Luke Gromen, founder and president of FFTT, discusses the fierce US-China competition for critical minerals and its economic implications. He argues that the US's heavy reliance on China for manufacturing poses significant risks and emphasizes the need for a shift in industrial policy. Gromen believes China is well-positioned to dominate high-end tech, especially semiconductors. He also explores the potential of gold to stabilize the economy, suggesting that rising gold prices could alleviate US debt burdens and re-balance global financial systems.
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insights INSIGHT
U.S. Dependency On China Is Unsustainable
The US has become overly reliant on China for manufacturing and faces unsustainable debt and political instability.
Re-industrializing requires devaluing debt or massive policy shifts to avoid crisis when separating from China.
insights INSIGHT
China Likely Wins The High-End Chip Race
China likely wins the race for high-end semiconductors due to long-term strategic planning and execution.
The U.S. lacks labor, industrial capacity, and the political will to rebuild on the needed timeline.
insights INSIGHT
You Can't Repeat WWII Mobilization Easily
Wartime-style industrial mobilization requires fiscal conditions the US no longer has without extreme measures.
Rapid reindustrialization today would likely trigger bond-market collapse without debt revaluation.
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Luke Gromen, founder and president of FFTT, discussed the geopolitical and economic implications of the US and China’s competition for critical minerals and infrastructure, particularly in the context of rare earth elements and semiconductor technology. Gromen highlighted the US’s recognition of the unsustainability of its current economic model, which has led to a significant reliance on China for manufacturing and industrial output. He emphasized that the US’s high debt-to-GDP ratio and political instability necessitate a shift in policy to re-industrialize and strengthen its domestic industrial base.
Gromen argued that China’s strategic initiatives, such as the China 2025 plan, have been underestimated and that China is well-positioned to win the race for high-end semiconductor and AI capabilities. He contrasted this with the US’s challenges in rebuilding its industrial infrastructure, citing examples like the delayed repair of the Francis Scott Key Bridge in Baltimore. Gromen also discussed the potential for gold to serve as a rebalancing mechanism for the global economy, given its role as a neutral reserve asset. He suggested that central banks buying gold signals a shift towards a more stable economic system and that a significant rise in gold prices could help address the US’s debt issues.
Luke also touches on the role of Bitcoin and stablecoins in the global financial system, arguing that while stablecoins could provide short-term benefits, they may not be a sustainable solution. He expresses skepticism about the US government’s ability to implement effective policies without causing further economic disruptions. Gromen concluded by emphasizing the importance of understanding the broader economic context and being prepared for elevated market volatility. He recommended investing in physical gold, Bitcoin, and electrical infrastructure as sectors poised to benefit from the current economic environment.
Timestamps: 00:00:00 – Introduction 00:00:31 – US-China Minerals Race 00:04:28 – Semiconductor Supply Competition 00:13:30 – Rebuilding US Industry Challenges 00:18:29 – Government Mining Investments 00:23:40 – Oil Price Paradox Explained 00:27:13 – Gold as Escape Valve 00:32:38 – Bitcoin Stablecoin Dynamics 00:42:36 – Central Banks Hoarding Gold 00:46:40 – Risks to Gold Rally 00:57:43 – Banking Liquidity Concerns 01:03:19 – Sectors for Investment 01:04:32 – Concluding Thoughts
Luke Gromen began his career in the mid-1990s in Research at Midwest Research before moving over to institutional equity sales and becoming a partner. While in sales, Luke was a founding editor of Midwest’s widely-read weekly summary (“Heard in the Midwest”) for the firm’s clients. He aggregated and combined proprietary research from Midwest with inputs from other sources.
In 2006, Luke left FTN Midwest to become a founding partner of Cleveland Research Company. At CRC, Luke continued to work in sales and edit CRC’s flagship weekly research summary piece (“Straight from the Source”) for the firm’s customers.
In 2014, Luke left Cleveland Research to found FFTT, LLC (“Forest for the Trees”), a macro/thematic research firm catering to institutions and individuals that aggregates a wide variety of macroeconomic, thematic, and sector trends in an unconventional manner to identify investable developing economic bottlenecks.
Luke also provides strategic consulting services for corporate executives. He is a graduate of the University of Cincinnati and received his MBA from Case Western Reserve University and earned the CFA designation in 2003.
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