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> China’s lower costs may mean that its defense spending has purchasing parity with ours. This was shocking to me.

by teryyy 6y ago

pacman2 6y ago
If I may quote two sources (controversial, so please take it with a grain of salt but keep an open mind) http://cluborlov.blogspot.com/2019/07/war-profiteers-and-demise-of-us.html http://cluborlov.blogspot.com/2019/07/war-profiteers-and-dem... https://www.amazon.com/Losing-Military-Supremacy-American-Strategic/dp/B07KWBFJ11 https://www.amazon.com/Losing-Military-Supremacy-American-St... I am not Russian by the way, the links could give you this impression.
- astrea 6y ago
  Your prevalence in the comments speaks louder than the words you type
  - stickyricky 6y ago
    It seems he has relevant experience in the subject matter and is relating that experience to an audience eager to interrogate him. How could that be interpreted negatively?
- TaylorAlexander 6y ago
  Great article! I have been thinking a lot about the feeling I have that “US manufacturing jobs” has become a political myth, and that real decay is setting in. I have been ordering CNC machined parts from a machine shop in China. The only US organization I priced from is Plethora which probably isn’t the cheapest but their prices were much, much higher than China. Of course Chinas prices have been lower for a long time, but in the past my simplified understanding is that there was a large volume of cheap labor that suffered a poor standard of living. But China has grown leaps and bounds in the past three decades. I suspect that now for many machine shops in China the standard of living for their workers is probably on par with that of workers in the US. It could even be better, I wouldn’t be surprised. So now it’s cheaper in China just because they took manufacturing seriously. In the US we let MBA’s sell off all our manufacturing capability to foreign nations. Which seemed to work great for increasing profits. But the lack of higher level planning has left us with a vulnerability. Selling your business to China works great in peace time. But China has power over us now. I am hopeful that the article is correct, and our horrendous military spending is coming to a close. But I worry about what will happen in the US to make us finally understand the need to change our ways. I think the best outcome would be for the US to end its posturing against China and learn to benefit from collaboration.
lifeisstillgood 6y ago
Very roughly : US GNP $21 Trillion China $14 Trillion Using PPP US $21 Tn (obv) China $28 Tn (!!!) China can buy more stuff from itself each year than US. It just cannot buy the most sophisticated stuff yet. This is presumably why the report puts "reshoring" and building out 21C manufacturing top of its priority list. source:https://podcasts.apple.com/gb/podcast/macro-musings-with-david-beckworth/id1099277290?i=1000495227521 https://podcasts.apple.com/gb/podcast/macro-musings-with-dav... (worth listening too !)
- lumost 6y ago
  This seems to imply that one party or the other is manipulating the currency markets aye? the claim is effectively that $1 when converted to local currency in china buys 2x what $1 buys in the US.
  - Nowado 6y ago
    Not really, why? There are a lot of things that go into pricing of a purchase. Especially large scale purchase of cutting edge military technology with long time horizons by state actors.
  - lifeisstillgood 6y ago
    Yes thats the point of PPP. I found it counter intuitive for ages, but might have got it now. Think of it as if 2 bucks buys you 1 loaf of bread in Chicago, but take those two dollars to Beijing, turn it into yuan at the prevailing exchange rate, and that buys you 2 loaves of bread in Beijing, then very roughly speaking China can take 50 million dollars worth of yuan, and buy two jet fighters for the price USA pays for one. It varies of course, when you look at shipbuilding capacity, in that China probably has a huge cost advantage in that they, you know, build ships a lot. Vice versa Jet fighters. As ever it depends greatly on the basket of goods - which is naturally bent towards consumer and FMCG. The Economist runs a Big Mac index - a trivial but effective means of doing the same - how much does a Big mac cost in different cities. (https://www.economist.com/big-mac-index https://www.economist.com/big-mac-index)

> China’s lower costs may mean that its defense spending has purchasing parity with ours. This was shocking to me.

by teryyy 6y ago

> China’s lower costs may mean that its defense spending has purchasing parity with ours. This was shocking to me.

If I may quote two sources (controversial, so please take it with a grain of salt but keep an open mind) http://cluborlov.blogspot.com/2019/07/war-profiteers-and-demise-of-us.html http://cluborlov.blogspot.com/2019/07/war-profiteers-and-dem... https://www.amazon.com/Losing-Military-Supremacy-American-Strategic/dp/B07KWBFJ11 https://www.amazon.com/Losing-Military-Supremacy-American-St... I am not Russian by the way, the links could give you this impression.

astrea 6y ago
Your prevalence in the comments speaks louder than the words you type
- stickyricky 6y ago
  It seems he has relevant experience in the subject matter and is relating that experience to an audience eager to interrogate him. How could that be interpreted negatively?
TaylorAlexander 6y ago
Great article! I have been thinking a lot about the feeling I have that “US manufacturing jobs” has become a political myth, and that real decay is setting in. I have been ordering CNC machined parts from a machine shop in China. The only US organization I priced from is Plethora which probably isn’t the cheapest but their prices were much, much higher than China. Of course Chinas prices have been lower for a long time, but in the past my simplified understanding is that there was a large volume of cheap labor that suffered a poor standard of living. But China has grown leaps and bounds in the past three decades. I suspect that now for many machine shops in China the standard of living for their workers is probably on par with that of workers in the US. It could even be better, I wouldn’t be surprised. So now it’s cheaper in China just because they took manufacturing seriously. In the US we let MBA’s sell off all our manufacturing capability to foreign nations. Which seemed to work great for increasing profits. But the lack of higher level planning has left us with a vulnerability. Selling your business to China works great in peace time. But China has power over us now. I am hopeful that the article is correct, and our horrendous military spending is coming to a close. But I worry about what will happen in the US to make us finally understand the need to change our ways. I think the best outcome would be for the US to end its posturing against China and learn to benefit from collaboration.

lifeisstillgood 6y ago

Very roughly : US GNP $21 Trillion China $14 Trillion Using PPP US $21 Tn (obv) China $28 Tn (!!!) China can buy more stuff from itself each year than US. It just cannot buy the most sophisticated stuff yet. This is presumably why the report puts "reshoring" and building out 21C manufacturing top of its priority list. source:https://podcasts.apple.com/gb/podcast/macro-musings-with-david-beckworth/id1099277290?i=1000495227521 https://podcasts.apple.com/gb/podcast/macro-musings-with-dav... (worth listening too !)

lumost 6y ago
This seems to imply that one party or the other is manipulating the currency markets aye? the claim is effectively that $1 when converted to local currency in china buys 2x what $1 buys in the US.
- Nowado 6y ago
  Not really, why? There are a lot of things that go into pricing of a purchase. Especially large scale purchase of cutting edge military technology with long time horizons by state actors.
- lifeisstillgood 6y ago
  Yes thats the point of PPP. I found it counter intuitive for ages, but might have got it now. Think of it as if 2 bucks buys you 1 loaf of bread in Chicago, but take those two dollars to Beijing, turn it into yuan at the prevailing exchange rate, and that buys you 2 loaves of bread in Beijing, then very roughly speaking China can take 50 million dollars worth of yuan, and buy two jet fighters for the price USA pays for one. It varies of course, when you look at shipbuilding capacity, in that China probably has a huge cost advantage in that they, you know, build ships a lot. Vice versa Jet fighters. As ever it depends greatly on the basket of goods - which is naturally bent towards consumer and FMCG. The Economist runs a Big Mac index - a trivial but effective means of doing the same - how much does a Big mac cost in different cities. (https://www.economist.com/big-mac-index https://www.economist.com/big-mac-index)