Saturday, October 29, 2011
World Power Swings Back to America
Without question the
awful shock and is struggling to overcome it.
I see much of the efforts so far as weak and often misguided. I see plenty of optimistic plans but still
little implementation. USA
Yet the all important energy balance of payments is swinging back in favor to the
at an astounding rate. At the same time, US armies are coming home and US dollars are
no longer flooding deserts everywhere. USA
Technology breakthroughs are also soon to simply eliminate fossil fuels anyway.
All this sets the stage for even a muddled and profoundly corrupt financial system to pull itself together and get back into the business of funding rapid growth.
I think that the
USA and is capable of a sustained
growth of in excess of four percent per year over the next decade. That is a certainty if the housing market is
restructured immediately rather than piecemeal in the present muddled fashion. Or perhaps enough time has ground through the
system to revitalize it already. Canada
World power swings back to
The American phoenix is slowly rising again. Within five years or so, the
will be well on its way to self-sufficiency in fuel and energy. Manufacturing
will have closed the labour gap with US in a clutch of key
industries. The current account might even be in surplus. China
The making of computers, electrical equipment, machinery, autos and other goods may shift back to the
from . Photo:
By Ambrose Evans-Pritchard, International Business Editor
5:53PM BST 23 Oct 2011
Assumptions that the
Great Republic must inevitably spiral into economic and strategic
decline - so like the chatter of the late 1980s, when was in vogue - will seem
wildly off the mark by then. Japan
Telegraph readers already know about the "shale gas revolution" that has turned
into the world’s number one producer of natural gas, ahead of . Russia
Less known is that the technology of hydraulic fracturing - breaking rocks with jets of water - will also bring a quantum leap in shale oil supply, mostly from the Bakken fields in North Dakota, Eagle Ford in Texas, and other reserves across the Mid-West.
US was the
single largest contributor to global oil supply growth last year, with a net
395,000 barrels per day (b/d)," said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea.
shale output is "set to expand dramatically" as fresh sources come on
stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since
already meets 72pc of its own oil needs, up from around 50pc a decade ago. US
"The implications of this shift are very large for geopolitics, energy security, historical military alliances and economic activity. As US reliance on the Middle East continues to drop, Europe is turning more dependent and will likely become more exposed to rent-seeking behaviour from oligopolistic players," said Mr Blanch.
Meanwhile, the China-US seesaw is about to swing the other way. Offshoring is out, 're-inshoring' is the new fashion.
"Made in America, Again" - a report this month by Boston Consulting Group - said Chinese wage inflation running at 16pc a year for a decade has closed much of the cost gap.
is no longer the "default location" for cheap plants supplying the . US
A "tipping point" is near in computers, electrical equipment, machinery, autos and motor parts, plastics and rubber, fabricated metals, and even furniture.
"A surprising amount of work that rushed to
past decade could soon start to come back," said BCG's Harold Sirkin. China
The gap in "productivity-adjusted wages" will narrow from 22pc of US levels in 2005 to 43pc (61pc for the
South) by 2015. Add in shipping
costs, reliability woes, technology piracy, and the advantage shifts back to
the US . US
The list of "repatriates" is growing. Farouk Systems is bringing back assembly of hair dryers to Texas after counterfeiting problems; ET Water Systems has switched its irrigation products to California; Master Lock is returning to Milwaukee, and NCR is bringing back its ATM output to Georgia. NatLabs is coming home to
Boston Consulting expects up to 800,000 manufacturing jobs to return to the US by mid-decade, with a multiplier effect creating 3.2m in total. This would take some sting out of the Long Slump.
As Cleveland Fed chief Sandra Pianalto said last week, US manufacturing is "very competitive" at the current dollar exchange rate. Whether intended or not, the Fed's zero rates and $2.3 trillion printing blitz have brought matters to an abrupt head for
Fed actions confronted Beijing with a Morton's Fork of ugly choices: revalue the yuan, or hang onto the mercantilist dollar peg and import a
monetary policy that is far too loose for a red-hot economy at the top of the
cycle. Either choice erodes US 's
wage advantage. The Communist Party chose inflation. China
Foreign exchange effects are subtle. They take a long to time play out as old plant slowly runs down, and fresh investment goes elsewhere. Yet you can see the damage to
Europe from an over-strong
euro in foreign direct investment (FDI) data.
Flows into the EU collapsed by 63p from 2007 to 2010 (UNCTAD data), and fell by 77pc in
Flows into the Italy
rose by 5pc. US
Volkswagen is investing $4bn in
led by its
Passat plant. Chattanooga 's
Samsung has begun a $20bn US investment blitz. Meanwhile, Intel, GM, and
Caterpillar and other Korea
firms are opting to stay at home rather than invest abroad. US
The European Central Bank has since made matters worse (for Italy, Spain, Portugal, and France) by keeping rates above those of the US, UK, and Japan. That has been a deliberate policy choice. It let real M1 deposits in
at a 7pc annual rate over the summer. May it live with the consequences. Italy
The trade-weighted dollar has been sliding for a decade, falling 37pc since 2001. This roughly replicates the post-Plaza slide in the late 1980s, which was followed - with a lag - by 3pc of GDP shrinkage in the current account deficit. The
had a surplus by 1991. US
Charles Dumas and Diana Choyleva from
Lombard Street Research argue that this
may happen again in their new book "The American ". Phoenix
The switch in advantage to the
is relative. It does not imply a
recovery. The global depression will grind on as much of the Western world
tightens fiscal policy and slowly purges debt, and as US deflates its credit bubble. China
retains a pack of trump cards, and not just in sixteen of the world’s top
twenty universities. America
It is almost the only economic power with a fertility rate above 2.0 - and therefore the ability to outgrow debt - in sharp contrast to the demographic decay awaiting
China, Korea, Germany,
Italy, and . Russia
Europe's EMU soap opera has shown why it matters that America is a genuine nation, forged by shared language and the ancestral chords of memory over two centuries, with institutions that ultimately work and a real central bank able to back-stop the system.
The 21st Century may be American after all, just like the last.