Category Archives: economics

It was better in Dubai before Iran attacked

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Dubai is a gorgeous, clean, modern city in the Emirates state of Abu Dhabi. As such it is Abu Dhabi’ as it were, Abu Dhabi’s gateway into being a modern Islamic Republic. All religions are respected in the city of Dubai, though not elsewhere in the Emirates. Alcohol and nightclubs are permitted, even encouraged, along with western books, movies, and music. There’s fast Internet, low taxes, free newspapers, and great plane connections via Emirates Air, along with premiere hotels, Ferraris, lots of them, and villas on peninsulas shaped like palm trees. Dubai is promoted with the phrase, “It’s better in Dubai,” Other promotions included having the Sex in the City movie filmed there and hosting the 2022 FIFA World Cup. And then Iran attacked with 5000 drones and missiles, hitting hotels, below and oil shipping. Three Emirates oil ships struck in the last week alone, leaving one crew member dead, 20 injured. Some rich people are fleeing, while others are staying. The airport is still open, as are the eyes of some rich folks in the US and Europe. It’s not so great in Dubai, but not that bad either. I don’t think Dubai is going away, and expect it to grow, slowly.

Photos from Dubai after an attack last week.

A similar pattern is playing out in Qatar’s western-style area of Doha. This is a section of the capital city that allows alcohol, and has fast internet, air-conditioning, western religion, movies, and books. I’d written, with wonder about Qatar, with its rich citizens and indentured, workers. I would have thought Doha would be safe from Iranian missiles since Qatar is Shia Mulsim, like Iran. It too is being hit, and not only in the western areas. Iran also destroyed Qatar’s largest natural gas and oil facilities, and their helium plant. The problem for Iran is that Qatar isn’t Shia Islamic enough to make them happy. Alternately, Qatar is rich, and Iran is jealous. Destruction is the answer, but the city endures, and I expect it will grow.

Saudi Arabia was in the process of building the beginnings of its own, modern gateway city, NEOM. It’s more conservative religiously than Dubai, but more technically advanced, envisioned with robots, solar energy, and zero cars. It’s in the early stages, but already attacked by Iran. The motivation, I expect, is to insure that the king doesn’t sign the Abraham accords with Israel and Abu Dhabi. The king has slowed construction, but not stopped, or stopped working with the US.

While these attacks are clearly a setback for these western-enclaves, I don’t expect Saudi Arabia, Qatar, and Abu Dhabi will shut them down. Dubai, Doha, and Neom are attractive, and seen as a necessary part of a post oil future. I suspect the attacks only bring resentment of Iran and its mullahs, plus a desire for increased spending on defense. The attacked countries may ally with each other, something unlikely before the attacks perhaps through expended Abraham accords, or via some other defense cooperation. I also imagine that the gateway cities will grow, allowing conservative Muslims to become more comfortable with Western ideas and behaviors.

I don’t expect Iran to change, nor copy these cities, nor do I expect their influence to weaken much. They have oil and a powerful ally, China, who depends on Iranian oil. China benefits by Iran fighting China’s western rivals, or it did before sanctions. I expect Iran to make more trouble for us and their neighbors, especially when Democrats win congress in a few months. I’m not totally sure why Democrats are sanguine about a nuclear Iran as negotiated by Obama, or seem OK with Iran bombing their neighbors for no good reason. Then again, I don’t quite understand “Queers for Palestine.” Most liberals are unhappy, and my guess is that the Iran leadership is too. Both are happy seeing Dubai and Doha bombed. Even with the bombs falling, I see these cities as a gate to a more peaceful, more tolerant Middle East.

Robert Buxbaum September 14, 2026

Michigan’s only sad container port, Monroe

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Michigan has only one container-capable port, the port of Monroe, shown below. It’s small, connected to Lake Erie via a channel that’s 500 ft wide but only 21 feet deep. This is OK for handling Great Lakes, wide-bottom rafts and some shallow draft barges, but it is too shallow to handle ocean going vessels, or even larger Great Lakes ships. The only way Port Monroe takes containers is by pushing them onto rafts that are then drawn by tug, typically to Canada. The port has been neglected due to a belief, popular with Michigan Democrats, that fast rail traffic is the future success, while ports are the past. This is a popular belief in Europe, Japan, and China, but planes, cars, and ships make more sense in the US I think, in part because of regulations that prevent rail-carried mail. A nice thing about planes and ships is we don’t buy land, nor maintain tracks.

In term of price per pound mile, ships are vastly cheaper than any other system, especially big ships. But big ships need deep water ports, ideally ports with good road (or rail) connections, and good connections to the sea. Monroe has good road and rail connections, and Detroit does too. Detroit is an obvious city for a hub, centrally located on the narrows between the US and Canada, but Detroit has no port infrastructure currently, and shows no interest in adding any. That leaves Monroe, pretty bad, but better than nothing.

The port of Monroe, MI, is a bulker port, mostly and handles no ferries or cruise ships. Some few containers leave by barge. The shallow channel is part of the problem. Picture from the Detroit News.

I would like to see the Port Monroe improved, with cranes and more storage area, and with the channel deepened to handle seaway – max vessels of 27 feet draft so we could handle ocean- cargo business, and cruise ships — a ferry would be nice too. With an improved Michigan port, our exports would not have to be trucked to New York for shipment, and we would be able to import machinery and steel without it having to stop in New York, or Montreal. The lack of a decent port is why Detroit is the most expensive major US city in terms of the cost of international trade.

Monroe has the space for improvement, and they got a recent USDoT grant of $15 million to improve. It’s covered the building of a new dock, and is expect to provide for some berths for Coast Guard ships and tugs (needed). With the new dock, there’s rumors that Monroe could be a decent way to export windmills components and other items that are too large for bridges and unsuitable to major ships. We’ll see how things develop.

Robert Buxbaum August 26, 2026

The economic case for Alberta separatism

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Canada is poor relative to the US as I discussed in a previous post. Though they have lots of available land, home prices are very high, much higher than in the US because of regulations and fees. Similarly, it is hard to start a business in Canada, and salaries are lower. Again the major problems appear to be regulations and taxes. The Western Provences, Alberta, British Columbia, and Saskatchewan complain regularly that their interests are being ignored. So, earlier this year, Alberta’s legislature approved a referendum for separation from Canada. Independence! In part the reason is that Albertans find they are financing the rest of Canada. Independence is something that Quebec attempted Canada some 30 years ago. There the “exit” vote lost by a mere 0.6%, and the argument to stay was mostly economic: Quebec needed Canada’s money. Alberta does not. It funds Quebec and every other Provence of Canada.

Trump praised Alberta’s decision to Canada’s dismay. Some Albertans want to want to join the US, a fulfillment of James Knox Polk’s vision. It may not be legal, though. Alberta judge, Shaina Leonard declared Alberta separation unconstitutional as “secession from Canada will have an impact” on native groups. Why this is different from Quebec, I don’t know. The Alberta legislature is now preparing for a referendum on whether Alberta should “commence the legal process … to hold a binding provincial referendum”. This is a referendum on whether to have a referendum.

Currently Alberta is the only Provence that puts in more to the federal government than it takes out, and the disparity is huge. The Provence of Alberta has more oil than most oil countries, more that Iraq, Kuwait, or Norway, for example. It currently produces ~4.1 million barrels of oil per day. Valued at the current world rate of $100/bbl, that’s about $150 billion per year. If you divide by 5 million Albertans, the oil revenue alone is ~$30,000 per man woman or child, or $100,000 per voter. To this you can add bountiful natural gas, other minerals, and a strong industry, and you see a lot of info e that federal Canada “redistributes” east. Because of Canada’s parliamentary system Alberta has virtually no rights. Each vote is counted equally, and almost every one in Canada believes Albertans should not keep their bonanza. The central Canadian government provides programs, it’s true, healthcare with long waits and medical-assisted suicide. They also policed face masks for truckers, taking away the truckers savings and trucks if Canada found the mandates were being ignored.

Canada’s liberal politicians blast Albertans for being racist and stingy. They spend widely and run a deficit, about 15% of tax income despite the money taken from stingy Alberta. And despite this spending, managed to put Canada into recession, the only G7 country in recession, currently. Canadians are poorer than US citizens, with lower wages, and higher home prices, and Canada looking to China as an ally. I would suggest, instead, fewer regulations and less spending as Albertans want. If Alberta leaves, the rest of Canada will be bankrupt.

Current odds are against Albertans’ separation from Canada, but Quebec almost left, and the economic argument for leaving was non existent. Quebec was taking money from the rest of Canada when the Quebec separation vote came 30 years ago, and even so non-secession won by a mere 0.6%. Economically Alberta is more than self sufficient, and culturally Alberta is so like the US that it could join us easily, or relatively so. A vote for separation, if it were allowed to take place, could easily result in separation.

Robert Buxbaum, July 23, 2026

A year-long war in Iran is a cheap peace.

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Our war with Iran is now a month old and the press is already calling it lost. They see Americans dead, and allies angry, but no value in the removal of a supreme leader who’d been trying to killing Americans for years, and who’d enriched enough uranium, at 60% to make 11 atom bombs. With our European and Chinese “allies” they see no pressing problem inIran’s space program where the missiles are emblazoned, “Death to USA”, or so they claim. Instead they claim our war is illegal, immoral and damaging. They call for a quick (immediate) end to the war (that is, we stop fighting) and refuse to cooperate in opening the straight of Hormuz, saying it’s not their war, though their ships, some 3200 of them are trapped in the Persian Gulf. Some “allies” have even closed their airspace in protest.

In fact, I suspect that the leadership in China and in Europe are glad to see Iran’s A-bomb project impeded, but who knows. They like to bee seen meeting with Iranian leaders, as Chairman Xi below in January 2026, then attacking the US as reactionary. Iran’s gulf neighbors are less happy with Iran because of the attacks. Even Shia Qatar has complained. Though they have not said so, I suspect most are against Iran’s proxy attacks in the Red Sea (straight of Mandab). China benefits from a non-nuclear war, and keeps sending Iran missile fuel and components in support of Iran’s proletarian government that enforces religion and kills Americans and Iranians, and that traps ships in the Persian Gulf. China benefitted from Iran’s sanctions, as they got cheaper oil, and I can see they’d like this to continue. European leaders just want cheap oil, and to be considered as tolerant, peace makers.

Chairman Xi visits Iran in January 2026, photo from the Independent.

My take, I feel bad for the sailors on these ships, some American, but to my mind, the current state of war is better than the state of peace before it, with continuous proxy attacks, and is far better than the atomic war that could follow. I like peace, but don’t see that happening quicker if we stop bombing Iran, nor quicker than a year from now, even with booming Iran. Iran’s mullahs have distributed power, allowing them to hang on indefinitely, if we let them, and our European friends seem intent to promote Iran’s mullah-leadership, such as it is, at least for now. In a year or so, I suspect that will change, but who knows?

So far, no one is suffering greatly. Gasoline is about 30% more expensive, about $3.95 per gallon today in Michigan, but that’s 50¢/gal cheaper than under Biden. European prices are up a similar percent, not welcome, but not high historically. They would go down if Europe would drill or reopen its nuclear and coal plants, or if European leaders would sign Trump’s trade deal that the UK rejected in the most embarrassing, demonstrative way. I don’t expect any signatures in the next few months — there even an anti conference. In a year they’ll sign, or decide to reopen nuclear plants, or maybe the war will be over. Supposedly this war will take 0.5% off of the GDP of the US, Europe, and China, a cheap price for peace IMHO, far less than the Ukraine war.

Trump has asked for European help opening the straight, in part because help is needed, but in part because it would be a sign to Europe’s citizens, that their leaders stand with us and NATO. Trump teases European leaders over their unwillingness to protect their own ships, and seems willing to let oil prices stay high to pressure Europe, China, and the Mid-east. For now, China does not seem ready for direct war, and seems wi, too seems willing to draw-down its oil reserves, as a way to blunt inflation at home, and promote cheap products abroad. All this is good, it’s a version of peace that should lead to a longer peace after the straight is open. Even poor Canada benefits, for now.

Robert E. Buxbaum, April 7, 2026. I don’t expect anything of an oil deal or a defense deal during King Charles’s visit in 3 weeks, nor during Trump’s visit to China, but who knows.

Poor Canada and its China lifeline

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Canada has long-standing economic problems relative to the US, and they have been growing since 2015 as the figure shows (figure from a conservative, Canadian politician, Ryan Williams). These problems infect most of Europe, and will soon extend to the US. They are largely due to a declining birthrate, bad management, and an aging population. The result is a declining Canadian dollar (CAD), rising housing prices, rising national health costs and rising government debt. In both countries, life feels less affordable than in previous years, but the effects hit harder in Canada. Consider, for example, that the average salary in Toronto, Canada’s largest city, is $62,050 CAD. that’s pretty low by US standards, the equivalent of $45,000 US, well below the average salary in Chicago or Houston, two comparable US cities. In those cities the average is ~$63,000 US. Meanwhile rent prices in Toronto are about the same as in Chicago in US dollars, and far above rent prices in Houston. If you wish to buy a home, the price in Chicago is about half that in Toronto. Even with healthcare, life is generally more affordable in the US, and home ownership, though difficult, is not out of reach, especially in Houston.

Image generated by (for) Ryan Williams, a Conservative Canadian politician. It overstates the problems caused by Trudeau. Canada first began falling behind in the 1980s, though problems increased in 2015.

A main reason that Canadian housing is so expensive is permitting is difficult. Canada has plenty of space for housing, but it’s hard to get a permit to build, and it’s hard to sell the home, too. To be a real-estate agent in Canada, for example, you have to take a year-long course, and pass several stages of permitting tests costing $6000 -$10,000 CAD. In the US, it’s cheaper, about $1000 US and generally it requires only a month-long course. These same regulations also cause salaries to be low, by decreasing productivity. It is hard to start a company in Canada, and hard to retain good workers, since low-productivity workers have rights to equal pay for equal work, with no regard to productivity.

Canadian salaries also suffer from high immigration, particularly of low skill labor. Canada accepts about 500,000 immigrants per year, offering free healthcare and social services. During the Biden years, we accepted 6x more, about 3 million per year, mostly illegally, but Canada has 1/8 the population of the US and more generous benefits. As a result the decrease in affordability has been far greater. In the US and Canada, immigrants have been low skill or unemployed, presenting tough competition for native-born, low-skill workers, and burdening the government welfare system. There has been a push-back in Canada, as in the US, and Canada has begun removing illegal immigrants, as have we in the US. It’s less unpopular in Canada because Canadians see themselves as good no matter what they do. The Canadian population shrank by 0.15% last year, while ours continued to grow. In both countries, lower immigration of unemployed individuals, should lower housing prices, and should protect the welfare system. Of course some businesses benefit from low wage immigrant, and from the unemployed, the social services industry for one, Janitorial services for another. Rich folks are alway s complaining for more immigration because they find it’s hard to get cleaning help, and because they rarely pay taxes at any meaningful rate.

As a band-aide to these economic problems, both in Canada and the US, we have caught to raise government income through a new tax, tariffs. We’ve each put 25% tariffs on automobiles produced in the neighboring country. But Canada has a twist, it can benefit bringing bringing in high-tariff and prohibited imports from China and Cuba hoping the imports cross the border to the US. For example, they import Cuban cigars, and sell them near the border at inflated prices to Americans (largely) who smuggle them to the US. It worked too during prohibition for whiskey. In the last month, Canadian PM Carney reduced the tariff on 50,000 China-made EVs to 6.1%. If large numbers find their way to the US as new or used vehicles, the hope is that Chinese companies will buy manufactured goods from Canada, or evenest up manufacturing. It might work, though Cuba never set up cigar manufacturing in Canada. Typically Chinese companies send abroad nearly finished items, allowing the host country to add finishing touches that involve no technology but that can be claimed to raise the value significantly to avoid taxes. As the chart above, China imports from Canada are virtual all raw goods: food, petroleum, iron ore, gold… Technological expertise stays at home. Canada will need a home grown engine to get out of its funk.

At this point, the most likely home-grown engine is likely to be oil. Canada has oil, and the world needs it, especially China. Currently the Straight of Hormuz is effectively closed because of the war. Many countries are being hurt by this, but particularly China because of troubles in three of its major, sanctioned suppliers, Iran, Venezuela, and Russia. China will need a new source of oil, and will likely pay Canadian prices if the Canadian government can see through to provide infrastructure for export. Selling to China could also avoid a war.

Another thought, both to benefit Canada and the US, I’m pro-immigration, but suggest we target hard working, honest immigrants with usable skills: plumbers, cooks, programmers, cement workers … people who are unlikely to start out on welfare, and likely to provide a decent middle class lifestyle. The children from these immigrants integrate well in the US, and likely will into Canada. They integrate far better than the children of unskilled violent refugees. I also favor tariffs, especially on manufactured and luxury goods, like cars and wine. It provides government income, and promotes technical skill at home.

Robert Buxbaum, March 10, 2026.

Does solar powered AI on the moon and in space make sense?

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Jeff Bezos’s “Blue Alchemist” program recently got $25M from NASA to develop moon-based solar cell manufacturing on earth. See article here. The idea sort of makes sense to me: instead of transporting solar cells to the moon from earth, why not make them on the moon in bulk. Even light solar cells would weigh about 1kg/kW, making cells on the moon would reduce the effective weight per kW by a factor of 100 it is predicted, see figure. Given a need for megawatts of power, and the high cost to transport things to the moon, $1M/kg currently, this may make sense for the not super-distant future. Moon-made solar cells could reduce the cost per kW on the moon from $1million currently, to a mere $10,000/kW, cheap by moon prices, though super expensive by earth standards.

Elon Musk, perhaps out of envy or long-range vision, wants to go far further. He” recently’s posted’s proposed, at length a plan to launch moon-made solar cells into space along wit moon-made AI chips, with all this done to power AI centers in space, orbiting the earth or moon, see him discuss it here. He notes that “It’s always sunny in space”, so this electricity should be cheap. I don’t consider even moon-solar at $10,000/kW cheap, and power from these moon-launched cells will be pricer yet.

The reason all this makes sense to Musk is that he avoids the disruptions of solar power that come at night-time, and he avoids regulatory boards. He argues that there is no real alternative! given that power on earth is too hard and expensive, and complains that regulators oppose new power plants. I suspect there are some over-regulations, but some regulations are necessary, and I doubt he’ll avoid by going to space. As for the high cost of power, it’s really cheap in China, Lebanon, Iraq, Iran…Just look att he figure below showing the electric cost of bitcoin harvesting around the world. China runs on nuclear power or coal, delivering large-scale electricity at ~ 2¢/kWh. You can make power at a similar cost if you build your own plant, many of the bit-coin folks operate that way. It’s not exactly cheap, but a known technology, and cheaper than space solar amortized to less than 50 years.

AI chip-making is hard to do, even on earth, requiring water, chemicals, equipment and technical attention. Most companies can’t do it; China has barely cracked the technology. Doing it on the moon adds unnecessary difficulties: water and chemicals scarce, skilled servicing labor is hard to find. At some point, the moon and Mars community will want to make AI in space, but before that, they’ll want to make simpler things, like rice cookers. Until we have a fairly large community on the moon, why now make AI chips on earth. If he’s looking for practice, Musk could manufacture in a place that’s inhospitable, but more accessible than the moon: Greenland or Antarctica or the top of Everest. These locations are wam compared to the moon, and they have air and water, and I suspect electricity on Everest is cheaper than on the moon.

Operating AI centers in space is not particularly attractive, by the way. Chips have a tendency to flake-out in space because of cosmic radiation and stronger electromagnetic fields (EM). For this to work at all, chips have to be built specially robust, with correction software that must be particularly active, and you must shield everything from EM to a much greater extent than on earth.

I suspect the reason Musk wants to manufacture AI in space, and to operate there, is to over-shadow Bezos’s solar cell factory, and show off his own (Tesla) technology. Also to have a use for his Starships lifting heavy complicated things. It’s not a plan I would back.

Robert Buxbaum, March 1, 2026

A fair price for Bitcoin: less than $33,300.

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Some 8 years ago, 2018, I calculated that a fair price for Bitcoin was likely $11,000, with a maximum of perhaps 4x more, $44,000. I used Fischer’s formula from my economics textbook, perhaps the only useful formula there. It’s based on the idea that the total currency value times the speed of money has to match the value of the things people buy with it. See the analysis here. Based on this formula, you see that, if you print more money, you get inflation — a concept that seems forgotten today.

It’s eight years later, and while there has been some inflation in the price of everything, the price of bitcoin has outstripped most everything else. After years of Bitcoin staying in the price range I’d suggested, it jumped to over $120,000 in 2025 before dropping back to $70,500. I figured I should revisit my calculations, and again find about the same result corrected for normal inflation: a “true value”, of <$33,300. I show why I value it this much, and share why, I think the market is wrong.

A history of Bitcoin prices

Bitcoin has only one “legitimate” use, as best I can tell, and that’s for illegal activities, like paying $6 million dollar to ransom Nancy Guthrie. The problems preventing a high bitcoin valuation, IMHO, are that there is not that much illegal trade, and there are other ways to pay for illegal things. Suitcases of cash can be used, or gold coins, or artwork. These are just as safe as bitcoin, and almost as easy to ship. For legitimate business, almost any pay method is better: easier, faster, and more secure.

Most people, I suspect, don’t use their bitcoin at all. They buy it as an investment, or as a gambling speculation, but that’s a zero-sum gamble, somewhat worse than gold, since gold have value above trade. Having no value aside from trade, Bitcoins are only as valuable as their use is.

One of the main use of bitcoin transactions is to avoid tariffs on legitimate goods – I explained how that was done, previously. I estimate the magnitude of this business to be $500 billion or so per year. The US collected about $220 billion in tariffs last year on a trillion dollars of trade, and I find it hard to believe that Bitcoins cover more than another 50%. Add to this, bitcoin is likely also used to hide payment for illegal, sanctioned oil from Iran and Russia. There are other ways to do this, but let’s assume it’s all bitcoin-trades. Since this oil trade seems to be about 8 million barrels per day, and since oil costs ~ $70 barrel, I calculate a business of $200 billion in world oil. Add a few more items that you don’t want traced: drugs, weapons, for a total of maybe $200 billion, add $100 billion to over-throw countries and for a kidnapping or two, and I find a total bitcoin trade of $1 trillion, or $1000 billion. If a bitcoin trades 1.5 times per year (a fairly low rate) the total value of bitcoin is $1000 billion /1.5 = $667 billion. Divide by the total number of bitcoins, 20 million, and I calculate a value of $33,300 per bitcoin or less.

A lot more value in bitcoins trade per year, about $10.5 trillion. The average Bitcoin price is three times higher than I estimate and it is spent 7.5 times per year. Most of this is churn: investment, plus some legitimate purchases based on illegal activity, like when the drug dealer buys a new car in Panama, but these sales are consequences of the other, illegal sales. I figured that each Bitcoin was used for an illegal purchase only 1.5 times per year because normal money is used ~4.5 times per year.

I should note that some illegal activity is done in US dollars, including most drug deals, and when Obama bought back US soldiers kidnaped by Iran, using bales of € 500 notes, and some is done using gold or silver. Bitcoin is easier to move but large quantity moves can still be traced, and there are other crypto currencies too. Bitcoin transactions aren’t free, either, or particularly cheap. And it takes time to process the transfer of bitcoin numbers, milliseconds, but that’s slow in world commerce. As a result. I don’t see bitcoin being used for legitimate business, and unless it can break out of the black market, the value seems limited to $33,300, and probably less.

Robert Buxbaum, February 15, 2026. Gold, by the way, is similarly overvalued, in my opinion. Like bitcoin, it’s a non-dividend investment that’s expensive to trade, but at least it has some other uses, as jewelry, and in electronics. Besides, it’s relatively hard to steal a billion dollars in gold from a Swiss bank – harder than stealing $1B in bitcoin.

Will a cut-off in oil to China spark war?

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Japan’s decision to attack the US on December 7, 1941 was made a year earlier, December 1940, largely because of the need for oil, but also because of a perceived need for an empire. An approriate nave was fitted out, and airmen were trained. Nine months later, September, 1941, we cut off oil to Japan following Japan’s invasion of Indonesia and their ceasing the Indonesian oil fields. Japan now had the choice of war with us or of moderating their economy and ambitions. The worry is that China may choose the same if Iran and/or Russia goes off-line. That was my worry at the start of this essay. I’m no longer that concerned.

Some background, as I see it: China’s economy is larger than the IMF gives it credit for, In my opinion. I’ve calculated that it is 11% lager than the US calculated here based on food purchasing parity They also have a larger army and navy, 754 ships vs 440 for the US, with military ambitions for Taiwan and new, man-made islands in the China sea. They continue to add aircraft carriers and submarines (we’re still ahead there), and like Japan in 1940, China fuels all this with oil. They use some 17 million barrels per day: 11.3 million imported by ship. They put another million bb/day into a reserve of 2.2 billion barrels, amounting to 6 months of current use. Japan did the same in 1940-41.

This shows how dependent Japan was on foreign oil, before and during WWII. The cut off of imports sues them to attack Pearl Harbor, source = Sarah Paine, military historian

As with Japan, China’s internal production is far below their consumption, 4.5million bbl/day, a big vulnerability. One of their main suppliers, Venezuela, just went off line, sending 800,000 bbl/day of oil to the US. That’s oil that would have gone to China. Two other of their major suppliers, Iran and Russia have had delivery issues too; a disruption in oil could cause a revolt in China. Perhaps this fear will drive China to war with us in a drive for stability and empire.

Currently, China buys most of its imported oil from four countries: Russia, Iran, Saudi Arabia, and Iraq; two of these are under sanction. China used to get another 0.8 million barrels per day from Venezuela, another country under sanction, but that route was closed by Trump last week. Buying from sanctioned countries saves them significantly, and supports the BRICS alliance, an alliance specifically against the US and the EU. The money China pays for oil supports the war against Ukraine, plus ISIS’s, war against us, and the mullahs oppression in Iran.

Oil production worldwide, 2024. How much China buys from each varies month to month.

The problem for China is that Russian production is under attack from Ukraine. Ukraine sank or disabled several Russian tankers, and we took some more; they’ve blown up pumping stations, including three on the Caspian Sea, set fire, to a large liquid natural gas terminal and damaged the major off-load platform for Kazakh oil. According to the Foundation for Democracy report, here, by October 2025, China was down to getting only 800,000 bbl/day from Russia, a major blow, and Ukraine’s attacks continue.

Some dark fleet ships captured by the US navy off of Venezuela, on their way to China with sanctioned oil.

Iran too is under attack. Up until recently they provided nearly 2 million barrels of oil per day, 90% of Iran’s seaborne export. Much of that went indirectly, shipped to Indonesia, turkey, Iraq, and Kuwait where it was relabeled, blended or refined to avoid sanction penalties. Everyone makes a profit here. But Iran is in the midst of a revolution, and last week, Trump imposed an across-the board 25% additional tariff on counties that help Iran avoid the sanctions. My guess is that this tariff will be effective and that it will last until the revolution is over. His tariffs have been effective and profitable, it seems, for us. They’re harmful for China, but not exactly a cause for war.

One reason I don’t expect a war with China is that China has many other, non-sanctioned suppliers, something Japan didn’t have. They buy some 1.6 million barrels per day from Saudi Arabia, 1.2 million bbl/day, from Iraq, 1.3 million bbl per day from Malaysia, 700,000/ day from Brazil, and about 900,000/day from the USA. While it would cost more, they could make up any losses in Russian or Iranian supply by buying more on the open market. Trump could cut China off totally, and that would be a devastating cause for war, but I don’t expect it. Still, for all I know, Trump’s activities in Venezuela and Iran are meant to force a war decision on China before they are strong enough to defeat us militarily. It seems to have been part of FDR’s logic in cutting off Japan.

The main peaceful way China has addressed it oil vulnerability, as best I can tell, has been to push EVs development. They’ve financed some 500 new EV companies who now (late 2025) provide about 50% of new Chinese automobiles. Another 19% are hybrids, the rest ICs. In the US, only 8% of new cars are EVs, and 16% hybrids. Large-scale use of EVs lessens the pressure on Chinese leaders to find oil sources, some 40% of oil imports can be assumed to go to fuel automobiles; if China were to go 80% EV, it would save 5.5 million barrels/day, more than it gets from Russia and Iran combined. For now, China still has a big need for gasoline, and has a big excess in EV manufacturing. It’s turned to Canada as a customer for EVs and as a supplier for oil, a smart move.

Last week, Canadian PM, Mark Carney visited China and announced a “Strategic Partnership” on Agriculture, energy, finance, and Global governance.” There’s no specific mention of oil, but it’s implied. China gets most favored nation status sending goods, including EVs to Canada at rates lower than on US goods. China will export some 50,000 EVs in 2026, rising to 70,000 by 2030 with tariffs set to 6.1%. US-made cars are tariffed at 25%. Canadians will get visa-free, tourist visits), plus a loan of $1B to be used buying Chinese ships. In Davos last week, “We are in the midst of a Rupture” away from the US. He urged the EU and other “middle powers” to band together. He talks like China is a good, reliable friend to Canada, and like the US isn’t. I would worry more about his comments and the “global governance” phrase, if the EU seemed to be going along, but it is not. Nor do I see a real move in China for war. I see positive effects of increased EV sales for China, Canada, and the world. Even if the quality isn’t great, Go Canada, go peace.

Robert Buxbaum, January 25, 2026.

Tariffs raise $30 billion per month, but haven’t affected inflation

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Economic experts claimed the tariffs would raise no signifiant money, would bring in no jobs, and would be so inflationary that the damage would far exceed any benefit. President Trump instituted them anyway, claiming they would benefit workers, raising wages, returning manufacturing to the US, and serving as a tool of diplomacy. Based on data so far, it appears the experts were completely wrong, and that Trump was right on all counts.

As an average, for the last nine months, our tariff rate has been about 17%, as shown in the chart above, bringing in about $30 billion per month. That tariff rate is as high as it’s been since the 1940s, but far lower than it was in the early 20th century. Chinese products are taxed more, at 47.5% on average, while goods from Mexico and Canada are taxed less, about 5%. High or low the tariffs generate complaints all around. Strangely, those complaining, in the US and out, see nothing amiss with the tariffs that our trading partners have placed on US products. The money from these tariffs came in handy, for example during the recent government shutdown, when we could not borrow money. This tariff money allowed us to pay the military and has helped reduce the annual deficit.

Despite the dire inflation prediction, there has been no noticeable uptick. Inflation has held constant for the last year, at about 2.7%. This is the same as during the last months under Biden, see chart, and is far lower than the 4-8% we saw for most of the Biden term. Basic commodities, in particular, remain cheap, with the price of gasoline and beer lower than in 2024, and luxury imports somewhat more expensive. Lower and middle income Americans don’t seem to mind since most of us don’t buy these goods. This year of inflation data supports Milton Friedman’s claim that taxes are inflation neutral, and that the cause of inflation is government overspending, as he says here. Liberal experts disagree, but the data says otherwise. I suspect the experts are blinded by overly simple theory, of Keynes, that they refuse to abandon. Alternately, they may be willfully lying to promote the agenda of university heads and all others who fund them. I noticed this pattern with global warming experts too. They don’t change their models and dire predictions though it’s way past 2014, and the arctic isn’t ice free.

There has been some job growth, but less than hoped for. There was a decrease in the tech sector and in government employment, but an uptick in services and healthcare. Unemployment has changed little, remaining at 4.4%. Several foreign businesses have moved manufacturing to the US. These include BASF, Volkswagen, LG, and Hanwha to name a few. Hanwha just completed its purchase of the Philadelphia shipyard, and committed $5B to its modernization. I consider this very important. It provides jobs, but beyond this, improved shipbuilding will help us commercially and militarily.

The reason that employment has not gone up as much as hoped seems to be that we’re still buying the same amount from abroad as before, containerized are the same as in the pre-COVID years, see chart below. There’s been some switching of sources, with more coming from Mexico, Taiwan, and Vietnam, and less from Canada and India. Import volumes from China have hardly changed though, since last year, nor have the prices that Americans pay risen. This suggests that China is “eating the tariffs”. I suspect they’ve undervalued their currency to make this happen. We’re selling a little more too, causing the trade imbalance to narrow, but the sales increase are largely precious metals (gold) to China, about 1000 tons in 2025. I’m not sure what China achieves by this; they’ve raised the price of gold to $4,675/oz currently, about double in 1.5 years, and kept the price of Chinese currency low. Perhaps that’s the intent — to keep their currency devalued relative to the dollar. Maybe they have some other idea, like to switch to a gold-backed currency? Who knows? Their purchases increase the value of our gold in Ft. Knox.

Trump’s other justification for the tariffs was as a tool of diplomacy. Trump is using tariffs somewhat this way, as a non-military stick to encourage friendly nations to do what he wants. He got Mexico to stop immigrants and drugs, encouraged the same from Canada and Columbia. He got the EU to spend more in their defense, and got them deal a little less with Russia. They’re still the biggest buyer of Russian natural gas. He also used tariffs to nudge for peace in the Middle East, and between Cambodia and Thailand. Recently, he’s using them to support the Iranian rebels by threatening countries that buy from Iran, or that help the mullahs launder their money and oil. All in all, the tariffs seem to be working for us. The experts are not impressed.

Robert Buxbaum, January 19, 2026

Is China really a smaller economy than the US, but twice as efficient

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The Economist has run this burger-metric of currency valuation for 40 years or so. I find it instructive.

One can buy a new electric car in China for US $20,000, roughly half of what it would cost in the US. Similarly, a good phone is cheaper in China, or clothes, or a Big Mac. A McDonald’s Big Mac in China costs, effectively $3.55, 59% of what it costs in the US, slightly less than 3/5 the US price. The Chinese explanation is that China is nearly twice as efficient as the US at most every type of manufacturing. I don’t believe this explanation, though there is some truth to it: Their electricity is cheaper, in part because they burn mostly coal for electric power. Meanwhile we have shut-down our coal plants, and have hardly built nuclear since the 1970s.

Another source of efficiency is that China arranges its manufacturing into dedicated cities for different products, one city for toys, another for luggage, others for cars, planes, hair driers… This helps efficiency but I’m not sure how much, and I don’t see these advantages applying to McDonald’s. There is no way I believe their workers are 5/3 as efficient as US workers when it comes to making burgers. It’s not like they ship the burgers from a central factory, and they buy gain and meat from us. My sense, then, is that it’s not efficiency that keeps prices low, but that the Chinese currency, the yuan is undervalued.

It’s hard to estimate how much their currency is undervalued, but I will use the burger-metric, above and say the yuan selling for about 3/5 its true value, and that this explains most of why Chinese shoes, cars, and clothes are so cheap. The rest of the price difference is efficiency, I’d guess. China isn’t the only country with an under-valued currency; Japan’s currency seems even more undervalued. Similarly India, Taiwan… The China is a bigger economy, though, and correcting the Chinese GDP by 5/3, I find their economy is yet bigger, about 111% as big as ours. By a similar correction, European economies appear smaller than they are given credit for.

Chinese electricity is cheap, in part because they burn coal. Also, their currency is undervalued; ditto for India, Indonesia, Turkey.

China’s undervalued currency helps propel its growth, I think, and provides us with cheap goods, but our industry suffers. Also troubling, China will likely surpass us militarily in 3-5 years. One way of slowing this is through tariffs. Trump’s tariff formula, as I understand it, was designed to preserve some China trade, allowing US consumers to benefit, but also taxing the exchange. I think this is a good idea.

Another proposal is to lower the US interest rates. Currently our prime interest rate is 6.5% while China’s is 3%. This provides an incentive for the Chinese industry to invest in the US, maintaining its undervalued currency. The benefit isn’t quite as large as it might seem since we have a 2.7% inflation rate and China has a 0.7% inflation rate. Correcting for this, our bonds return an effective 3.8% and Chinese bonds return 2.3%. The difference is about 3/5 similar to the mismatch in our currencies. Trump has been pushing the Federal Reserve to lower our interest rates, and The Fed has grudgingly agreed, slowly. A lower interest rate would also spike US industry and inflation, and help reduce the government deficit. Trump has also proposed new ships for the navy. Too little, too late, I think. Things should get dicy in the next decade between the US and China.

Robert Buxbaum, December 30, 2025. I started this post not knowing where it would lead. As I research and write, I learn. Perhaps you will too,