Electrification of Everything? Latest Update

If you would like more details, please refer to my prior NRC.com website blogs on the Electrification of Everything. Part 1 here and Part 2 here.

It appears the Electrification of Everything is coming faster than everyone has thought. From rumors only, it sounds like Elon Musk is close to the creation of a much smaller and greatly improved computer chip called a nano chip, that will make space travel, vehicles, newly constructed manufacturing plants and more, much less expensive and more inventive in the AI race with China.

Then suddenly another Middle East war comes along that appeared easy to fix, but….Interesting that the only ships allowed by Iran to cross the Strait of Hormuz are those that pay in non - U.S. Dollar currencies. We still need oil trade in U.S. currency for foreign nations to buy our bonds and other paper to cover are very high debt obligations. The agreement to pay for all OPEC oil goes back to 1973 with the Saudis who had a much higher percentage of the world oil market at that time. This agreement helped create a long period of economic growth and world trade -  mostly in U.S. Dollars with the U.S. a huge economic beneficiary because we can print our own money in paper backed by the faith and trust of the U.S. Government.

History has shown that countries that are good savers, like Japan, can sustain some non-inflationary growth with good savings rates, made more difficult now for counties adding debt for AI related capital expenditures. Some of these countries have more stress now from demographic pressures where populations are not growing, or even decreasing. We Americans have worked hard since World War II, resulting that 70% of our GDP comes from consumer goods and services, while much of our savings has successfully gone into real estate and stocks. IF we can grow at annual rates of 5% or more from the benefits of AI, our large debt will be much more manageable. So, we can call AI what we like, such as high tech, creative destruction, ‘Google squared’, but the results will be the same, and it will create many winning companies and many losing companies who don’t adapt.

And this story is all unfolding just several months before our very important Mid Term Elections.

How will this story end?  Beats me. Fingers crossed. We’ve successfully gotten out of tough predicaments before. This one is new and, of course, very different.

Call if you have any comments or questions.

Jeff Kramer

jeff.kramer@nrc.com

(303) 619-0611