidies To Stay Ahead of China


dreamstime_xl_137107962

Spooked by a recent but temporary shortage of semiconductors and by China’s plans to spend the equivalent of about $150 billion to bolster its own computer chip industry, the Senate is now considering a proposal to throw $52 billion in new subsidies at American semiconductor manufacturers to spur domestic production.

It’s an idea that dovetails nicely with President Joe Biden’s pivot toward China as the post-pandemic villain that will justify future expansions of government, as well as with the emerging nationalist economics and anti-China sentiment on the political right.

But what it really amounts to is a massive handout to a successful industry that doesn’t need government aid, delivered under the guise of a national security argument that doesn’t stand up to scrutiny. Rather than countering a perceived threat from China, lawmakers risk bogging down one of the most innovative and successful parts of the American economy with an industrial policy that will force chipmakers to care more about what makes Washington happy than what is best for their own businesses.

That perceived competition with China is fundamental to the United States Innovation and Competition Act of 2021, an omnibus bill that encompasses Senate Majority Leader Chuck Schumer’s (D–N.Y.) Endless Frontier Act and several other proposals from lawmakers on both sides of the aisle. The very first page of a fact sheet released last week by Senate Democrats points out that America’s share of global semiconductor manufacturing has fallen from 37 percent in 1990 to just 12 percent last year. Government action is necessary “to preserve our competitive edge,” the document argues, before going on to warn that nothing less than America’s “economic and national security” could be at risk if Congress doesn’t hand over $52 billion in taxpayer cash to a handful of successful, deep-pocketed chipmaking companies.

Companies that, by the way, admit they don’t need the cash to be competitive. Intel, one of the world’s biggest chipmaking companies, is in the process of building a $20 billion fabrication facility in Arizona. In March, CEO Pat Gelsinger said the project “would not depend on a penny of government support or state support.” (Though he immediately followed that comment by saying that “of course…we want incentives” and it appears that Congress is prepared to dutifully provide them.)

If there is some sort of problem with American semiconductor manufacturing—and there’s really not, as we’ll see shortly—it certainly isn’t a lack of money. The New York Times reported earlier this month that equity investors have “plowed more than $12 billion into 407 chip-related companies” during 2020, which is more than double what they invested in 2019. Revenue for global chip manufacturers was up 10 percent in 2020, despite a pandemic-induced slowdown in demand, the Times reported, and NXP Semiconductors, which makes chips for automobiles and industrial equipment, saw revenue climb by 27 percent.

Those numbers don’t suggest an industry in dire need of government aid.

Concerns about America’s share of global semiconductor manufacturing are similarly misplaced. According to the Semiconductor Industry Association, a trade group, American-based firms control 47 percent of the global share of the semiconductor industry—a far cry from congressional concerns about the U.S. losing its competitive edge.

The trick that lawmakers are trying to pull here is to focus on where semiconductors are made. But this doesn’t really matter. It’s true that a smaller share is manufactured in the U.S. today than 30 years ago, but that’s the result of natural shifts in the market, not evidence of a collapse in American technological prowess.

Indeed, American companies are still at the forefront of semiconductor development—earlier this month, American-based IBM announced a breakthrough in the development of the world’s first two-nanometer chip.

“It is true that America has slipped to a 12 percent market share in semiconductor manufacturing, but it doesn’t follow that firms need government help not to slip further,” wrote T.J. Rodgers, CEO of Cypress Semiconductor Corporation and a former chairman of the Semiconductor Industry Association, in The Wall Street Journal this week. “Around 60 years after the commercialization of the integrated circuit, most chips have become commodities with little strategic value, and their manufacturing has been pushed offshore by relentless demand for lower cost.”

Ah, but what about the recent supply chain issues that left automakers and tech companies without access to the semiconductors they need? “It is not an exaggeration to say at the moment that we have a crisis in our supply chain,” Commerce Secretary Gina Raimondo told the Senate Appropriations Committee in April.

Except, well, it kind of is. It takes a long time to make semiconductors—up to 26 weeks, in some cases—and production is still ramping up again in the wake of last year’s disruptive pandemic. This isn’t a nationalist issue in which some evil foreigners are cutting off America’s share of semiconductors, but a market-based issue that will be resolved as chipmakers increase production capacity to catch up to increasing demand.

But what about China? Yes, the Chinese government is investing heavily in semiconductor-making technology, but it remains far behind America in terms of technological know-how. A recent Nikkei report shows that China mostly manufactures nothing smaller than 14-nanometer chips, which are several generations behind the most advanced chips being made elsewhere—remember, IBM just announced plans for a two-nanometer chip. Closing that gap will be difficult now that America has banned the sale of semiconductor-manufacturing equipment to China (and enforced that ban even when the sale involved other countries).

If there is one major worry for the global supply chain of semiconductors, it is the island of Taiwan. The majority of the world’s semiconductors are made in Taiwan, which is home to the Taiwan Semiconductor Manufacturing Company, by far the world’s largest chipmaker. There are obviously many complicated geopolitical issues involving Taiwan that America and the world’s semiconductor industry will have to navigate in the coming years—but it is downright foolish to believe that $52 billion in subsidies will make a meaningful impact in that complex situation, or in a global market that was worth $425 billion last year alone.

No, the United States Innovation and Competition Act of 2021 won’t meaningfully change the fact that most of the world’s semiconductors will continue to be produced in one of the world’s biggest geopolitical hot spots. It won’t do anything to reconfigure global supply chains that major chipmakers and semiconductor consumers aren’t already doing—probably by copying the strategies that Toyota used to successfully weather the recent semiconductor shortage. It won’t provide a needed boost to American companies’ research and development efforts, which are already running at an all-time high. And it won’t do much to stop companies from trying to find the cheapest places to manufacture their goods, whether those goods are T-shirts or the world’s most advanced computer chips.

All it will do is shovel $52 billion of taxpayer money (some of it probably borrowed from China, ironically enough) to successful businesses flush with cash.

“We must invest in R&D, innovation, and manufacturing to ensure the U.S. continues to lead the world in science and technology,” says Schumer. But private companies are already doing that in record amounts, and America is the world’s leader in science and technology, no matter what the China hawks might want you to believe.

The semiconductor industry doesn’t need a $52 billion stimulus package to keep doing what it is doing. It mostly just needs the federal government to stay out of the way.

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Latest MMT Madness Is “QE = Savings”, Really…

Latest MMT Madness Is “QE = Savings”, Really…

Authored by Mike Shedlock via MishTalk.com,

The latest MMT nonsense is that savings can be printed…

Fantasyland Position

“Government bonds are not debt. They are savings just as the reserves from whence the came are savings. When they mature they will either roll over or be converted back to reserves. They will never be a burden on our children.”

What Are Savings?

Savings = Production Minus Consumption

That’s what savings always meant and still does. By your labor, you produce something and part of it you consume. The rest is savings.

In the classic example a farmer grows wheat, consumes some of it and saves some of it. But stored wheat can go bad so he sells some of it for money.

That money is savings. 

If you work at a factory, you help produce widgets even if you are a secretary. You get paid. You buy food and clothes and save the rest. 

That money is savings.

MMT Savings Madness

  1. Savings can be conjured out of thin air.

  2. Money the Fed prints to support government dropping bombs in the Mideast is allegedly savings.

  3. If government builds a bridge and pays $1 million for it by floating bonds, the savings are $1 million. If government paid $1 trillion for the same bridge, the savings would be $1 trillion. 

  4. QE is savings. 

  5. Paying people money to do nothing is saving.

  6. One does not have to produce anything to save. 

Modern Monetary Theory (MMT) is sheer lunacy.

Tyler Durden
Thu, 05/27/2021 – 11:19

via ZeroHedge News https://ift.tt/3wAEpBY Tyler Durden

Tesla Is “Paying In Advance” For Semiconductors And “Actively Considering” Buying Their Own Foundry

Tesla Is “Paying In Advance” For Semiconductors And “Actively Considering” Buying Their Own Foundry

Tesla is taking what is being called an “unusual step” to secure its supply of semiconductor chips for its vehicles in the midst of a global shortage. The company is going to be “paying for advance” for the semis it needs and is also considering “buying a plant”, according to a new report by FT. 

The company is reportedly in talks with semi companies in Taiwan, South Korea and the US. The chips that Tesla uses for its vehicles are mainly made in Taiwan and South Korea. Tesla’s interest in buying a plant is still preliminary, sources noted. 

Some chipmakers have been allowing large customers to make upfront deposits to secure orders at fixed prices. While that practice is outside the norm generally, it has come to prominence once again due to the supply shortage. 

Ambrose Conroy, founder and chief executive of Seraph Consulting, a supply chain consultancy, of Tesla, told FT: “They will buy capacity at first, but they are actively considering buying their own foundry.”

Velu Sinha, a partner at Bain in Shanghai, added that he didn’t think Tesla would buy their own factory: “They see the price tag for the factory and they go back and get in line.”

CW Chung, an analyst at Nomura, noted that companies like Samsung can change contracting arrangements with companies like Tesla who seek specialized chips: “Given the current capacity shortage, Samsung may give dedicated capacity to companies like Tesla, which uses chips with a longer life cycle.”

One European auto advisor told FT that carmakers would have “more direct dealings” with chip manufacturers. “That means they have to invest in in-house expertise and it also means dedicated buying agreements,” they said. 

But dedicating lines to individual customers has its drawbacks for semi companies. “The moment you block out certain capacity for one customer, that flexibility disappears,” one semi company exec commented.

We noted earlier this month that automakers like Nissan are leaving navigation systems out of “thousands of vehicles” that would typically have them due to the shortage and that Dodge’s Ram no longer offers its 1500 pickups with an “intelligent” rearview mirror. Renault has stopped offering an oversized digital screen behind the steering wheel of its Arkana SUV. 

We also pointed out “thousands” of Ford trucks sitting along the highway in Kentucky, awaiting semi chips for completion of assembly weeks ago. We noted when, earlier this month, Stellantis said there would be “no end in sight” to the shortage and that the company was making changes to its lineup, including changing the dashboard of the Peugeot 308, to try and adapt to the crisis. 

Intel’s CEO, speaking on 60 Minutes several weeks ago, said: “We have a couple of years until we catch up to this surging demand across every aspect of the business.” 

Meanwhile, Tesla currently has an astounding $6.6 billion in accounts payable, per its last 10-Q.

This has us begging the question about “paying in advance”: was this a decision prompted by Tesla decision making, or was this suppliers finally saying to the company: “The games are over. Time to pay up or shut up”?

Tyler Durden
Thu, 05/27/2021 – 11:05

via ZeroHedge News https://ift.tt/3oX1psj Tyler Durden