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What happens to Europe: the future is being defined now
Against the backdrop of the EU’s energy problems (endless problems), the time has gradually come to talk about the de-industrialization of Europe due to high energy prices.
And if the current resource trend continues, European production will no longer be viable. Energy expenses are one of the main cost categories in production. And these costs will be too high to produce anything. The goods will simply be cheaper to buy elsewhere.
Manufacturing creates jobs in Europe. Without manufacturing jobs, Europeans will have much less purchasing power. They will be much poorer.
A part of the production might move to America. The USA might probably be the winner. And now The USA feels not very well. Its economic model is outdated. It needs some wind of change.
America needs a little chance
Let’s look at some numbers. Germany’s manufacturing is about 30% of GDP, or $1.3 trillion.
The US industrial sector is only 18%, or $4.1 trillion. At the same time, the US financial sector is 20%. America’s entire service sector is 77% as a share of GDP!
Halting QE and reducing the Fed’s balance sheet will contract the US service sector. And it will be an unprecedented contraction, which means that America will stop creating a significant part of its GDP from the service sector, including financial services.
High inflation and the inability to go on making money out of thin air is a complex challenge that will not allow America to live its former life.
The USA needs a deep reset. And above all, favourable circumstances are needed badly. Europe, with its energy trap, is just such a case. And if everything in the EU goes the way it is now, part of the EU “power” (in particular, production) can smoothly flow over to the United States.
To survive, America urgently needs to develop the real sector. It needs production badly.
Everything will happen naturally
What is the peculiarity of the EU industrial sector? Powerful manufacturability and marginality, high and long threshold for entry.
To work in the EU style, the USA needs scientific and technological developments, patents, and many highly qualified staff. In such a situation, America must drag everything mentioned above onto its territory.
And, probably, America does not need to do anything anymore. The unbearable economic conditions in the EU and the production shutdown will do everything themselves. Personnel and technologies, together with patents, will flow to the States themselves.
For eight months of 2022, German industrial production shrank by 1.8% amid anti-Russian sanctions. The german chemical-pharmaceutical sector, heavily dependent on gas, fell by more than 10%.
The business relocation from the EU to America is already in full swing. On September 21, the Wall Street Journal published an article stating that huge German businesses are massively relocating to the USA.
And these gas branches’ breaks on the Nord Streams pipeline. These are bad omens.
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