RE: RE: A new world of trade protectionism?
"major changes must be made and seemingly one of the best way is by Trade Protectionism."
Freedom,
Trade Protection is the past.
The days of a world of 100% made American products is the relic; a throwback to a manufacturing world of decades ago. It's why most of China's exports are classified as 're-exports': it assembles the iPod from components made in Taiwan and elsewhere.
As such, tariffs resulting from new restrictive trade policies will actually increase the cost of American made goods as many key inputs come from foreign suppliers. Increase product costs will make the products less competitive and the resulting loss of business will force employers to cut jobs.
That's why we didn't see any significant trade protectionism in this current Great Recession. And we did Big Time in the 1930s.
Job losses resulting from trade wars would force the world into a renewed economic slowdown. That would decrease the demand of oil. A lower oil price would result in less capital going into clean tech investments.
And that's not good for rare earths or its prices.
Didn't we just see this? Compare VC capital going into alternative energy investments in 2009 via the amount invested 2008 or even 2007. There was a significant decrease in green investments last year that just over the past couple months has started to return to this sector.
But I don't see this scenario happening.
I see the emergence of an Asian Middle Class as the defining economic event of our lifetime.
And as I lived and worked in Asia for a couple of decades; I've seen the same changes that western countries went through in the 1950 and 1960s first hand. Trust me: they are considerable.
I also see the huge demographic numbers implied in millions upon millions of Chinese, Indians and other third world citizens march towards prosperity fueling Peak Oil concerns that will drive both capital and resources to clean tech applications.
Creating changes that yes...will be 'staggering and quite frankly shocking'.
That are some very good reasons to be bullish on rare earths.
Trade protectionism is NOT one of them.
If that occurs, you should start selling your rare earth stocks!