1) China is both a low cost manufacturer and a damn good one at that. Being low cost means nothing if you produce garbage. China is really stealing jobs from Mexico because of this. Think about it. Low cost, close proximity to the US and yet we still go to China. Cheap is just one factor. Maybe some manufacturing will shift to other Asian countries, but not all of them are as developed as China, as stable, as accommodating. Freight shipping costs have increase also which makes manufacturing in the USA more enticing. Not saying you will see a complete 180, but I think you will see an increase in repatriation.
2) The industrial revolution saw growth and mass production. This is why prices declined. It is unfair to compare the current, well developed economy to the industrial revolution.
Economic growth, on a global scale, increases prices in finite commodities. Since everything involves being created from a commodity, unless you consider digital items, prices will increase. The global economy is growing and people are becoming middle class. That is driving the consumption of high protein food. Animal meat requires a lot of grain. This is pushing up grain prices.
People want electronics. Electronics require precious metals, etc. This is helping push up those prices. Same thing with plastics that are petroleum based. Finite goods with an ever increasing global demand.
As for the economy of the US vs Europe. I have a different opinion on it. Europe has high taxes and in return offers a lot of services. Decent services for everyone. Problem is they have negative population replacement, high fixed costs and an older population. Energy prices are only going to increase which will be magnified in Europe because of the high energy taxes. I am all for green energy, but in the near term it will only cause pain. Industry might not be leaving Europe, but it sure as hell isn't flocking to that continent. There are massive fiscal nations with many EU members and once the US scales back the military it will be up to Europe to fund their own defense. I think it is fair to say that Europe has been able to under fund their own military because of an over funded US military.
Yes, the military budget is massive and it will be scaled back. Yes, wars in the ME have been costly. But to say that the deficit is only because of these is to ignore an ever growing Federal government and an ever shrinking tax base. 50% of the people in the US (and growing) pay zero Federal taxes. Half the US enjoys the benefit of this nation without paying for it. I am sorry, but when I hear cries that we should tax the rich when we allow half the people in this country to pay nothing, I call BS. We milk the successful and bribe the poor to get their vote.
Cut social programs for now and bring them back when we are more financially stable. I have no problem with a safety net, but what the US has now is a warm fuzzy blanket.