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As an ignorant American, I feel like I pay enormous taxes to defend international trade that mostly seems to benefit non-Americans. For 30 years, I was told “tr

by afpx 6y ago

As an ignorant American, I feel like I pay enormous taxes to defend international trade that mostly seems to benefit non-Americans. For 30 years, I was told “trade causes democracy” and “democracies don’t fight each other”. But, that doesn’t seem to be working very well. Why should the US continue to spend on defense so heavily? Why should we care?

thewarrior 6y ago
Because you need to defend the exorbitant privilege of having the worlds reserve currency. This means Americans can generally live easier lives by borrowing from the rest of the world. It’s also why wages in the US are so high. America can’t really be an export manufacturer as long as it’s currency is artificially inflated by massive inflows from global trading imbalances. It could after WW2 for a short while. That was because all others were bombed out and China etc weren’t developed.
- baybal2 6y ago
  And now the price is here. I was always telling all smarty business degree holder that you can't make money out of thin air no matter what trick you use. One way, or another, you can't escape the invisible hand finding ways to smack you good in the end.
  - thewarrior 6y ago
    It’s not easy to go back to working hard in an era of global competition. Chinese workers work far longer hours and make more product for each hour worked. Plus they are integrated into a massive supply chain and ecosystem. The wages that need to be paid to an American worker to assemble phones all day would be really really high. They’d rather just work at McDonald’s or play video games. Those high wages would give them enormous leverage (unions etc) upsetting the entire American economic system. The American system is a cyber punk reality where a country is just a container for the aspirations of a bunch of short term thinking warring AIs called corporations. The people being one of its inputs. Elections don’t change much. Anything that disrupts the AIs too much is taken care of one way or the other. Doesn’t matter if it’s Bernie or Trump. So I would say that China is safe because the last thing america will do give up any notions that their system is the best or needs to change. The west needs to realize that the momentum of a head start on industrialization and ill gotten gains from historical loot is running out. As everyone joins the industrial game the world inherently becomes multi polar. There’s no reason why only the west can have high living standards or that only the western system can sustain it. in a situation of having to manage Russia, China and Iran at once while greatly weakened , Multi lateralism is inevitable. Democracy cannot be delivered at the barrel of a gun. That only creates more messes. This week witnessed the amusing spectacle of Boris Johnson calling himself a Sinophile (give us a trade deal please). All this after running down the Chinese for months. The west can’t even decide what to do.
    - baybal2 6y ago
      And the price for it is China being able to shut down a big chunk of your multi-trillion dollar economy with a few pen strokes. Look for example how SMIC sanctions effectively shut down the car industry, and few others. A murmur I heard is of US now backing off on SMIC because of the car industry, but that will send an even worse precedent. It will mean that nobody else will come and fill the SMIC niche, and it will still have a chokehold on a very well moneyed, and full of lobbyists industry. The next time, sanctions on SMIC may come not from US, but China itself.
      - thewarrior 6y ago
        The sanctions on SMIC were imposed by the US which incentivized a stock piling and cut global supply. So it was US hobbling itself and not Chinas doing. Instead of this ham fisted approach it needs systemic solutions. For eg - make college free. Make corporations subservient to state planning of strategic priorities. It’s clear that China has the upper hand as long as US is a bunch of warring corporations that think of the next quarter. US corporations will eventually force a retreat to protect their Chinese profits. China just needs to offer them some returns. As the largest market in the world they now can.
        baybal2 6y ago
        > The sanctions on SMIC were imposed by the US which incentivized a stock piling and cut global supply. No... SMIC was making a great deal of 200mm business, possibly the biggest 200mm foundry. A lot of those decades old automotive ICs were fabbed there for the proximity to assembly lines, and tarriff avoidance.
        sudosysgen 6y ago
        Of course, but if it can't develop finer lithographies, it might as well give up and declare bankruptcy right now.
        6y ago
neolog 6y ago
Efficient trade benefits everyone, including Americans. But Americans aren't the only ones who pay for it.
geopolitical_ta 6y ago
As an equally ignorant non-American, I'd like you to look at a map of all US fleets for 30 seconds By doing so you'll be able to see that the US Navy is strategically positioned to defend international trade against any kind of blockade that an enemy would try to pull up in a strategic chokepoint If you squint, though, you'll be able to see that coincidentally the US can use those same fleets to enact said chokeholds. In other words: no one can have a significant world-wide logistics network without the implied consent of the US. Do you know what kind of requires this scale of transportation? a world war between great powers Is it clear now what you're paying for?
- baybal2 6y ago
  > By doing so you'll be able to see that the US Navy is strategically positioned to defend international trade against any kind of blockade that an enemy would try to pull up in a strategic chokepoint What is "international" trade these days. It's trade in between two countries, yours, and China. To blockade anybody economically, China just needs to put an embargo.
- deleted 6y ago
  [deleted]
- sudosysgen 6y ago
  Technological solutions to this problem are coming. Try as it may, in the next decade or so, a US blockade will have to run the risk of catching a few hundred hypersonic missiles. We will likely move to a world where no one is able to enforce more than localized blockades for a while.
yfzhou 6y ago
Because the US military is not about defending trade, arguably it's the very opposite: it is China's goal to protect global trade as it is the biggest trading partner of most countries, while the US invests heavily to maintain the ability to disrupt trade of any country it thinks is benefiting too much. (e.g. the first island chain for blocking China's access to the seas - https://en.wikipedia.org/wiki/First_island_chain https://en.wikipedia.org/wiki/First_island_chain)
akamaka 6y ago
Sent from my iPhone
xkcd-sucks 6y ago
The military and all its associated suppliers are also a massive jobs/welfare program - maybe the money could be used more constructively but plenty of americans benefit from it
alert0 6y ago
The reason for this is that the USD is the global reserve currency. The petrodollar (OPEC only trades oil for dollars) is kinda how we solidified it. However, being the global reserve currency forces you to be a net importer. You have to run trade deficits. Running trade deficits is not sustainable over the long term [1] and we're probably nearing the end of it. So we should continue to invest in defense because it is a massive industry for the US. To solve the trade imbalances though, the dollar should be weakened (it may occur naturally). That will allow us to rebuild our manufacturing base as our products will be more competitive on the international stage. Additionally, right now we're in a low interest rate period of the long term debt cycle and will probably remain there for about a decade (at least). This is great because it means there is a ton of money exiting bonds looking for yield. There is a lot of capital ready to invest in projects. Combined with a weaker dollar, we're at a critical point for on-shoring and rebuilding US manufacturing. I'm pretty hyped about the next 10 years for this reason. It will allow us to shore up the DoD supply chain as we currently rely on adversaries for defense critical parts. 1. https://en.wikipedia.org/wiki/Triffin_dilemma https://en.wikipedia.org/wiki/Triffin_dilemma
- baybal2 6y ago
  > So we should continue to invest in defense because it is a massive industry for the US. To solve the trade imbalances though, the dollar should be weakened (it may occur naturally). That will allow us to rebuild our manufacturing base as our products will be more competitive on the international stage. A side effect of this not talked often is that the bigger you economy, and currency is globally, the more deficit spending by the government hit your balance of payment. US can't devalue the USD dramatically for as long as its debt is held of special value inside the country, and around the world. Americans, want slash, and murder your trade deficit? Run state budged at surplus for a few years, and you will see it melt away.

by afpx 6y ago

thewarrior 6y ago

Because you need to defend the exorbitant privilege of having the worlds reserve currency. This means Americans can generally live easier lives by borrowing from the rest of the world. It’s also why wages in the US are so high. America can’t really be an export manufacturer as long as it’s currency is artificially inflated by massive inflows from global trading imbalances. It could after WW2 for a short while. That was because all others were bombed out and China etc weren’t developed.

baybal2 6y ago
And now the price is here. I was always telling all smarty business degree holder that you can't make money out of thin air no matter what trick you use. One way, or another, you can't escape the invisible hand finding ways to smack you good in the end.
- thewarrior 6y ago
  It’s not easy to go back to working hard in an era of global competition. Chinese workers work far longer hours and make more product for each hour worked. Plus they are integrated into a massive supply chain and ecosystem. The wages that need to be paid to an American worker to assemble phones all day would be really really high. They’d rather just work at McDonald’s or play video games. Those high wages would give them enormous leverage (unions etc) upsetting the entire American economic system. The American system is a cyber punk reality where a country is just a container for the aspirations of a bunch of short term thinking warring AIs called corporations. The people being one of its inputs. Elections don’t change much. Anything that disrupts the AIs too much is taken care of one way or the other. Doesn’t matter if it’s Bernie or Trump. So I would say that China is safe because the last thing america will do give up any notions that their system is the best or needs to change. The west needs to realize that the momentum of a head start on industrialization and ill gotten gains from historical loot is running out. As everyone joins the industrial game the world inherently becomes multi polar. There’s no reason why only the west can have high living standards or that only the western system can sustain it. in a situation of having to manage Russia, China and Iran at once while greatly weakened , Multi lateralism is inevitable. Democracy cannot be delivered at the barrel of a gun. That only creates more messes. This week witnessed the amusing spectacle of Boris Johnson calling himself a Sinophile (give us a trade deal please). All this after running down the Chinese for months. The west can’t even decide what to do.
  - baybal2 6y ago
    And the price for it is China being able to shut down a big chunk of your multi-trillion dollar economy with a few pen strokes. Look for example how SMIC sanctions effectively shut down the car industry, and few others. A murmur I heard is of US now backing off on SMIC because of the car industry, but that will send an even worse precedent. It will mean that nobody else will come and fill the SMIC niche, and it will still have a chokehold on a very well moneyed, and full of lobbyists industry. The next time, sanctions on SMIC may come not from US, but China itself.
    - thewarrior 6y ago
      The sanctions on SMIC were imposed by the US which incentivized a stock piling and cut global supply. So it was US hobbling itself and not Chinas doing. Instead of this ham fisted approach it needs systemic solutions. For eg - make college free. Make corporations subservient to state planning of strategic priorities. It’s clear that China has the upper hand as long as US is a bunch of warring corporations that think of the next quarter. US corporations will eventually force a retreat to protect their Chinese profits. China just needs to offer them some returns. As the largest market in the world they now can.
      - baybal2 6y ago
        > The sanctions on SMIC were imposed by the US which incentivized a stock piling and cut global supply. No... SMIC was making a great deal of 200mm business, possibly the biggest 200mm foundry. A lot of those decades old automotive ICs were fabbed there for the proximity to assembly lines, and tarriff avoidance.
        sudosysgen 6y ago
        Of course, but if it can't develop finer lithographies, it might as well give up and declare bankruptcy right now.
        6y ago

neolog 6y ago

Efficient trade benefits everyone, including Americans. But Americans aren't the only ones who pay for it.

geopolitical_ta 6y ago

As an equally ignorant non-American, I'd like you to look at a map of all US fleets for 30 seconds By doing so you'll be able to see that the US Navy is strategically positioned to defend international trade against any kind of blockade that an enemy would try to pull up in a strategic chokepoint If you squint, though, you'll be able to see that coincidentally the US can use those same fleets to enact said chokeholds. In other words: no one can have a significant world-wide logistics network without the implied consent of the US. Do you know what kind of requires this scale of transportation? a world war between great powers Is it clear now what you're paying for?

baybal2 6y ago
> By doing so you'll be able to see that the US Navy is strategically positioned to defend international trade against any kind of blockade that an enemy would try to pull up in a strategic chokepoint What is "international" trade these days. It's trade in between two countries, yours, and China. To blockade anybody economically, China just needs to put an embargo.
deleted 6y ago
[deleted]
sudosysgen 6y ago
Technological solutions to this problem are coming. Try as it may, in the next decade or so, a US blockade will have to run the risk of catching a few hundred hypersonic missiles. We will likely move to a world where no one is able to enforce more than localized blockades for a while.

yfzhou 6y ago

Because the US military is not about defending trade, arguably it's the very opposite: it is China's goal to protect global trade as it is the biggest trading partner of most countries, while the US invests heavily to maintain the ability to disrupt trade of any country it thinks is benefiting too much. (e.g. the first island chain for blocking China's access to the seas - https://en.wikipedia.org/wiki/First_island_chain https://en.wikipedia.org/wiki/First_island_chain)

akamaka 6y ago

Sent from my iPhone

xkcd-sucks 6y ago

The military and all its associated suppliers are also a massive jobs/welfare program - maybe the money could be used more constructively but plenty of americans benefit from it

alert0 6y ago

The reason for this is that the USD is the global reserve currency. The petrodollar (OPEC only trades oil for dollars) is kinda how we solidified it. However, being the global reserve currency forces you to be a net importer. You have to run trade deficits. Running trade deficits is not sustainable over the long term [1] and we're probably nearing the end of it. So we should continue to invest in defense because it is a massive industry for the US. To solve the trade imbalances though, the dollar should be weakened (it may occur naturally). That will allow us to rebuild our manufacturing base as our products will be more competitive on the international stage. Additionally, right now we're in a low interest rate period of the long term debt cycle and will probably remain there for about a decade (at least). This is great because it means there is a ton of money exiting bonds looking for yield. There is a lot of capital ready to invest in projects. Combined with a weaker dollar, we're at a critical point for on-shoring and rebuilding US manufacturing. I'm pretty hyped about the next 10 years for this reason. It will allow us to shore up the DoD supply chain as we currently rely on adversaries for defense critical parts. 1. https://en.wikipedia.org/wiki/Triffin_dilemma https://en.wikipedia.org/wiki/Triffin_dilemma

baybal2 6y ago
> So we should continue to invest in defense because it is a massive industry for the US. To solve the trade imbalances though, the dollar should be weakened (it may occur naturally). That will allow us to rebuild our manufacturing base as our products will be more competitive on the international stage. A side effect of this not talked often is that the bigger you economy, and currency is globally, the more deficit spending by the government hit your balance of payment. US can't devalue the USD dramatically for as long as its debt is held of special value inside the country, and around the world. Americans, want slash, and murder your trade deficit? Run state budged at surplus for a few years, and you will see it melt away.