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"Econ 102" with Noah Smith and Erik Torenberg
The Macro Episode
Jun 19, 2024
Noah Smith and Erik Torenberg discuss the Federal Reserve's interest rate strategy, challenges in macroeconomic prediction, evolution of industrial policy, and impact of synthetic biology on global security. They also explore AI in manufacturing, Warren Buffett's cash holdings, and policy contests in political and economic circles.
56:34
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Quick takeaways
- Interest rates impact investment decisions by influencing the hurdle rate for deploying capital.
- Machine tools drive manufacturing automation more than robots, influencing access to efficient processes.
Deep dives
Interest Rates Influence Investment Decisions
Interest rates play a significant role in investment decisions, as highlighted by Warren Buffett holding $200 billion in cash due to not finding worthwhile investment opportunities. When interest rates are high, like at 5%, investors are less inclined to deploy their cash into investments, leading to a slowdown in economic activity. This demonstrates the concept of opportunity cost, where higher interest rates increase the hurdle rate for investing capital.
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Listen to the best highlights from the podcasts you love and dive into the full episode