 It started so as I said the Congress has now passed the Senate and and the house I think I read 24 Republicans voted for this in the Senate so this is a bipartisan bill beware always beware of bipartisan bills you know whenever the Democrats and Republicans actually agree on something it's probably bad it's probably not good for the country it's probably not good for you and this is a good example of that this is a pretty good example of that and we will you know where both Republicans and never could have agreed and of course they agree because there is a national security threat and of course you can't argue with a national security threat the study the national security threat is the fact that chips microprocessors computer chips are really really important for everything but particularly really really important for the defense department all sophisticated weapons today all weapons system today anyway from drones the tanks the airplanes to the computers to everything everything the military does today depends on chips and and some of the stuff depends on some of the most advanced chips in the world and over the last couple of decades much of the chip manufacturing has moved to places like Taiwan and South Korea and much of the innovation in chips much of the you know breakthroughs technologically in chips that used to be what the United States particularly Intel was was was really good at today the Taiwanese and the Koreans are pushing the envelope and we are lagging behind them and the challenges how do we how do we keep a fresh supply of chips for the State Department for the Defense Department to make sure that our weapons systems have the latest and best and greatest chips possible now I have I have I've got a I've got a solution for that but what is let's first talk about what is the national security threat well the way it's phrased there are two aspects the national security threat the first is supply chains you know while Taiwan and South Korea are friendly countries their allies it's difficult to get the chips over here you have to fly them you have to bring them right boat their bottlenecks the difficulties one of those countries could have I don't know a pandemic or something they'd lock it down and then manufacturing that country would slow down although of course Taiwan was never locked down South Korea was never really locked down it's America that was locked down actually they did really well comparatively speaking Taiwan did phenomenally well comparatively speaking with the latest pandemic where the ones are screwed it up Todd thank you hundred dollars Todd says chips I've owned Intel since early 2009 but this is stupid and I don't know you probably not doing too well with Intel these days they just reported pretty bleak earnings again so Intel not doing well the last few years although this bill will do very it'll be really good for Intel we'll get to that as well so supply chain issues you know how do we get the chips there being chip shortages although I don't know that those shortages have affected the Pentagon those shortages were market shortages that resulted from shipping constraints and and disruptions to the global supply chains even though the Korean and the Taiwanese economies did not shut down much of what they you know chips that are not made whole in those places they get materials from elsewhere the whole supply chain kind of was broken and everything slowed down I don't know that the Pentagon was was hurt by that maybe the Pentagon has priority maybe they get the first chips maybe they fly them in you know especially I I don't know I don't know but that's one of the excuses given we need we need the chip manufacturers to be right here in the United States and they should be American we can't trust those Taiwanese and the Koreans they should be American and they should be here in the United States and therefore we won't have these supply chain bottlenecks so that the Pentagon the story goes we'll get its chips just like that again no proof no suggestions that the Pentagon is having a hard time sourcing chips right now the second issue that people have raised the second issue that people you know mention and and this one is even they're more adamant around they're more inspired by they're more motivated by is the fact that well it's not a fact is one word you just say this one word and people quiver people shake people are just just overcome with fear and apprehension and that word is you just say China and everybody goes whoa China China subsidizing its chip industry China is pouring billions of dollars into chip industry China is gonna dominate the chip industry China is and of course China could invade Taiwan and conquer Taiwan and take the chip industry for the Taiwanese China now yes China is pouring billions of dollars into a semiconductor industry China is as a top strategic priority for the Chinese central planners is domination of the chip industry guess how successful they are not very China has a very small percentage of the worldwide chip manufacturing industry it is not anywhere near cutting edge it is anywhere from five to ten years behind the Taiwanese the Koreans and even Intel which is a couple of years behind the Taiwanese and the Koreans so China is not a threat the most centrally planned Chinese semiconductor industry becomes the less of a threat it is again this understanding of what generates innovation what generates ingenuity what generates progress what generates wealth freedom respect for reason respect for individual innovators when you see that lacking lacking in a culture when you said lacking in a country you're not gonna get innovation there you're not gonna get massive progress now yes the Chinese can steal well but they haven't been successful in stealing the semiconductor stuff because again they're at least five years behind five years is a long time in semiconductors in tech generally five years behind remember version of the iPhone five years ago so what are we afraid of we have this belief it's ingrained in our politics it's ungrained in our politicians and unfortunately most people in America and in the world believe it that central planning is better than leaving the market alone that you know I if the markets are left alone how will we get the right chip how will be the right science how will we get the right technology I mean isn't it better if we get somebody really really really smart and they figure it out and they subsidize all the best people and they invest in all the smartest guys and then we get the best deal because somebody thought about it and figured it out and and mapped it all out no it turns out that's not how it works maybe the ultimate research is is a point in is a point in case case in point not point in case case in point the whole beauty of the market is that private entrepreneurs go out there and they try and they test they fail and they try again the whole idea is venture capitalists invest in some and don't invest in others and try and invest in the best and if you look at a company like Intel which is not doing well and yet Intel is investing 23 billion dollars in R&D next year this bill by the way is gonna subsidize the semiconductor industry by about 50 billion over the next few years five years maybe and Intel is probably gonna get half of that so Intel is already investing 23 billion dollars a year of its owners money of its shareholders money in trying to figure this out now the government's gonna give them more which means Intel if it had failed maybe should go out of business so the capital can be allocated some new entrepreneur who is gonna make better chips than Intel but now with the government giving the half of the 50 billion that they're gonna subsidize the chip industry with to Intel guess what's gonna happen Intel can't fail Intel is now secure Intel doesn't have to worry about failure indeed I would say the energy the incentive their passion about going out there and solving the problem is reduced because they're not into that big of a deal threat because the government's bailing them out markets are truly amazing things yes failure happens now let's say you are the defense department the Pentagon and you're worried about chip supplies for for national security real national security I'm not talking about Trump's national security with the auto industry was deemed strategic for national security I mean I think personally I am convinced that the Iran book show is you know fundamental and essential for the American national security actually for global national security I mean every government in the world should be sending me money because I'm crucial for their national except the Russians maybe and the Chinese but in the South Koreans and no I mean the North Koreans and Iranians and the Saudis well all the good countries should be sending me money because I think my show is crucial for national security I mean give me a break so but there is national security issues so what could the Pentagon do now the Pentagon is a big buyer of chips it could for example say okay we'll buy from you you know Taiwanese company or we'll buy from you South Korean company but we want all the chips made for us to be actually manufactured in the United States we want you to manufacture them here because we're worried about supply chain we'll worry about what happens if there's a war between North and South Korea between China and Taiwan we want the actual manufacturing facility in the United States that is it it's all you need you don't need it to be America owned you just need to be in the United States and you don't need to subsidize that you're already paying for the chips you're already a huge customer why wouldn't they just do it so the whole national security issue is a bogus issue it always is at 99.9 percent of the time when national security concerns are raised around you know central planning issues whether it's trade subsidies tariffs you know picking winners and losers which is what the government is gonna do now with chips it is bogus you know funnily enough we tried to do this in the 1980s the Reagan administration was worried that American superiority in chip manufacturing was in decline because of the Japanese I don't know how many of you round were back then but don't you remember the days where Japan was gonna take over the world Japan was the biggest strategic threat to the United States Japan was gonna become the richest biggest economy in the world the United States was in massive decline and it was all about Japan so the Reagan administration designed a whole series of you know God limitations and the quantities that came in tariffs all kinds of restrictions including subsidies and restrictions and everything and what happened as a result of the United States government intervening in the marketplace on chips shockingly Japan became more dominant in chip manufacturing the United States started a long decline in chip manufacturing Japan ultimately was not the winner in this they they gave market share for a while and then they declined as South Korea and Taiwan became the dominant it's not even I shouldn't even mention the countries because really it's the companies but I don't remember the company so it's easy to remember the countries but it's the companies in these countries the entrepreneurs in these countries the innovators in these countries that made the appropriate progress that changed the world but so dominance and semiconductor moved in the United States to Japan from Japan ultimately to South Korea and Taiwan although the United States is still a very big player in chip manufacturing and you know who isn't a big player in chip manufacturing China so I know yesterday when we had the the the interview with Jim Roney about happiness talked about motivation by fear and notice that politicians almost always use motivation by fear and you know they're doing something bad when that's how they motivated now Shuma senator Shuma from New York also motivated this by positive values jobs in New York so this is just the whole thing is it has nothing to do with national security it has everything to do with the attempt of you know people to the attempt of some politicians to centrally plan of economists to centrally plan to control to subsidize to penalize to basically determine the fate of a particular market and at the same time to line the pockets of politicians providing jobs for the community helping out the community okay so not sorry not line the pockets of politicians although that usually comes up as well it's about lining up the votes for those politicians so tell with the fact that this bill will probably weaken the US economy tell with the fact that this bill might actually reduce American competitiveness American company competitiveness in the semiconductor industry it doesn't matter because the senators are gonna get more votes because they can inspire people because at the superficial level at the level of you know economics in economics in one lesson how's the talks about the fact that what's interesting about economics what's important about economics what matters about economics and not the first level effects but the second third fourth level effects the first level effect of the government subsidizing an industry is more jobs than an industry yay but what are the second third fourth level effects they're never positive in this kind of scenario and they are always way outweigh the negative the the sorry the positives the the increased jobs so for example you're sucking money out of other parts of the economy in order to subsidize this who said this is where the money should be flowing it obviously isn't you're subsidizing companies that are not doing well ultimately that's at the expense of companies that are doing well you're giving competitive firepower to companies that don't have them maybe in them anymore you're distorting providing the marketplace you're shifting people's jobs you're taking power away from let's say a Taiwanese or Korean company that's innovative and power and you're giving market share to a company like Intel that's not doing that well the national security issues can be dealt with easily without having to spend 50 it's more than 50 billion that's just part of the bill that's just that direct subsidies visit also parts of it that are going to grant the National Science Foundation to give out for research and this money to universities and you know in other words a huge push into semiconductor research in the United States at universities and other levels massive amounts of waste massive amounts of again just just spending the money where it doesn't need to be spent spending and yeah positive results might come of it but what's the cost what's the net cost the net value thank you Jack I appreciate the $20 value for value I appreciate that so the CHIPS Act which Republicans are hailing and Democrats are hailing and everybody is excited about everybody's kumbaya and everybody is great not good for the US economy not good for chip manufacturers not good for technology you know long-term and need one of the reasons given I've had a number of articles on this one of the reasons given for the fact that the Chinese are behind behind in chip manufacturing chip development is the fact that it's subsidized and controlled and manipulated and centrally planned that's how you kill an economy that's how you kill an industry what we want is to unleash the creative juices of people productive people in this country to do that what you need is to get the government out of the way not to give the government a giant pot of money and to tell it to go pick the winners and losers and to make investments and to and to plan plan our futures for us all all right thank you for listening or watching the Iran book show if you'd like to 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