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The US destroyed American manufacturing, not China nor
Posted on: May 5, 2025 at 22:50:45 CT
TigerMatt STL
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any other country.
In 1944, Bretton Woods was instituted pegging European and Japanese currency at a fixed exchange rate. There was a cap on how much currency could be exchanged for dollars. But this gave strength to European and Japanese currency in the immediate post war period.
This was a crucial step for post-war American manufacturing. Domestic consumption could not keep up with manufacturing, so the US used Bretton Woods to create markets that could buy American exports. US loans and aid packages would return to the US in the form of US exports.
By the 1960s, Germany and Japan manufacturing had been restored and were more efficient than American manufacturing. Johnson’s Great Society was reducing poverty, and foreign imports started turning the US into a net importer. Countries started exchanging US dollars for gold. Gold was pegged at $35 an ounce and the US knew it would run out.
In 1971, Nixon broke the gold standard. European and Japanese currencies were depegged from the dollar. The wild variability in currencies resulted in a rush to safe haven in the US dollar. Dollars were needed to buy oil. Foreign countries were compelled to “dollarize” their profits by investing in Wall Street and US Treasury bonds.
Wall Street and American businesses, to maximize this stream of capital needed to increase profit margins to catch up to the efficiency of Germany and Japan. Wages of American workers needed to be crushed. This ushered in the era of union busting, later evolving into outsourcing manufacturing to countries like China.(and what we now see with white collar work to India).
Banking regulations changed allowing banks create financial products to increase money creation through loans. They took loans, and shifted the risk elsewhere by creating financial instruments that split the loans into pieces and packaged them with many other loans and sold these products to foreign (and domestic) investors ballooning the financial market to $739 trillion by 2007. These and other financial products allowed the US to maintain massive trade deficits while keeping the money flowing back into the US.
The middle class was poorer in relation to what it was in 1974, but we had all the cheap junk we wanted.
The current path is not sustainable. The US financial markets are bloated far beyond actual worth.
Trump wants to kick the can down the curb by overhauling the global economic system. He knows this trade imbalance cannot be sustained. But the massive problem that exists is China. China is a net exporter whose manufacturing was built up past their domestic demand capacity, much like the US in 1944. In order to not have an economic depression, China needs to keep flooding the world with exports and needs to keep their wages down relative to the West to make re-industrialization in the US too costly.
Tariffs and new trade agreements are desired to help incentivize investment in US manufacturing. But there are problems with this. The US worker wages are too high to compete with China. Decades of offshoring of manufacturing have resulted in not having the infrastructure and trained employees. The supply chains are not in place and are dependent upon China.
In order for this to work, US wages need to be further suppressed to become more competitive with China and it requires cooperation with China to let their wages rise faster. Whether China agrees or not is up in the air. They need to be compelled to do so by financial pain. And it is not a sure thing the US has the ability to inflict enough financial pain. The US will feel it too, and that opens up windows for Democrats and Republicans to use that against Trump in 2026 and 2028.
The biggest problem with Trump’s plan is it isn’t about the middle class. It won’t help the middle class boom, regardless of whether or not he succeeds. If he succeeds, we have greater balance in trade and more domestic manufacturing, but at further depressed wages.
Who ultimately benefits is the wealthy, whose wealth is tied up in Wall Street investments. The middle class ends up further squeezed. They will own even more, you will own even less. But you’ll feel better because the collapse has been delayed for a little bit.
In 1944, Bretton Woods was instituted pegging European and Japanese currency at a fixed exchange rate. There was a cap on how much currency could be exchanged for dollars. But this gave strength to European and Japanese currency in the immediate post war period.
This was a crucial step for post-war American manufacturing. Domestic consumption could not keep up with manufacturing, so the US used Bretton Woods to create markets that could buy American exports. US loans and aid packages would return to the US in the form of US exports.
By the 1960s, Germany and Japan manufacturing had been restored and were more efficient than American manufacturing. Johnson’s Great Society was reducing poverty, and foreign imports started turning the US into a net importer. Countries started exchanging US dollars for gold. Gold was pegged at $35 an ounce and the US knew it would run out.
In 1971, Nixon broke the gold standard. European and Japanese currencies were depegged from the dollar. The wild variability in currencies resulted in a rush to safe haven in the US dollar. Dollars were needed to buy oil. Foreign countries were compelled to “dollarize” their profits by investing in Wall Street and US Treasury bonds.
Wall Street and American businesses, to maximize this stream of capital needed to increase profit margins to catch up to the efficiency of Germany and Japan. Wages of American workers needed to be crushed. This ushered in the era of union busting, later evolving into outsourcing manufacturing to countries like China.(and what we now see with white collar work to India).
Banking regulations changed allowing banks create financial products to increase money creation through loans. They took loans, and shifted the risk elsewhere by creating financial instruments that split the loans into pieces and packaged them with many other loans and sold these products to foreign (and domestic) investors ballooning the financial market to $739 trillion by 2007. These and other financial products allowed the US to maintain massive trade deficits while keeping the money flowing back into the US.
The middle class was poorer in relation to what it was in 1974, but we had all the cheap junk we wanted.
The current path is not sustainable. The US financial markets are bloated far beyond actual worth.
Trump wants to kick the can down the curb by overhauling the global economic system. He knows this trade imbalance cannot be sustained. But the massive problem that exists is China. China is a net exporter whose manufacturing was built up past their domestic demand capacity, much like the US in 1944. In order to not have an economic depression, China needs to keep flooding the world with exports and needs to keep their wages down relative to the West to make re-industrialization in the US too costly.
Tariffs and new trade agreements are desired to help incentivize investment in US manufacturing. But there are problems with this. The US worker wages are too high to compete with China. Decades of offshoring of manufacturing have resulted in not having the infrastructure and trained employees. The supply chains are not in place and are dependent upon China.
In order for this to work, US wages need to be further suppressed to become more competitive with China and it requires cooperation with China to let their wages rise faster. Whether China agrees or not is up in the air. They need to be compelled to do so by financial pain. And it is not a sure thing the US has the ability to inflict enough financial pain. The US will feel it too, and that opens up windows for Democrats and Republicans to use that against Trump in 2026 and 2028.
The biggest problem with Trump’s plan is it isn’t about the middle class. It won’t help the middle class boom, regardless of whether or not he succeeds. If he succeeds, we have greater balance in trade and more domestic manufacturing, but at further depressed wages.
Who ultimately benefits is the wealthy, whose wealth is tied up in Wall Street investments. The middle class ends up further squeezed. They will own even more, you will own even less. But you’ll feel better because the collapse has been delayed for a little bit.
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The US destroyed American manufacturing, not China nor - TigerMatt STL - 5/5 22:50:45
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