I’m trying to decipher the first third of this article, maybe others are seeing an incomplete picture as well. I get the idea that the author thinks when China sells something in the U.S. that somehow China has to buy something in USD. In a way that is true, because they can buy their own currency. That way they can purchase good and services from other Chinese firms. They can also buy other currencies and purchase from other nations.
Now let’s straighten out a few things without any understanding of foreign exchange markets. First, there’s a difference between fair trade and free trade. When a nation subsidizes certain industries or uses slave labor and another nation does not, there is an inherent competitive advantage for the nation that subsidizes and has slaves. The nation that doesn’t will have businesses cannot compete, resulting in those businesses not existing. This can be corrected by having tariffs on imports from the subsidized and slave owning businesses’ products equal to the difference of the subsidies and employee pay that should go to slaves. The U.S. is not the only nation that must have tariffs, all nations do.
Alternatively, the U.S. can forbid imports all together from businesses that receive subsidies or use slave labor.
As for buying commercial real estate, natural resource rights, businesses, farmland, and other things in the U.S. there is a matter of control that becomes an issue. Do any of these thing pose a national security risk? Can a foreign nation control our food supply, potentially starving Americans? Can a foreign nation control minerals, such as uranium, lithium, or rare earths so that they become the only major supplier. All of these need to be looked at absent of any economics.
Then there is the case, when we (U.S.) purchase things from foreign nations and we no longer produce those things or never produces those things. The individual item needs to be viewed as a strategic item to the functioning of our nation, or not. If it’s bananas (we don’t grow those), and for some reason we can’t buy bananas from abroad anymore, we can always replace bananas with apples or oranges grown in the U.S. That’s not a strategic concern. However, if microprocessors and electronics are cut off, then there is a slightly different problem. That can impact national security and the ability to purchase everything from computers to phones to automobiles and more. It could send us back technology wise a couple of decades.
Lastly, there is an extreme dire person security case. If life sustaining drugs are only manufactured abroad and they get cut off for some reason, then people die, some rather quickly - much faster than manufacturing can be ramped up in the U.S. (I take two drugs in this category - one only made in India and the other only made in China. Yeah, I checked.)
Now with all that said, there are many reasons other than above for America to return to its industrial giant status. We are not living up to our potential. We are not the richest nation on a per capita basis. Those are worthy goals to achieve.
We are an incredibly blessed nation. We have limitless energy right here in the U.S. that is requirement one to be an industrial giant. The notion of peak oil/gas has been proven completely wrong.
Requirement two: We are a nation rich in natural resources - iron, metals, rare earths, lumber and more. We have the raw materials to be an industrial giant - right here, not half a world away.
Requirement three: We are a nation that has multiple deep harbors, ports, navigable rivers and inter coastal waterways used to transport and export raw materials and finished goods. Unfortunately, we have those ports pointed the wrong way. We import more than we export.
Requirement four: We have the colleges and universities to educate scientists and engineers. The world comes to us for our knowledge. Associated to education, we have the intellectual property to be an industrial giant.
Requirement five: we have the ability to feed us and the world. We can fill the bellies of what could be the most skilled and most productive workforce in the world. That however is being destroyed by education system. In other words, public schools are not producing enough of the STEM students in our great colleges and universities. The rest of the world fills our college STEM programs. But we’re great at producing transgender studies students and a lot of other crap majors that you can’t build a damn thing with.
Lastly, requirement six: We are Americans. It’s a cultural thing. It’s rugged individualism. It’s being innovative, solving any problem. It’s inventive. It’s entrepreneurial. Much of the rest of world has to legally purchase our ip or steal and copy.
Our government’s policies are completely uncoordinated. Domestic, foreign, trade, tax, regulatory, monetary and fiscal policies work against each other. Despite that we still have the world’s highest GDP. We can be so much more by doing so much less. Government just needs to get the eff out of our way and focus purely on the things that people and businesses cannot do themselves.
The one thing not mentioned yet is they buy our debt, they lend it back to us. Per agreements.
Generally speaking, I think I agree with you on all points…
I wrote this the way I did for a couple of reasons…. I wrote a piece just a couple days ago about how much we buy from China, and I intended this piece to be the other side of that coin; to talk about how much they buy from us.
You indicated that you were wondering why I wrote the first third of the article. It was as a set up for the second and third thirds. I wanted to stress that this is how everyone thinks of international trade: you send them dollars, and they can use them to either buy your things or trade those dollars with other countries so someone else buys your things. As a result, your money gets spent on your things. That’s the theory… And it’s the reason why so many politicians and economists don’t worry about trade deficits… They truly believe that the money comes back home to another purchase, so another American sell something, so it all evens out in the end.
The purpose of the rest of my article was to explain why that is not a full picture. I wanted to talk about the other, non-goods oriented, purchases that a foreign country can make with their international trade profits.
I think there are a lot of Americans, who don’t realize how China is buying up American businesses, American farmland, American, residential and commercial properties, etc., etc. I think that most Americans know what they see every day: they see goods made in China, sitting on their store shelves, and it really horrifies them. But they don’t realize how much else China is buying up, all over our country.
So I may have failed in communicating that point… But that was my goal, anyway.