Interesting point on the damaging feedback loop on recession signals. That’s something I need to keep in mind. I don’t think I’ve seen anyone else ever mention this ironic, inflationary effect of hiking rates enough to stoke recession fears.

I totally missed the Boise reference. If I had noticed, I sure wouldn’t make the Micron connection!

As a data geek, I would have liked to hear some Q&A about the speed with which rates are being raised. Too-fast raises convince companies that a recession is coming, and they react by counter-productive measures to reduce supply. Below-capacity production exacerbates boom-bust cycles.

We’re seeing that in oil, as OPEC this week announced a 2M bbl/day production cut that immediately reversed the downtrends in both crude and distillates.

We’re also seeing that in semiconductors. Micron this week simultaneously announced a new fabrication plant in NY (to come on line many years from now), but more immediately a 50% cut in planned 2023 capex. That cut will directly reduce global supply of DRAM (computer and mobile device memory) and NAND (computer and mobile device storage). They are doing that to support the prices of their chips, which would otherwise fall to single-digit margins… which would have helped the Fed’s anti-inflation effort.

These two examples are proof that at least in those niches, raising rates too quickly has had a counter-productive effect.

Incidentally, I picked up on something only a few of the viewers of this video would recognize: Daly said she was just in Boise Idaho. The dominant employer there is Micron, which made those big announcements right around the time she visited. Coincidence? 😉