The resurgence of America...

Now for some good news.

The leftie pundits and Guardianistas have been smacking their chops and drooling at the pleasing prospect of America’s imminent demotion as the world’s leading economy, military power and general big-shot to a more modest status and a declining economy, falling living-standards, and permanent unemployment problems.

I think I may have to disappoint them.

I have just acquired a new book, ‘The American Phoenix’ from Lombard Street Research economists, who have a different tale to tell. I have yet to read it but a scan-read reveals some fascinating economic projections.

Let me begin with the all-important topic of fuel and energy self-sufficiency.

The US is now the world’s biggest producer of natural gas, having overtaken even the massive Russian production that supplies half Europe. This is mainly due to the shale gas revolution and especially the development of fracking. My friend Jim Fideldy, a life-time oil man, told me last year that travelling around ND was a revelation. It’s boomsville, with all the attendant stresses such as soaring rents and an acute shortage of both accommodation and labour. He said that he was offered three jobs in quick succession. Texas is also prospering from shale. The US had the highest net growth in oil supply last year, and shale oil is set to  produce 5.5 million barrels a day by 2015, which would be a 10-fold increase from 2009.

Amazingly, the US already meets 72% of its needs.

It would be a very perceptive person who could identify the geopolitical, economic and military implications of all this, but clearly they are huge. Dependency on the Middle East will soon begin to evaporate for the US at a time when Europe is becoming more dependent.

Where does this leave the UK?

We have vast shale oil deposits in the Irish Sea which we are already fracking.

But inevitably the Greens are making mischief, claiming that it is environmentally dangerous and causes earthquakes! These idiots would have us back in caves, but not dressed in skins because that would be contrary to animal welfare.

There are also some seismic shifts in other areas. ‘Off-shoring’ is turning into ‘on-shoring’ as a huge amount of work returns to the US, especially from China. This includes computers, electrical equipment, machinery, vehicle manufacture, plastics, rubber, and even furniture – the very things that made China the huge supplier of cheap goods and a favoured location for low-cost factories.

One reason for this is that wage inflation in China is currently running at 16%, so the wages-gap is closing rapidly, and the present dollar exchange rate makes US goods very competitive. But there are other causes – shipping costs, reliability and build-quality problems. And chickens can be seen coming home to roost as businesses lose patience with Chinese technology piracy and theft of intellectual property. The Chinese government has also introduced a $10000 annual levy on foreign workers.

It is estimated that as many as 800,000 jobs could be repatriated to the US by 2015 to make a total increase in employment of over 3 million – always remembering that it takes about 5 years after economic recovery before employment recovery reaches previous levels.

So the US has some pretty good cards to play, including the fact that it has a fertility rate of over 2 % in contrast to Japan, China, Korea, Germany, Italy and Russia (the UK is just on 2%), so it is not facing the massive aging population problem of Europe, which will be ruined by its pensions burden without major changes. And it is very significant that the US has 5 of the world’s top 10 universities (and amazingly England has the other 5!).

This leaves Europe ‘sucking off the hind tit’ as our old farmers would say.

The Euro is over-valued, partly as a result of deliberate and disastrous policy by the ECB in keeping rates above the UIS, UK and Japan, and partly because China is shifting part of its $10 TRILLION cash mountain into EMU bonds. This has led to a collapse in foreign direct investment of more than 60% in three years. The lack of competiveness has in turn led to a hollowing out of Europe’s industrial base. German productivity and efficiency means that for them the Euro is just fine compared with what the Dm would have been, but Germany’s surpluses mean that there must be corresponding deficiencies elsewhere in the Eurozone, as we see in the Club Med.

So if this analysis is correct, the US will remain as king of the midden!