The Painful Nuance One of the reasons why optics around the trade balance are so confusing is that if it’s phrased directly, it’s unlikely to be popular. All of the potentially successful methods to improve the trade balance of the global system are going to feel like eating vegetables or taking medicine for a while.

-If the dollar is structurally weakened with a currency accord, and then further rebalanced with a more multi-polar global reserve approach, then it would help re-shore manufacturing to some extent, but would also hurt financial asset performance and raise the likelihood of consumer price inflation. Who’s going to vote for a poorly-performing 401(k) and higher consumer prices? Miran acknowledges this and provides mitigating variables, but I think those variables are very likely to be insufficient.

-Most new US manufacturing facilities would be heavily automated. While this would benefit national self-sustainability and security, the jobs created from it are likely to be fewer than many people think even though many would indeed be created.

-Reversing a multi-decade trend is going to take many years. It can’t happen overnight. This is because there are significant physical aspects to it: manufacturing facilities, supply chains, increased energy infrastructure to support the new manufacturing facilities, increased internal transportation infrastructure, and so forth.

-Trade deficits don’t generally close in pleasant ways. The typical order of things is that import demand collapses first, and then after economic weakness and currency weakness, the country becomes more competitive for their manufacturers, and thus exports can increase. In other words, the transition process tends to be stagflationary. Who would vote for that?

I view the United States and indeed the global financial system as likely beginning a very long-term transition. Even back when I wrote my 2020 article it was gradually underway, but some things since then kicked it into high-gear. And the way I see it, there are painful parts along the journey no matter what. The status quo is painful for those on the wrong side of the huge imbalance. But the change itself would likely be stagflationary and long-lasting, with no guarantee of success.