CS

This ends with a bloody nose for the ISR/ US military &their eventual withdrawal from the ME over the next decade or a nuke. There is no in between. Can't believe the Americans are going to lose Europe & the ME within the same decade.

@cvkrishnan No way in hell should they get clearance from the MoD to go ahead with this.

Carlyle Consortium 🇺🇸 set to take control of 🇮🇳 defence parts supplier Micropack with a ₹1,175 crore bet Bengaluru-based Micropack is a leading manufacturer of printed circuit boards for defence, space, avionics, telecom, medical and industrial electronics, serving customers such as Isro, DRDO and Data Patterns, Retd. Gen. Byran Fenton, who previously headed US Special Operations Command, will join the firm as an operating executive, the company said. 🤷🏼‍♂️ economictimes.indiatimes.com/news/defence/c…

This is actually a very clear consequence of the end, of the unipolar moment, in world history

The United States has roughly two dozen people who know how to run rare earth solvent extraction at commercial scale. The Chinese Society of Rare Earths has over 100,000 members. In 2023, American mining engineering programs graduated 162 students. China graduated about 3,000 from 45 programs. Twelve US universities have shut down their mining engineering departments, including UC Berkeley and Ohio State. The Bureau of Mines, the federal agency responsible for mining research and training, was dissolved in 1996. Chinese pricing drove Western rare earth operations out of business through the 1990s and 2000s. The people who knew how to run those plants retired, changed industries, or died. Rare earth separation requires understanding how 17 chemically similar elements behave across hundreds of interconnected mixer-settler stages over months of continuous operation. That knowledge is accumulated through years of hands-on work in facilities the West stopped running. The average US mine worker is 46. 221,000 are expected to retire by 2029. Building an entirely new critical minerals supply chain means rebuilding the workforce that was eliminated a generation ago. The operational knowledge only comes back by running real plants.

In rare public remarks, CIA Director John Ratcliffe announces trio of internal changes he says amounts to the "fundamental reshaping of the CIA’s entire approach to technology." Also says it's not "misplaced" to refer to frontier AI as "akin to digital nuclear weapons."

@suryakane They're basically saying decouple from China not from us, we're the benevolent imperialists

@suryakane To put out this st. exactly one week after banning the export of Mythos is wild

What level of gaslighting has been unlocked? The kind where a country developing sovereign foundational AI models automatically gets labeled an “adversary” of the US.

@TheMichaelEvery Ehh they never had any autonomy, but nor do they have the energy and manpower..

Smart move(?); but forget strategic autonomy…

@BaldingsWorld The issue is there in ZERO incentive to change the system, doesn't matter how many economists talk about consumption. As long as the world absorbs its surplus, Chn will continue its policies.

Here is the reality of virtually every industrial and economic think piece written on China: anybody can do amazing things if they receive unlimited debt, boundless subsidies, don't have to pay it back, or make money. Exports, trains, you name it. That's the issue

@KSingh_1469 When you have Kaveri which is functional for drones, the world should be your oyster, but alas we refuse to live in reality

Every other large nation is thinking about the future and India is still trying to import the basics

Tordoir and Klein are right in saying that the "best" way to resolve global imbalances is for Beijing to take steps (including currency revaluation) to raise the household share of GDP, but it is important to understand the reason "this feels far away". It is not the Beijing has a special animus towards consumption, as any have argued. The claim that Beijing is ideologically opposed to allowing households more wealth relative to the state seems to have become an after-the-fact justification, both abroad and sometimes even in China. But in fact other countries that pursued the same high-saving/high-investment growth model also ran into the same set of problems. Once they had closed their underinvestment gap, the economy shifted from rapid, healthy growth to less rapid, and increasingly unhealthy, growth, driven by excessive reliance on unproductive investment and trade surpluses. They also recognized that they had to rebalance domestic income distribution towards households, but had the same difficulty that China currently has in rebalancing towards consumption. In every case, they were nonetheless forced to do so not because of foreign pressure but because the surging debt associated with the soaring non-productive investment and the manufacturing subsidies eventually became unsustainable. The most obvious case is – as always – Japan, which formally recognized in 1986 (in the Maekawa Commission Report) that it had a serious problem with low consumption and said, with great fanfare, that it would take urgent steps to boost the consumption share of GDP. In fact the consumption share of GDP didn't bottom out until 1991, five years later, and it took a further 17 years (until 2008), even under very accommodating global conditions, for Japan to raise its consumption share by 10 percentage points. This wasn't because Tokyo was ideologically opposed to consumption but rather because raising the consumption share required structural changes that undermined other parts of the economy. Because the low consumption share was part of a growth model that also resulted in easily-available capital, a very forgiving banking system, and heavily-subsidized manufacturing, raising the former also meant reversing the latter. Everyone remembers that in the 17 years during which Japan raised its consumption share, GDP growth declined from roughly 4% in the previous decade to just over 0%. What analysts often don't remember is that during this time Japan's share of global manufacturing also declined by more than 50%. That's the problem. As long as Beijing sets high GDP growth targets and as long as it wants to continue supporting the manufacturing sector (which, at this point, represents a larger share of the economy than even the property sector at its peak), the only way it can rebalance towards consumption is with huge – and perhaps politically disruptive – transfer of assets and income from local governments to households. The point is that until Beijing either sharply lowers the GDP growth target (perhaps to 2%?) or forces the transfers to households, it can make all the promises it likes about raising the consumption share of GDP, and foreign policymakers can propose as often as they like that this is the only real solution to global imbalances, but it cannot happen. That is why it is basically a waste of time for foreign policymakers to try to "convince" Beijing that they should stop opposing a rise in China's consumption share on ideological grounds. Beijing is not opposed to allowing Chinese households to have a better living standard. What they are opposed to is anything that might slow economic growth and undermine manufacturing, especially now when China already has a large problem with youth unemployment and overall underemployment.

@BaldingsWorld And for all intents and purposes, job well done by the Chinese, they've been using member states to do their bidding for the better part of 3 years now (the first discussion of the EV tariff).

@BaldingsWorld The answers to the 1st and 2nd questions are a resounding NO. Europe is a group of sovereign countries, who have outsourced national security (therefore foreign policy) to NATO. There is no such thing as sovereign EU, we'll have the dissolution of the EU before sovereign EU.

I am all for working with "allies" but the latest "Europe can't make China policy because Trump won't tell Europe what to do" makes zero sense. 1. Is Europe a sovereign government? 2. Do they make decisions on foreign policy and national security? 3. How would involving Trump allow Europe to make a decision? There are many times you are best advised to let them figure it out even if you want to involve yourself. If Europe can't figure this one out on their own, there is zero chance Trump getting involved will make any difference. Detailed coordination is a much lower rung problem

@RushDoshi That ship sailed with Trump tariffs, maybe when the next Dem admin takes over they can do a better job than Biden/Trump. With the CA deficit acceleration, it's clear that without coherent industrial policy/content requirements tariffs are useless.

Industrial catastrophe happens fast. Industrial renewal happens slowly, if at all. Time for the US and Europe to make common cause with Asian democracies on maintaining healthy industrial bases protected from PRC dumping. “Allied scale” is the only way out.

This is what Rubio said in 2022 when Apple was thinking of buying memory chips from China’s YMTC 👇🔥

@fbermingham Why isn't common sense policy, common in Germany

And a remarkable detail: since Germany's subsidy for consumers buying EVs entered force, Chinese brands MG and BYD posted average sales increases of between 50% and 75%. Some have said the incentive should be limited to European brands to support local industry

Chinese cars made up more than one in ten new purchases in Europe for the first time last month, as consumers flock to models that offer better features for less money bloomberg.com/news/articles/…

Lavrov: “I don't even want to think about Alaska having been conceived to buy time to rearm Kiev, but it is what it is”

@michaelxpettis Real question is did anybody expect differently? Specially after the 100% ++ tariffs of last year

Global Times on a new "Plaza Accord": "China will not accept using exchange rates as a pretext for oppression, nor will it return to the old era of great powers coordinating the fate of a few countries." This is a rather bizarre argument to make, although it is one you often hear in the Chinese press. It assumes that the RMB exchange rate belongs to China, and that for the EU or anyone else to intervene in the RMB exchange rate is an act of colonial oppression. But this simply isn't true. An exchange rate "belongs" to both countries involved. If China has intervened to devalue the RMB by 20-30% against the currency of its trade partners, this is exactly the same as if it had engineered a "stealth" Plaza Accord in which it forced its trade partners to revalue their currencies by 25-43%. There is no difference between the two, and so if one way isn't an act of colonial oppression, the other way isn't either. The Global Times also argues that China's trade surplus and its manufacturing competitiveness have nothing to do with an undervalued RMB. If the PBoC actually believed this, it is pretty obvious what it should do – it should revalue the RMB as quickly as it can. There would be no cost to doing so as, presumably, Chinese manufacturers would be as globally competitive as ever, and it would immediately benefit Chinese households by raising the real value of their domestic income. Of course the reason the PBoC isn't doing this is because it knows (as most analysts know, including, I suspect, the editors of the Global Times) that this just isn't true. The claim that currency values don't affect trade imbalances is just silly. But to the extent that these kind of editorials reflect actual positions among policymakers, we should expect a difficult and probably painful outcome. Joan Robinson warned in the 1930s that mercantilist regimes that ran large, persistent trade surpluses would inevitably drive their trade partners to retaliate with their own forms of trade intervention once the costs of beggar-thy-neighbor trade surpluses were perceived as too high. We are clearly in Joan Robinson's world, and denying the problem is an extremely ineffective way of resolving it. We know this from the rather lengthy history. There have been many large trade imbalances – especially ones associated with large increases in debt – in the past 100 years, and they have usually ended very badly. The interesting question in retrospect has been why, and under what conditions, the brunt of the adjustment costs were ultimately borne by either the surplus countries or the deficit countries. I worry that because there is clearly no appetite among surplus and deficit economies to reduce the imbalances in the least painful way possible for both sides, and because the imbalances may have already gone too far for any compromise, we may be moving inexorably towards an adjustment process in which the costs are magnified, as each side tries to force the other to bear the brunt. globaltimes.cn/page/202606/13…

@TheresaAFallon The time to take the EU seriously will be when Germany finally takes some sort of action regarding energy. Before that it's all noise and they'll keep haemorrhaging jobs to China

In the run up to #EUCO, much ink was spilled in the media that now, finally, the EU had woken up to the China challenge. Sadly, as I predicted, they are shuffling away from any showdown. PM Sanchez noted that China can be an EU ally. As the EU de-industrializes (Germany is losing about 10,000 jobs a month) while proclaiming need to build up defense bases across🇪🇺, ignoring the economic challenge of China now will make it even more difficult to act later. EU Member States leaders have opted to postpone tough decisions and press the snooze button once again. 😴💤

@michaelxpettis It's one of the biggest reasons the Chinese campaign of divide and conquer has worked so well

Reuters: "The investigations typically last just over a year, but including preparatory work this means there is generally a two- to three-year gap between a problem being identified ​and a solution found. Critics say this is too long for struggling domestic EU industries." reuters.com/world/china/ho…