How U.S. Elites Destroyed the American Middle Class
The Trump administration has just “greenlit” one of the greatest investment booms of all time.
It all started with a little-known memo President Trump signed on July 22, 2019.
The media barely noted this development, as the Democrats had just launched their impeachment investigation into the President’s interactions with Ukraine. And Wall Street didn’t catch on either, as they were too busy worrying about the trade war with China.
However, with a single act, the President sent a signal that the U.S. economy was about to embark on a tectonic shift… one that would undo 30+ years of economic decline… and which would generate trillions of dollars of wealth in the years to come.
Harnessing a 1950s-Era Law
The President invoked section 303(a)(5) of the Defense Production Act.
The Defense Production Act was established in 1950 during the Cold War between the U.S. and the Soviet Union. In its simplest rendering, the Act gives the president the ability to accelerate key sectors of the U.S. economy in the name of national security.
For example, let’s say the U.S. economy relies excessively on another country for a certain resource. If the President decides that this reliance could hurt the U.S. economy from a strategic perspective, he can invoke the act to dramatically cut regulations and even provide government loans to domestic producers of the resource in order to boost domestic production.
In the case of President Trump’s memo in July 2019, he was invoking section 303(a)(5) of the Defense Production Act of 1950 to determine that the “separation and processing of Light Rare Earth Elements is essential to the national defense.”
And while the industry in question here is relatively small ($14 billion), the symbolism of this move, particularly that the president would invoke this act, cannot be overstated.
Let me explain.
How Rare Earths Illustrate the Gutting of the U.S. Economy
Rare earths are 17 elements used in the production of countless high tech and military devices: DVDs, cell phones, catalytic converters, magnets, night vision goggles, laser rangefinders, GPS equipment, and more.
Prior to the 1990s, the U.S. had been the largest producer of rare earths, accounting for 80% of all global production. But thanks to some questionable political moves by Congress, the U.S. shut down all of its rare earths mines, allowing China to become the #1 producer of these resources.
In this regard, rare earths are the poster child for the disastrous economic policy that American elites have pursued in this country over the last 30 years that’s resulted in the U.S. industrial and manufacturing base being eroded. Domestic operations have been shut down for political purposes and our supply chains outsourced to China — all in the name of globalism and higher profits.
From a strategic perspective, the effects have been devastating.
The High Cost of Globalism
First and foremost, it’s effectively gutted the middle class. It is no coincidence that as the U.S. outsourced more and more of its factories and production facilities, entire swaths of the U.S. became ghost towns.
This fact — that the middle class has been shrinking — stares all of us in the face, though few connect the dots. In the 1960s, typically one parent worked, and most families could live comfortably on one income. Today, typically both parents work, and the family relies on credit/debt to maintain their standard of living.
Secondly, by outsourcing its manufacturing/industrial base, particularly to China, the U.S. weakened its position in the world from a strategic perspective. A country that relies on trade partners for manufacturing/industrial services is a country that is beholden to other nations for its strength and power.
In regard to the U.S.’s relationship with China, this was a particularly dangerous set up as China does not respect U.S. intellectual property (IP) laws. As a result, trillions of dollars of IP and trade secrets have been stolen. This is an effective “brain drain” as well as a capital drain in that the U.S. would invest heavily in designing/ engineering/ developing its IP, only to then have China rip it off.
This was a long-term trend from 1990 onward, with the U.S. increasingly relying on China
for the production of everything. Few Americans understand the degree to which the everyday items they use come from China.
Consider the following…
China currently produces:
- 80% of all U.S. antibiotics
- 78% of U.S. apple juice
- 97% of electric toasters
- 97% of thermoses
- 95% of baby carriages
And that list goes on and on…
Bear in mind, numbers like these are just the known numbers. China also sends goods to firms in Canada and Mexico — who then funnel them into the U.S. to skirt trade restrictions. Many of the items you see claiming to be “made in Mexico” were, in fact, originally made in China.
In terms of disentangling the U.S. economy from China, there’s no question President Trump has had his work cut out for him.
But realistically, what can be done?
Tomorrow, I’ll outline President Trump’s four-step plan to fix this…
Editor, Money & Crisis