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ยป World economic power swings back to America
Date published: 04/12/2011
World economic power swings back to America
Don’t write off the American economy just yet. According to an article in the UK Telegraph the American phoenix is slowly rising again.
Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.
Assumptions that the Great Republic must inevitably spiral into economic and strategic decline will seem wildly off the mark by then.
The "shale gas revolution" that has turned America into the world’s number one producer of natural gas, ahead of Russia.
"The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d)," said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea.
Total US shale output is "set to expand dramatically" as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since 2009.
The US already meets 72pc of its own oil needs, up from around 50pc a decade ago. The implications of this shift are very large for geopolitics, energy security, historical military alliances and economic activity.
Meanwhile, the China-US seesaw is about to swing the other way. Offshoring is out, 're-inshoring' is the new fashion.
"Made in America, Again" - a report this month by Boston Consulting Group - said Chinese wage inflation running at 16pc a year for a decade has closed much of the cost gap. China is no longer the "default location" for cheap plants supplying the US.
A "tipping point" is near in computers, electrical equipment, machinery, autos and motor parts, plastics and rubber, fabricated metals, and even furniture.
"A surprising amount of work that rushed to China over the past decade could soon start to come back," said BCG's Harold Sirkin.
The list of "repatriates" is growing. Farouk Systems is bringing back assembly of hair dryers to Texas after counterfeiting problems; ET Water Systems has switched its irrigation products to California; Master Lock is returning to Milwaukee, and NCR is bringing back its ATM output to Georgia. NatLabs is coming home to Florida
Boston Consulting expects up to 800,000 manufacturing jobs to return to the US by mid-decade, with a multiplier effect creating 3.2m in total. This would take some sting out of the Long Slump.
Volkswagen is investing $4bn in America, led by its Chattanooga Passat plant. Korea's Samsung has begun a $20bn US investment blitz. Meanwhile, Intel, GM, and Caterpillar and other US firms are opting to stay at home rather than invest abroad.
And America retains a pack of trump cards, and not just in sixteen of the world’s top twenty universities.
It is almost the only economic power with a fertility rate above 2.0 - and therefore the ability to outgrow debt - in sharp contrast to the demographic decay awaiting Japan, China, Korea, Germany, Italy, and Russia.
The 21st Century may be American after all, just like the last.
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Michael Yardney
Metropole Property Strategists
Michael Yardney is the director of Metropole Property Strategists, a best-selling author and one of Australia’s leading experts in wealth creation through property. You may subscribe to his e-magazine at www.propertyupdate.com.au. For more information about Michael visit www.metropole.com.au.
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