Postcards: He Who Rules the Seas (Part Three)

In this final issue of the series, let's examine why America can't build ships anymore. ͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­͏   ­ Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: He Who Rules the Seas (Part Three)]( In this final issue of the series, let's examine why America can't build ships anymore. [Garrett {NAME}](floridarepublic) Jun 20 floridarepublic   [READ IN APP](   When I’m writing Postcards, someone sits down next to me to watch TikTok videos at full volume. --------------------------------------------------------------- Dear Fellow Expat: [Yesterday, on the Day Off]( I delved into the crucial topic of why an investigation into China’s shipbuilding dominance is not just timely, but also necessary. This is a situation that has been evolving over the past 40 years, with China strategically outlining its plans for dominance in seven key sectors as early as 2006. But let’s pretend that April 2024 was the first time anyone had heard about China’s dominance in the shipbuilding industries… and no one understood why it all popped up and why the U.S. is so far behind. During an April hearing, a Navy Secretary took the ship producers to task – but the headlines only focused on comments about military contractors prioritizing stock buybacks, deferring investments, executive compensation, and accounting instead of investing in ships. Those called out included a familiar face: General Dynamics Corp. They also noted that Huntington Ingalls and Italy’s Fincantieri SpA were behind in producing war vessels, an unusual public admonishment. Bloomberg recapped that the public “admonishment was a bit unfair.” “Contractors underinvested in their shipyards in the past, but they were following the Navy’s lead of shrinking defense budgets,” [an April article reads](. And that’s fair, as we haven’t subsidized the shipping industry in 40 years. The story fueled a panic among policy experts but largely stayed out of the public spotlight. It was more likely to be read about in Foreign Affairs, Foreign Policy, The Economist, or Military. Com is a place that has long written about the issues. You know… the same magazines and sites catering to policy experts who might consult Senate Committee on Foreign Relations members. It’s just the same old American shit. In a massive bureaucracy, the attitude becomes “someone else will do it…” or “it’s not my problem.” Meanwhile, the world’s largest centrally planned economy has been building ships during peacetime at a pace that might only rival what existed in the secrets of Genoa’s emergence. And they’ve been doing it through a publicly announced initiative from 2001. China Versus America We explained that China doesn’t care about the costs of this dominance. And if they pile up too much debt or exports become uncompetitive, they’ll just cut their currency again at some point… while building its Silk Road Initiative, which ensnares other nations in debt. In time, its military ships across the Indian Ocean and the Pacific Ocean will enforce the contracts of what’s owed… Or they’ll seize the assets backed by the collateral – like ports, bridges, and other strategic infrastructure. [They’ve been doing it for years.]( Meanwhile, as happened to Russia, they’ll engage in this policy while doing everything necessary to avoid U.S. sanctions. This is important because China doesn’t seem to care about the economics of it all. It’s all about the power and preparing for a bipolar world where they maintain influence. As we discussed yesterday, we stopped subsidizing ships, which seems odd. China subsidizes by a massive level. China also adopted the U.S. strategy of dual-use shipyards, as America did during World War II. According to the U.S. Office of Naval Intelligence, China now has 232 times the United States's shipbuilding capacity. This is the scoreboard for people at home… China built 50% of the world’s new ships in 2022. America built 0.13%. That’s… 13%... of 1%. What gives? The U.S. has seen a drastic decline in shipyards. Well, let’s get to the cynical part. We could probably try to open some on the East Coast, but there’d likely be a lawyer on call to sue the Pentagon over a striped bass within 50 miles of the docks. [Foreign money is fueling the Sue and Settle issue that remains behind the scenes.]( However, the real issue is the subsidies and labor. [Chinese shipbuilders make up to]( 13,000 a year. That’s beyond the poverty level in America. And even with good pay, finding U.S. workers is the biggest bottleneck. Americans don’t weld. Let’s be very honest: We’re a financialized economy of influencers, bankers, bloggers, TikTok dancers, and Pilates instructors who pay $1,000 to fix the refrigerator’s ice maker. We can’t even bother to watch a YouTube video on how to fix something. Meanwhile, Washington has crushed our supply-side economy with so much regulation over 30 years. They’ve subsidized the university system – driving workers into fields that might even pay less than the blue-collar workers we need. [Foreign Policy]( notes that fast food restaurants pay more than shipbuilders. I’m not saying the naval leader who barked about shareholder value was wrong. Still, General Dynamics’ CEO made $23 million last year—and I can’t figure out what she does (CEO Phebe Novakovic also owns $240 million in company stock). When the shipyards went away, the blue-collar work went with it. And today, no one wants to do that work. When they’re not dreaming of being Social Influencers, Americans also want to be lawyers – because that’s where the money is. That’s America. Lawyers. You know it. I know it. Since 1971, when we went off the gold standard, the chart counting the number of lawyers in America started to look like a recent price chart of NVIDIA. There’s a reason why we have more people in law school than actual lawyers… and why I want to open a manicure shop on every block in Washington, D.C. [To quote Frank Sobotka in Season 2 of The Wire]( “We used to make shit in this country, build shit. Now we just put our hand in the next guy’s pocket.” Delays Delays In May, [UNSI News noted]( that 40% of ships weren’t restored on time. It's not just bureaucratic delays and bad design… the Navy doesn’t have the people actually to design the damn ships. I assume those engineers went on to become lawyers. As I said years ago, the smartest person I’ve ever met was a 4.0 GPA in chemical and mechanical engineering from Northwestern’s Ford Engineering School. Fifty years ago, he’d have been designing bridges and even warships. He's a corporate lawyer with a beautiful condo in California. And that’s another problem. Defense One notes that the U.S. Navy hasn’t adapted to “modern ship designing tools,” [writes Asia Times](. While oil companies use advanced technology to design freight ships, such as 3-D and VR, the Navy still designs ships with 2D blueprints. There you go… bureaucracy again. Finally, there’s the issue of how the Navy spends money. In 2008, U.S. naval shipbuilding practices were already fueling a decline in ship numbers to the smallest fleet in 100 years—you know… back before there were military airplanes. America went from 835 combat ships in the 1950s to roughly 300 at the start of the century. All of the warnings of the last 15 years have gone ignored. [In the New Wars blog from that year]( – a source I read in my lone military class at Hopkins’ Security Studies Program – the author noted that starting in 2001, the U.S. government increased the total budget of the Navy and Marines by $900 billion in eight years. But what did the military arms do with the money? Did they replace the fleet during that critical period after 9/11? No, they didn’t. The defense contractors started to make lots of toys… The blog and the article cited note that the Navy went as high-tech as possible and instead focused on battles to protect aircraft carriers—perhaps the single most vulnerable ship in the ocean right now in an era of hypersonic missiles, a technology in which most analysts believe China has leapfrogged everyone. The author writes, “What [hi tech] has given us is mushroomed costs geared toward keeping the aircraft carrier fleet still relevant rather than a strategy to fight a 21st-century war at sea. Warships should be built to fight, but instead, we get  ships that are too costly to lose in a major war at sea and unprepared for a war of attrition.” In the 21st century, with China playing the long game economically, they might be willing to play it militarily, too—engaging in a multi-decade, start-stop war that is completely a form of attrition. The author suggests that the fear of losing a high-tech ship can ultimately lead to a lost battle… and, of course, higher costs. The blog concludes by suggesting that we turn away from the Cold War mentality… which is still clearly locked in the memories of our leaders… and focus on smaller, more agile ships in our price range. But here’s another one… By 2010, military analysts were already warning about “[The Terrible 20s]( –when we’d lack supplies while retiring countless ships and face incredible spending challenges. Read this… This was predicted… in 2010. “The fiscal nightmare of the series of deficits we are building and the debt service they will bring - along with the budgetary realities of building a Social Democracy (only tremendous political changes in the '10 and '12 elections will change this), will create budgetary pressures that will drive defense spending to below 3% of GDP by 2012 (it is 4% now).” In April, the Congressional Budget Office wrote that U.S. defense spending as a share of gross domestic product (GDP) will drop from 2.9% in 2024 to 2.5% in 2034. We already pay more money in interest than we do in defense spending. This is so spot on that it’s like the author had a time machine. Despite all this – these warnings went unheeded. With the U.S. government some $35 trillion in debt – and over-reliant on foreign payees – Foreign Policy noted the elephant in the room last month.   “The expensive upgrading of the U.S. nuclear triad, simultaneous modernization efforts across the services, and the constraint of rising government debt are compelling the Pentagon to make tough choices about what it can and cannot pay for,” [Gil Barndollar, a senior fellow at Defense Priorities]( writes. I go back to the 2010 piece predicting the terrible 20s for my final comment. To address the problem, the author called for a complete overhaul. He wants new admirals, leaders, visions, and philosophies, and it shouldn’t just be the people in charge of the military. The government has four jobs. Washington needs to prove it can do these four things before it starts enforcing carbon emissions goals or making sure enough left-handed people get to go bowling… 1)    Protect individual liberties… in which it’s failing. 2)    Protect property rights… in which it’s constantly encroaching… 3)    Maintaining law and order… which is laughable right now… Finally… 4) National defense. You tell me how you feel about this right now? The Genoa Route It’s time for a new generation of leaders, not just people in their 70s and 80s clinging to power. If we don’t develop new ideas, we’ll lose a capital war, a military war… and our identity. And some 300 to 400 years from now, a bunch of people will be giving walking tours around Washington D.C. and New York City… talking about how great America was in 1987 and what it meant to the world. It’s incredibly easy to see this when you’re not on your own shores… when you talk to Italians. This morning, a coffee shop owner here who worked in Denver for 25 years asked me: “What the hell is going on in America…” and started listing off all the absurd economic and social things he sees on the news. And Niall Ferguson, in joining the Free Press this week (with one of the most impressive resumes in the history of political thought), laid out the case of a system in America that looks all too familiar. [This essay will break your heart.]( It is easy to cling to yesterday. The Romans did it, the Genoans did it, the British did it, and the Soviets did it. Are we naive enough to believe we can’t fall under a similar spell? See through the lies of fiat currency and Paul Krugman's magical economics. Otherwise, be prepared to go the Genoa route. Stay positive, Garrett {NAME} Disclaimer Nothing in this email should be considered personalized financial advice. 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