You’re angry at China because Americans “no longer make things.” You are mistaken: American manufacturing output is now near an all-time high, and America remains the number one manufacturer in the world. It’s true that manufacturing jobs are decreasing, but rather than blame the Chinese, your anger would be better targeted (if not better justified) if you blamed American innovators and even American manufacturing workers. Productivity per-worker in U.S. manufacturing plants is so high today because modern technology and training permits a small handful of workers to do what in the past took a horde of workers to do. The greatest competition for Americans seeking manufacturing jobs comes not from the Chinese or from other foreign workers; it comes from other Americans – and the technology they work with – who produce so much per worker that relatively few manufacturing workers are needed today.

China’s capital expenditure as a percentage of GDP has now reached a historically unprecedented 50% of GDP. Throughout economic history, countries with especially high investment to GDP ratios have embarked on inefficient investments. In the 1820s they built too many canals. In the railroad boom in the UK in the 1840s they built three lines between Leeds and Liverpool but the traffic could barely support one. Throughout the 19th century railroad boom after railroad boom led to busts. We saw a repeat of the same across a broad spectrum of industries during the 20th century, right up to the present day. The oil boom of the 1970s led to gluts of rigs and tankers that were idled for a decade. The bubble decade in Japan produced unneeded private investment that, in the two decades since, has been scrapped and replaced. In emerging Asia in the late 1980s and 1990s excesses of residential investment led to gluts that took a decade to work off. In the past decade the US did in residential construction what emerging Asian countries did a decade earlier.

History, then, is replete with examples of the adverse consequences of bubbles. The fact that China has a fixed investment to GDP ratio of 50% when no country in economic history has had this ratio above 42% — and then only for a brief moment — makes it likely that there will be more gluts and more white elephants in China than anywhere else in history.

If “walk away as soon as it’s underwater” becomes more widespread, you can expect to see some of these things spread to the residential market–not just making loans harder to get, but making them considerably more expensive and annoying for the homeowners.

The media are starting to understand these facts. Better late than never. The big question is whether our politicians will ever catch on and ditch the currency obsession for a smarter China trade policy.

The metaphor he came up with is that government is not a cancer; it’s more like a leech. It sucks blood but there’s still a lot of blood left.