Subject: Re: Trade deal with China reached
Ah, but it does. The more closely integrated the Chinese economy is with the global economy, the greater the pain that comes in response to military action. When China was more economically isolated, the primary consequence they would face for military adventurism would be a military response. Now, if they were to roll into Taiwan (for example), the response from the rest of the world would not be limited to a military response, but a massive blow to their economy as well.

Would you care to guess who Germany's #1 trading partner was at the outset of World War 2?

France.

But there's a lot of stuff that can't be handled that way. Or rather, the ordinary application of free market forces would not have it handled that way. The lower end of the value chain isn't going to be located in the U.S., because it is more efficiently done with human labor rather than automation; and the higher end of the value chain "wants" to be located in proximity to their supply chains (and possibly vertically integrated with it), which means that it won't be located here.

You're making the argument of comparative advantage to a degree. That's why I'm fine with somebody else making simple things like mops and whatnot that are easily picked up in the event of a supply outage. But why do you feel that rare earth element processing or semiconductor sourcing is at the low end of the food chain?

Again, it's the tip of the pyramid problem. You can't have the 'critical' products manufactured here unless you also have all of the necessary inputs available here - which means you can't have the tip of the pyramid unless you build the whole pyramid.

You're literally arguing against the entire history of the United States. There's a reason why we've been #1 and when we weren't #1 we were on the fast track to getting there - we have land, we have labor, we have capital that can be utilized and invested here.

We have a large labor force and can import more - legally - if we need to. Nation of immigrants, remember?
We are the 3rd largest country by land area but something like 180th in population density...meaning we have room to grow.
As a part of the land ledger, we have abundant natural resources in the forms of

-Energy, oil/gas/coal/solar/geothermal/hydro/nuclear (if we build more)/tidal/wind
-Arable land - we have the most in the world
-Mineral resources - we have a lot across many states

Captial - the world's 2 largest stock exchanges, the NYSE and the NASDAQ combined represent some 46% of the world's total. And that doesn't even account for the trillions of dollars in commodities that flow through the Chicago Board of Trade.

Were you aware that we're #2 in oil refining also?


We add value up and down the chain.

We don't have the slack capacity to do that materially more than we do now, no. If we wanted to relocate vast swatches of the global manufacturing sector back to the U.S., then all of our rail and port and road systems that have been built to meet current needs will have to be massively expanded to accommodate the new stuff. Because the existing system doesn't have enough slack capacity to handle that.

Haven't been able to find the rail capacity by utilization rate, but according to this

https://www.aar.org/wp-content...

...the "freight car storage data" is about 20%, meaning 20% of freight cars are being stored someplace.

We see it most acutely today with electrical power and AI. As you point out, we have a massive exogenous demand for more electricity to meet the needs of AI centers - and so companies like Google are considering building their own nuclear power plants to meet that need. Which is something that can happen if the new infrastructure is being driven by market forces. But if you want to force that infrastructure to get built without the spur of the IHOTFM, it's the government that needs to do it.

Glad you're mentioning the Invisible Hand. The Invisible Hand has another name: incentive-driven behavior.

For too long, *ALL* the incentives were towards a race to the bottom in terms of wages and convenient geolocating to the Pacific Rim. As we've said, that's great for them...with a mixed bag for us that while some sectors absolutely benefited, it's indisputable that others suffered.

No one is saying, 'let's go back to 1948 when the only industrial power left standing on the planet was the United States'. People tend to forget that the entire rest of the world required the United States to build infrastructure since the collective economies of China, Japan, France, Great Britain, Germany and Italy were put to the torch. Prior to WW2 the US had 2x the GDP of anyone else and after that went to 3x. That kind of event is something the world hopefully never experiences again.

There's nothing wrong with promoting a resurgence of high-value manufacturing in the United States. There's nothing wrong with weaning our economy off of bad actors globally. I can recall when it was supposedly impossible for the US to get off of foreign oil...yet somehow, it happened.