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Comment by wonderwonder | Hacker News Reader

Wonder if this could spur local manufacturing again if transportation costs start to out weigh labor / material costs.

That would be a good outcome: less transportation means less pollution, plus redundancy in production, which is seriously needed.

Not neccessarily for pollution. Efficency increases with larger sizes and that leads to it fulfilling broader areas. Larger manufacturing can afford more sophisticated forms of pollution control even if it is more concentrated.

Could afford, not can. The sad truth is that in far asian prudoction, most don't.

Scale brings a lot of efficiencies.

It can be more efficient and less polluting to sail a ship with 1000 tons of tomatoes from Mexico than have a local farm drive a few crates of tomatoes to the local farmer's market in his 1970 Ford pickup.

This self-balancing effect is a big part of how trade should work according to monetarist economics[0]

But for reasons I don't fully understand (possibly Triffin's Dilemma[1]), this hasn't worked for the US. Triffin's explanation basically says it can't work for the global reserve currency issuer because we have to keep exporting our currency to other places (and exporting currency means importing goods and services)

[0]https://en.wikipedia.org/wiki/Balance_of_trade#Monetarist_th...

[1]https://en.wikipedia.org/wiki/Triffin_dilemma

China pegs (floating within a range) its currency against the dollar, so that the dollar will always be a stronger currency than the yuan. This makes Chinese products cheaper in USD, which attracts consumers in the US, since China is guaranteeing the exchange rate for dollars to yuan, China ends up with USD. If things were normal China would simply use the USD to buy American goods (to be more precise, goods traded in USD including oil, which may not necessarily come from the USA). However, the trade surplus is a political goal, therefore the USD are put into the foreign exchange reserve where they are being used to buy treasury bonds. Because the money is not reaching the US economy, the US government has to either create a debt equal to the foreign exchange reserve or it can increase the money supply. If it does neither the direct result is unemployment because one person's spending is another person's income and China isn't spending.

It gets worse, because the USD is so widely adopted, transactions aren't limited to just USA <-> everyone, everyone <-> everyone is equally possible and it effectively has the same effect as the US importing products from China in regards to the deficit if the exporting side decides to purchase treasury bonds. E.g. foreign country puts the money into American companies, the investment pays off and then they use the profits to import something from China who then puts it into treasury bonds. Even though the US did nothing, the deficit must grow anyway.

I've seen an argument that we have reached the end of benefit from being the global reserve currency and that the US dollar should weaken to balance out trade. We have been a net importer (of goods) for so long, the upper class has reaped the benefits of cheaper goods while the manufacturing class has lost their jobs. China moved away from feeding the system by ceasing US bond purchases and starting the Belt and Road initiative. It seems like we're there and I'm pretty excited about a domestic manufacturing capability.

Combining this with low interest rates, a ton of money is exiting the bond market looking for yield. A lot of it is flowing to stocks, decreasing earnings. Overall, I believe it means greater investment availability. It's really the perfect storm for a very prosperous time in the US (expansion!).

It depends on what kind of economy you are in. If you are Turkey and you are struggling with a lack of domestic savings because everyone tries to keep their capital safe then you must do more investments than you can afford to keep growing. The lack of savings drive up the interest rate and ultimately put a stop to growth or slow it down significantly.

The US isn't in this position, it's a mature economy that keeps outsourcing the easy work to other countries, relative to investments there is too much in savings and those savings are in the bank accounts of corporations who would invest, if they saw a reason to do so. Assuming another fall in inflation, there won't be any reason to put the money to good use. If inflation rises over time and stays at slightly above 2% then those savings will be eroded because they can't lend the money to anyone to obtain interest, they'd have to lend the savings to themselves, or to consumers (bad idea unless they start a company). If companies fail to invest in anticipation of inflation, then the people who receive the fresh money will get to spend it, which will drive demand for products and therefore demand for companies to invest their savings into more production.

The US has plenty of manufacturing. The manufacturing jobs went. And they are not coming back.

If anything, a push to move more manufacturing to the US will drive further automation.

There are multiple chip (Intel, TSMC) fabs under development in Arizona.

Which is a very good example of highly-automated manufacturing.

Depends on how long it continues. If demand is back to normal in 2 months and it takes 3 months to ramp up your manufacturing, then you'll be too late to get any benefit from this.

It’s not just your manufacturing steps, but you need all your upstream suppliers to also be local. There are reasons well beyond just price for a lot of electronics development to be done in and around Shenzhen.

Even worse, you’ll have blown however many million $ it took to ramp up production.

That's what automation is going to accomplish long term. First, wages in e.g. China are no longer as low as they used to be and second you need far less laborers if you automate things. Also you need higher skilled labor, which favors more developed economies.

Producing locally, also minimizes time to market and means you can distribute production. E.g. Arrival is doing that in the UK for assembling buses and vans. They don't build giga factories but instead have small, low cost factories that they can setup close to where the demand is.

Basically producing close to where the demand is, or close to where the resources you need are (or ideally both), minimizes cost.

There are still going to be components that you need that are affected by the worldwide supply chain issues. It might actually be worse if you are bringing in individual components from various places and have to get them all on ships.

Where do you manufacture the manufacturing equipment?

The cost of bootstrapping manufacturing is also probably impacted though.

Very much so. Seems like a good time for the federal government to make low cost loans available to those seeking to bring manufacturing back to the US.

Won't 3D printing also spur local manufacturing?

At industrial quantities, 3D printing is slow, low-quantity, and imprecise. You can fix one of those axes at the expense of making the others even worse.

As an example, I designed a part with micron-scale tolerances. Some 3D printing firms were able to provide it within a week. Others said they could but messed up the tolerances. Milling it out of metal turned out to be faster and more accurate.

As another example, I have a dream of making a part with 100 nm tolerances. It turns out there is only one supplier of 3D printers which can do this, and they are in Germany. One company in my country have their device, but a production run for them costs tens of thousands of dollars per part due to the slow printing required by the high precision and their high fixed capital costs. As a result, they mostly get hired to make molds for more traditional manufacturing methods.

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