I Would Build a Great Wall

"I would build a great wall!" These were the words spoken by Donald Trump from the lobby of the Trump Tower on June 16, 2015, when he announced his candidacy for President of the United States.

Most people took him to mean that he would build a physical wall between the U.S. and Mexico, and while that was certainly true, it only captured a small part of what he wanted to achieve. What the commentators failed to comprehend at the time is that Trump was, and continues to be, an anti-globalist who closely holds the parochial view that what we can't grow in or dig out of our own soil, or assemble with our own hands, we do not need. He rejects the post-WWII paradigm that guided U.S. domestic and foreign policy for the past 80 years in which the U.S. consumer was the engine of global growth, and that what is good for other countries is ultimately good for the United States. During that postwar period, the global GDP has grown by over 50 times (from $2T in 1965 to $105T in 2023) and the U.S. GDP has grown from $742B in 1965 to $28.5T in 2024, during which time the U.S. percentage of global GDP has remained relatively constant (from 38% in 1965 to 26% in 2023). What this means is that the world has grown wealthier on the back of the U.S. consumer, but the U.S. has grown wealthier as well.

However, what those numbers do not explain is why the median U.S. household feels less wealthy today than they did in the 1960's. In 1965, U.S. manufacturing accounted for 53% of U.S. GDP and the median U.S. household income was $6,900 ($69,585 in current dollars). By 2024, U.S. manufacturing as a percentage of GDP had fallen to 10%, while the median U.S. household income for 2024 was $80,020, only 15% higher in a time period in which the global GDP has increased 50 times and in which the U.S. share of global GDP has only decreased slightly. If we look at the U.S. stock market, the story is quite different. In 1965, the S&P Index of U.S. publicly traded companies peaked at $93.07 ($941.45 in today's dollars). The S&P Index peaked at an all-time high on February 19, 2025 at $6,144, or an increase of 553% since 1965. So, according to this metric, only 2.7% of the increase in U.S. wealth during the postwar period has flowed to U.S. households.

But wait, if the global GDP and U.S. GDP have grown so much in the post-war period, how is it possible that U.S. household income has only increased by 15%? How are these households able to afford this level of consumption with such meager wage increases? The short answer is by adding debt. In 1965 the national debt was 37% of the U.S. GDP; by 2024 that percentage had increased to 124%, a threefold increase. In 1965, the U.S. federal debt per capita was $1,632 ($16,444 in real terms). By 2024 the U.S. federal debt per capita had increased to $101,198, or a sixfold increase. Additionally, the U.S. household private debt has also increased dramatically, from 15% of GDP in 1965 to 62% of GDP in 2024. When you combine total public and private debt, the median U.S. household is currently carrying a debt load of $445,568 at a time when real household incomes have barely increased over time.

Median U.S. Household Income, 1975 - 2024

The combined pressures of stagnant wages and an increasing debt load generated the seismic forces that manifested themselves in tremors in Trump I (2016 - 2020) which are now full-blown earthquakes under Trump II.

As these earthquakes ripple out, they will create tremendous pain, dislocation, and economic loss to large swathes of the U.S. population and the U.S. and global economies. From the Trump Administration perspective, this is the shock therapy that the U.S. and world needs to reset the paradigm from one in which the world looks to the U.S. as the consumer of last resort and as the policeman overseeing the world order.

Assuming no radical changes to the current Trump trajectory, how might this play out in the short term (over the next 1-3 years)? In the short term, we can expect significant pain as prices for everything go up, as scarcity increases, as businesses dependent upon exports lose sales, as the unemployment rate goes up, as the U.S. GDP shrinks, and the U.S. dollar devalues. The drop in overall U.S. production, combined with the dramatic cuts to the federal workforce (particularly at the IRS) and the anticipated tax cuts, will cause the tax revenue collected to be reduced and will cause the U.S. debt to spike up even further, which could lead to a U.S. sovereign debt crisis that would most likely be temporarily resolved through a forced conversion of short term debt instruments into long term debt instruments.

In fact, the seemingly deliberate nature of the chaos that has been unleashed leads me to believe that the goal of the Trump Administration is some form of "creative destruction", leading to a "reset" where the debt gets wiped out (or, at least postponed into the far distant future) and all foreign alliances and obligations are severed to be reconstructed under different terms.

This sort of extreme, radical reset (akin to Mao's Cultural Revolution that led to as many as 2 million dead Chinese out of a population of 742 million) should never be undertaken by a liberal democracy without public debate and input from the people's representatives. While the problems that led to the seismic forces that allowed Trump to rise to power are as real as our elected representative's inability or unwillingness to do anything about them, the solution to the people's problems must come directly from the people, not through tyrannical rule. The test we face now is how our elected officials respond to the gauntlet that Trump has dropped before them. Let us pray they are up to the challenge, lest we go the way of the Weimar Republic.

Fortress North America

 

Greenland, Canada, the U.S. and Mexico Comprise North America

North America, which stretches from Alaska in the West to Mexico in the South and Greenland in the North and East, is a land mass that enjoys remarkable advantages:

• Wide oceans to the East and West providing protection against invasion.
• The world's largest proven reserves of fossil fuels.
• A population of almost 500 million individuals.
• A high literacy rate.
• The world's greatest basic research institutions.
• Ample bank reserves and highly liquid public markets.
• A low population density of only 21 people per square kilometer.
• Climate that ranges from tropical forest in the South to arctic tundra in the North.
• Massive boreal forests.
• Ample arable land.
• The world's largest reservoirs of fresh water.
• The longest coastline in the world (over 95,000 miles in total).
• Proven reserves of every critical mineral adequate for all forecast demand for the foreseeable future.

In other words, if North America were forced by world events to cut off trade with other economies it could survive with few dislocations. Areas where dislocations would occur are the following:

• Cutting edge microprocessors, which are mostly fabricated in Asia.
• Critical minerals such as cobalt and lithium, which are largely imported now.
• Solar panels, which are largely imported now.
• Clothing, which is mostly fabricated in Asia.

How can we mitigate these potential dislocations? By using a combination of tariffs, tax credits and other incentives we can increase the production of chips, critical minerals, solar panels, and clothing in North America.

On the chips front, the good news is that a lot is already happening. The 2022 Chips & Science Act appropriated $52.7 billion to boost research and manufacturing of semiconductors in the United States. In March 2025 the Taiwan Semiconductor Manufacturing Company announced an additional $100 billion in planned investments in U.S. manufacturing capacity, above the $50 billion they have already committed to spend. South Korea's Samsung, another advanced chip fabricator, is taking advantage of $4.7 billion in incentives to build a massive fab in Taylor Texas. The U.S. company Intel is building a massive new state-of-the-art plant in Ohio. The Chinese company Foxconn is currently building an assembly plant in Mexico to assemble NVidia's GB200 super-chips, which are critical for artificial intelligence learning.

Regarding critical minerals, like Cobalt, the picture is not as clear. Between the United States and Canada, there are over a million metric tons of reserves. However, less than 1% of the global production comes from North America currently. The majority of the world's production comes from countries like Congo, where lax or non-existent environmental regulations allow the industry to grow unfettered. Cobalt production generates large amounts of wastewater which is expensive to treat properly. In order to properly incentivize North American production of cobalt more action is necessary. Regarding lithium, North America also holds ample reserves, with almost 15 million metric tons available in the United States and Canada. However, North America produces only a tiny fraction of the world's demand for the mineral, for many of the same reasons as apply to cobalt. Clearly, further action is required on this front to ensure that North America is capable of producing the amount of cobalt, lithium and rare earth minerals that would be needed in the event that foreign sources of supply were cut off.

Through focused industrial policy, China has evolved to become the largest supplier of solar panels to the world. Solar panels are critical to provide a complete mix of energy and lacking adequate North American manufacturing capacity is a liability and security risk. Fortunately, all the raw materials needed to produce solar panels (silicon, aluminum, glass, copper and silver) are in ample supply in North America, so the main obstacles are economic. This is an area where tariffs and tax credits can be put to effective use to incentivize additional North American production capacity.

Regarding the supply of clothing, the news is promising. The United States has ample productive capacity of fabrics and threads, and Mexico has ample labor for the final assembly. However, even cheaper labor in Asia has undercut this industry, but tariffs can be put to effective use to make North American clothing more competitive in the marketplace.

North America sits in an enviable position on the world stage. However, as recent political upheaval shows, there are trade issues that must be addressed before this unified market can function properly. Most importantly, for the tariff structure that will incentivize the construction of new North American productive capacity to work, the tariffs applied to imports into Canada, the United States, and Mexico from nations outside of North America MUST BE UNIFORM. The unified market can be free of internal duties, but the duties for commodities entering the bloc must be the same, regardless of which member country is the importer.

North America is not just a powerful trading bloc, but it is also a powerful security bloc. For North American free trade to properly function, there must be control of the borders to properly regulate the flow of migrants and contraband, which is currently not the case. It is the responsibility of each member nation to protect its borders and to restrict undocumented migration and the passage of illegal substances or other types of contraband. In particular, the illegal trade in Fentanyl which is put into counterfeit pain pills with deadly results, must be stopped. Mexico in particular must crack down internally on the drug cartels that engage in this deadly trade.

Hopefully, the enormous value of preserving and investing in the greatest economic union the world has ever seen will be understood and the challenges it faces met.

En español

América del Norte, que se extiende desde Alaska en el oeste hasta México en el sur y Groenlandia en el norte y el este, es una masa de tierra que goza de ventajas notables:

• Océanos amplios al este y al oeste que brindan protección contra invasiones.
• Las mayores reservas comprobadas de combustibles fósiles del mundo.
• Una población de casi 400 millones de personas.
• Una alta tasa de alfabetización.
• Las mayores instituciones de investigación básica del mundo.
• Amplias reservas bancarias y mercados públicos altamente líquidos.
• Una baja densidad de población de sólo 21 personas por kilómetro cuadrado.
• Un clima que varía desde los bosques tropicales en el sur hasta la tundra ártica en el norte.
• Enormes bosques boreales.
• Amplia tierra cultivable.
• Las mayores reservas de agua dulce del mundo.
• La costa más larga del mundo (más de 95.000 millas en total).
• Reservas comprobadas de todos los minerales críticos adecuadas para toda la demanda prevista para el futuro previsible.

En otras palabras, si América del Norte se viera obligada por los acontecimientos mundiales a cortar el comercio con otras economías, podría sobrevivir con pocas dislocaciones. Las áreas en las que se producirían dislocaciones son las siguientes:

• Microprocesadores de última generación, que se fabrican principalmente en Asia.
• Minerales críticos como el cobalto y el litio, que ahora se importan en gran medida.
• Paneles solares, que ahora se importan en gran medida.
• Prendas de vestir, que se fabrican principalmente en Asia.

¿Cómo podemos mitigar estas posibles dislocaciones? Mediante una combinación de aranceles, créditos fiscales y otros incentivos, podemos aumentar la producción de chips, minerales críticos, paneles solares y prendas de vestir en América del Norte.

En el frente de los chips, la buena noticia es que ya se está haciendo mucho. La Ley de Chips y Ciencia de 2022, que asignó 52.700 millones de dólares para impulsar la investigación y la fabricación de semiconductores en los Estados Unidos. En marzo de 2025, la Taiwan Semiconductor Manufacturing Company anunció 100.000 millones de dólares adicionales en inversiones planificadas en capacidad de fabricación estadounidense, por encima de los 50.000 millones que ya se han comprometido a gastar. El surcoreano Samsung, otro fabricante de chips avanzados, está aprovechando incentivos por 4.700 millones de dólares para construir una enorme fábrica en Taylor, Texas. La empresa estadounidense Intel está construyendo una enorme planta de última generación en Ohio. La empresa china Foxconn está construyendo actualmente una planta de ensamblaje en México para ensamblar los superchips GB200 de NVidia, que son fundamentales para el aprendizaje de la inteligencia artificial.

En cuanto a los minerales críticos, el panorama no es tan claro. Entre Estados Unidos y Canadá, hay más de un millón de toneladas métricas de reservas. Sin embargo, menos del 1% de la producción mundial proviene actualmente de América del Norte. La mayor parte de la producción mundial proviene de países como el Congo, donde las regulaciones ambientales laxas o inexistentes permiten que la industria crezca sin trabas. La producción de cobalto genera grandes cantidades de aguas residuales que son caras de tratar adecuadamente. Para incentivar adecuadamente la producción norteamericana de cobalto es necesario tomar más medidas. En cuanto al litio, América del Norte también posee amplias reservas, con casi 15 millones de toneladas métricas disponibles en Estados Unidos y Canadá. Sin embargo, América del Norte produce sólo una pequeña fracción de la demanda mundial de este mineral, por muchas de las mismas razones que se aplican al cobalto. Claramente, se requieren más acciones en este frente para asegurar que América del Norte sea capaz de producir la cantidad de cobalto, litio y tierras raras que se necesitaría en caso de que se cortaran las fuentes de suministro extranjeras.

Mediante una política industrial enfocada, China ha evolucionado hasta convertirse en el mayor proveedor de paneles solares del mundo. Los paneles solares son fundamentales para proporcionar una combinación completa de energía y la falta de una capacidad de fabricación adecuada en América del Norte es un riesgo de responsabilidad y de seguridad. Afortunadamente, todas las materias primas necesarias para producir paneles solares (silicio, aluminio, vidrio, cobre y plata) están en abundancia en América del Norte, por lo que los principales obstáculos son económicos. Este es un área en el que los aranceles y los créditos fiscales se pueden utilizar de manera efectiva para incentivar una mayor capacidad de producción en América del Norte.

En cuanto al suministro de prendas de vestir, las noticias son prometedoras. Estados Unidos tiene una amplia capacidad productiva de telas e hilos, y México tiene abundante mano de obra para el ensamblaje final. Sin embargo, la mano de obra más barata en Asia ha socavado esta industria, pero los aranceles pueden utilizarse de manera eficaz para hacer que la indumentaria norteamericana sea más competitiva en el mercado.

América del Norte ocupa una posición envidiable en el escenario mundial. Sin embargo, como lo demuestra la reciente agitación política, hay cuestiones comerciales que deben abordarse antes de que este mercado unificado pueda funcionar adecuadamente. Lo más importante es que, para que funcione la estructura arancelaria que incentiva la construcción de nueva capacidad productiva en América del Norte, los aranceles aplicados a las importaciones en Canadá, Estados Unidos y México DEBEN SER UNIFORMES. El mercado unificado puede estar libre de aranceles internos, pero los aranceles para las mercancías que ingresan al bloque deben ser los mismos, independientemente de qué país miembro sea el importador.

América del Norte no es sólo un poderoso bloque comercial, sino también un poderoso bloque de seguridad. Para que el libre comercio norteamericano funcione adecuadamente, debe haber control de las fronteras para regular adecuadamente el flujo de migrantes y contrabando, lo que actualmente no es el caso. Es responsabilidad de cada nación miembro proteger sus fronteras y restringir la migración indocumentada y el paso de sustancias ilegales u otros tipos de contrabando. En particular, se debe detener el comercio ilegal de fentanilo, que se utiliza en analgésicos falsificados y que tiene resultados letales. México, en particular, debe tomar medidas enérgicas a nivel interno contra los cárteles de la droga que participan en este comercio letal.

Es de esperar que se comprenda el enorme valor de preservar e invertir en la mayor unión económica que el mundo haya visto jamás y se afronten los desafíos que enfrenta.

An Arab Riviera

 

Now that the Gaza War is winding down the hard work is set to begin.

President Trump has waded into the debate and proposed a "Riviera of the Middle East" in the Gaza Strip.

I agree that we face a unique, historic opportunity to rebuild Gaza into a prosperous, luxurious destination for world travelers to the benefit of the Gazans.

Here is my plan:

• Form a coalition between the U.S., Saudi Arabia and the UAE to finance the reconstruction and administer the territory.
• Quickly construct temporary housing for Gazans and their families where they can live during the reconstruction.
• Employ the Gazans and others to work on the reconstruction.
• Establish the principle of non-violence and disarmament to prevent future extremist violence, to be enforced by military police from the U.S., Saudi Arabia, and UAE, and by military contractors.

This plan will provide safety, security and prosperity for the Gazans for generations to come.

Because of the troubled history and the distrust that exists between the Gazans and the Israelis, it is critical that the security be guaranteed by the US/Saudi/UAE coalition and that the administration and management of the territory be handled by this coalition.

While this may be viewed as a disenfranchisement of the Gazans, it is the only way to avoid allowing extremism to rise again, leading to another cycle of violence.