KGOldWolf

Terrific slogan but simplistic. We lost millions of jobs for two reasons: reduced labor expense / reduced regulation and, automation. The result was to provide China with a weapon far more powerful than a nuclear device - we gave them economic power over us... they hold so much of our debt they could cripple us if they sold it for a loss on the world economy. It would hurt them short term but it would kill our future.

They manipulated the rules and took advantage of our corporate greed. There is a way to fight back. Give American companies incentives to re-shore industry. It will be painful.

For every ten American manufacturing jobs lost only one was gained in China. The rest were lost to automation. Give American companies investment tax credits for re-shore manufacturing- it really is a national security mandate. Sure, only a handful per hundred jobs will return but manufacturing will be here again and we’ll not be beholden to a foreign power to make our goods. Furthermore it will disrupt their economy and put their people out of work. They already have a problem with rural people heading to the cities and not finding employment. Let it lead to their civil disruption while we bring manufacturing back on shore.

Nixon created the ITC - investment tax credit. We can do the same and encourage huge multi-nationals like Apple to bring it back home.

Congress is now looking at tax reform; change it so American companies find it cost effective to bring highly automated manufacturing back home and to hell with China!

DaveO Loc: Northeast CT

Keep in mind that there are many, many more countries competing with products and a larger world population coupled with automation.

KGOldWolf

Agreed, and China is already losing some jobs to other countries like Indonesia. Automation is a worldwide threat in that it continues to make for more unemployment which ultimately leads to civil disruption. Putin recently commented on the severe threat AI poses to the world.

Nevertheless, better to automate on shore and accept fewer jobs than no jobs at all.

DaveO Loc: Northeast CT

Yes, it's tough. Less than 13 million people are involved in US manufacturing...

mwalsh Loc: Houston

You got me thinking about the reality of China's power over us as a debt holder. If they dumped tons of T-bills into the market, it would immediately drive down the interest rate on US debt, the bonds would sell at a deep discount. It would actually create an opportunity for the Fed to redeem previously issued debt for much less than the amount actually borrowed, saving us $ AND reducing the national debt total.

Could be a good thing long term...so I doubt China would do so.

They are likely quite happy to see us borrowing more and more, until we strangle ourselves with the debt burden.

Bazbo Loc: Lisboa, Portugal

China holds about 5% of our national debt. By far, the largest holders of our debt is us (either by way of individual/mutual fund investments of the Fed itself). China dumping our debt into the world currency markets would harm them far more than it would hurt us. If the US economy were harmed then that wold dry up one of China's most lucrative export markets. In fact. we saw this happen during the crash of 2008/2009. If we don't buy their cheap shit, who will?

https://www.thebalance.com/u-s-debt-to-china-how-much-does-it-own-3306355

DaveO Loc: Northeast CT

You mean besides these guys?
Hong Kong: $292.2 billion (13.8%)
Japan: $129.5 billion (6.1%)
South Korea: $94.7 billion (4.5%)
Germany: $65.8 billion (3.1%)
Vietnam: $61.6 billion (2.9%)
India: $58.9 billion (2.8%)
Netherlands: $57.7 billion (2.7%

Bazbo Loc: Lisboa, Portugal

Don't know where you get your percentages, Our national debt is just shy of 20 trillion. Hong Kong does not hold 13.8% of our national debt.

KGOldWolf

Great points all!

Dumping our bonds on open the market would create a glut and would in turn force the US to pay higher interest rates to borrow more money which would quickly increase our debt service level as a percentage of our DNP. That’s trouble with a capital T.

One way To counteract that growing service level is to incur inflation. That would cause the debt service level to decrease as a percent of our DNP but... but, that would burden the average American with higher prices. That is basically an indirect regressive tax.

The Fed is hoping for a modest, consistent inflation rate but can’t make it happen. They want to increase interest rates but it is proving more difficult than anticipated.

It would be a fascinating economic study if it wasn’t our lives in the balance!

DaveO Loc: Northeast CT

Sorry for the confusion. I was addressing who buys their products besides us. I'll be more careful.

Bazbo Loc: Lisboa, Portugal

OK. Now I see your point.

DaveO Loc: Northeast CT

Yeah, no matter how we view it, it's not good.