RE: Middle East-- i think we disagree more on the definitions than the actual outcomes. Team USA isn't going to launch the war, they will literally just get out of the way. Some might even suggest that ISIS was a US creation. In either event, the de facto result is the same. The west exploiting conflict in the region to maintain price stability among OPEC nations and curry political favor among big energy. Cheating etc is to be expected. Iran-china relations encouraged. etc.. this cabal is a win win for global economic stability.
China in the last 20 years has constructed over 100 cities of 1 MM or more. At the same time the west has literally shed it's almost entire capacity to make the raw materials needed for manufacturing of high value products.. That capacity simply doesn't exist in any competitive fashion. We are expecting a shortage of drugs in the coming year because of it.
The west went over there not just for cheap labor, although cheap labor was a very big component. Pharma and high priced industries went over there to sell to chinese. iPhones in 2012 were about 8% of sales in SE -Asia. In 2018, they made up about 35% of sales eclipsing all of Europe. It is very easy to get wrapped up in the idea that the chinese are a low cost manufacturer and forget they are a consumer too. Multi-globals, technology, and tooling have enabled manufacturing to be done with high quality and lower costs than anywhere else in the world. But low cost is not the only driver. Tooling, infrastructure and a competent workforce are needed. You can make shoes in Vietnam and Bangladesh,,, won't happen for IpHones, drugs, airplane components etc... It is not just cheap goods. Even the chinese economy has changed, with the service sector making up the fastest growing portion of their economy.
As a result, just like when fat man USA gets a cold and the rest of the world gets the flu, china has a very relevant portion of the world economy, and there is simply not a replacement that will happen in 5 years let alone 1-2 like people think.
Yes, people have been looking to move, but that isn't an irreversible process. It requires time, investment, and consumers. So just like the idea that the economics of war don't make sense,,, the economics of supply chains moving requires they have the economics to justify that move. I'm really not convinced yet. We will see some form of more equalizing tariffs, currency swings, and lots of other things happen before we see the hardware change locations in earnest.... IMO.
What is more likely to happen in my view, is worldwide investment in redundancy of supply chains and building of duplicate and competitive capacity worldwide. This should be viewed as a good thing and will probably be a positive growth factor in worldwide GDP and as economies really start to equalize, then major shift away from USD addiction. Assault on fiat will be a welcome trade,,, and it will come from all sides,,, not just western democracies... and will come from those positioned already. The laggards will be punished, just as they are being punished now. There will be disruption... for sure.
I just don't see it happening as a rapidly destabilizing event. |
