Zeihan-US-Re-Industrialization & Inflation-Powell-Interest Rates

Now we’re having to reshore everything and turn over the power system, driving construction levels and spending through the roof. And the Inflation Reduction Act has helped provide the funding and regulatory structure to make it all happen.

Although inflation will be up there for a while[1] surprise, you can’t double your industrial plant without that happening), we’re on a solid trajectory to establish a fully regionalized supply chain.

[1] Industrialization does not happen overnight–so higher inflation for years.
How does this factor into Powell’s thinking & interest rates?

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I’ve said this before, but the construction industry in Ohio and Nebraska is exploding. Use this information as you will, but the funnel of money into this area is almost unbelievable.

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Wendy and I have been discussing this for a couple of years now. You are only posting most of the time. I am not going to say it endlessly for someone who wont read my stuff for two years. Well…I will because you will read it once and be up to speed. Instead of coming up with opinions that have nothing to do with things.

Powell in all likelihood wont be chair. His term will end and another chair will be there. So the question either way is that will the FED do? The FED will keep rates normalized. The balance of taxes on the top bracket and the effective rate on corporation will be set up against higher rates to tamp down inflation throughout the period. The 1950s into 1965 reimagined with the GDP growth rates but not the effects later on of a declining top bracket tax rate and locked in low rates that could not head off inflation.

The FED eventually will relax rates but not much. By a comparison to the zero rates years the FED will raise rates and keep them higher. Everything is relative ultra low rates were very recent history.

The relative rate will become easier for planners to use in growth projections further out in time.

The economies of scale happen as the industrials trade with each other in North America. This will create major deflationary forces on the background noise of inflation.

The US and Mexico will become much richer.

The IRA and Chips Act, there is one more major act name eluding me, lead to much greater alternative energy implementations. We are waiting on one more major piece of bi partisan legislation to give the executive more power over a national grid. After that during the general election year the president and congress are mostly lame duck.

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Syke,

Construction does best at the top of the market until it suddenly plunges.

At some point a lender will say there is no way to substantiate a loan x of that much money. The value of the property wont add up to x. Then the value of the properties in the area will chase their tails downward.

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