"Old-line makers of durable machinery operate at only 67% of productive capacity. The figure is only 65% for producers of semiconductors and electronic components."
Chip foundry capacity has grown in Asian by 40 percent since 2000. Half of the equipment in the new Chinese factories is procured from the surplus used equipment.
Have to wonder with the interest rates cut to 1 percent this week and the US attempting to devalue the dollar, it wouldn't just be cheaper to just move the plants out of the country. If the dollar continues to sink, the effective interest rate on the loan would be negative. Didn't Japan go through this process ten years ago?
Yes, they did. Theoretically, all free markets reach an equilibrium where there is zero real profit on any one good or unit of labor; profits are generated by increasing productivity faster than competitors for a given good or by innovation to produce demand for new products. That's just life-cycle characteristics of the market. So, with the free trade agreements, we can probably expect to reach economic equilibrium with the 3rd world countries. Those last two sentences have some large logical jumps, I know, to the non-pessimist.
Deflation seems to me to be an inevitable consequence. And, as you say, the plants will go, sooner (as you recommend) or later (in more expensive fashion).