Re: Life under the bridge for techie California outcast


Straydog wrote:
> On Mon, 4 Dec 2005, Kamal R. Prasad wrote:
>
> >
> > Straydog wrote:
> >> On Sun, 4 Dec 2005, Kamal R. Prasad wrote:
> >>
> >>>
> >>> Straydog wrote:
> >>>> On Sat, 3 Dec 2005, Kamal R. Prasad wrote:
> >>>>
> >>>>>
> >>>>>>>>
>
>
> >>>>> Purchasing power parity.
> >>>>
> >>>> Go back and re read above. I _started_ by talking about a statement in a
> >>>> book written by an economist with some ~15 years experience analyzing SEA
> >>>> economics and working in SEA. I said that he said the dollar will collapse
> >>>> in the future. This was not exactly a response to what you said, but your
> >>>> response to what I said was not, either. However, you _linked_ your
> >>>> response to mine by starting your sentence like this: "No -when that
> >>>> happens, purchasing power will shift out of the USA...." And, I can tell
> >>>> you that every book or article I've read says that if the dollar
> >>>> collapses, then everything made in the USA (manufactured or service) will
> >>>> become cheaper and two things will happen: i) our exports will go up
> >>>> (because they are cheaper), and ii) our imports will go down (because it
> >>>> will cost more to buy imports). And, this contradicts what you say will
> >>>> happen.
> >>>>
> >>> all true.
> >>
> >> Fine. Good. Thank you.
> >>
> >>>> Im not suggesting a collapse of the USD. What
> >>>>> Im suggesting is a rationalization wherein $1 buys the same goods &
> >>>>> services in the US as in India.
> >>>>
> >>>> The only way $1 will buy the same in India as in the USA is if the USD
> >>>> does collapse.
> >>>>
> >>> not collapse completely but reach a resonable exchange rate -is what I
> >>> meant.
> >>
> >> OK.
> >>
> >>>> This will lead to same cost of living
> >>>>> (as far as necessities are concerned) between these 2 countries. When
> >>>>> that happens, neither will it be cheaper to hire americans nor Indians.
> >>>>> If work shifts from country A to country B, it will be solely because
> >>>>> personnel in the other country are doing a better job.
> >>>>
> >>>> And, the only way this can happen is if the dollar collapses. Or, if you
> >>>> can come up with a different cause, please tell us.
> >>>>
> >>> there are 2 things that matter (a) cost of living b) std of living.
> >>> Both need to come down in the USA for there to be parity or vice versa,
> >>> when the USD achieves parity -both will come down but not crash down.
> >>> Parity =equivalence not complete deterioration.
> >>
> >> I think not. We already have a gap between the wealthy and the poor which
> >> is growing. The rich will never see a decrease in standard of living, no
> >> matter where they live. The poor will simply be able to afford less of a
> >> health plan and medical care or they will not have any health care. Maybe
> >
> > Health care is a lot affordable in India than in USA.
>
> Well, I wouldn't know about that or what you get for your Rupees. And, who
> is it more affordable for? Indians living an Indian standard of living?
>
I just said devaluation won't trigger a rise in medical expenses or a
rise in rents.

> Medical insurance
> > provides coverage only for hospitalization in India. The rest are so
> > cheap -insurance is not necessary.
> > When I say cost of living comes down -it means everything from house
> > rent to medical insurance to food and other basic necessities come
> > down. And all of this is in relation to cost of living of OTHER
> > countries not wrt other sections of society within the same country.
>
> Again, I think you have to look at Americans who are _not_ going to jump
> on an airplane and fly over to India for health care and ask "how does it
> matter" that health care in India is cheaper.
>
They can jump on an airplane both for medical treatment as well as for
hiring personnel. Both capital and personnel are mobile.

> >
> >> that will make you happy. But, I see, also, a growth in average standard
> >> of living in India as its economy grows. YOu will still have people in
> >> poverty and YOUR rich guys will get richer, and there will be more of
> >> them.
> >>
> > When a country shifts from socialist economy to fre-market capitalism
> > (as India has done), it creates disparity of income -which is what you
> > are refferring to.
>
> Yes, and the question is whether much of a middle class will form in India
> and when.
>
there is already one the size of the US population and with state
sponsored education - its size can only increase. In India, there is
high priority for education -and othee things are considered
secondary. That will allow the country to move up the value chain
without polluting the environment.

> >> The only problem with standard of living are unwanted endpoints:
> >> exhaustion of non-renewable resources, production of polution, global
> >> warming, waste, etc. If I take the optimistic viewpoint, then to some
> >> degree or maybe to a large degree some technical adjustments will correct
> >> this situation.
> >> \
> > No -the problem at your end is the non-essentials like a BMW/SUV etc..
>
> I've already talked about it and agree. But, these are "status" cars and
> people don't think about oil, don't think about debt. I don't like it
> either.
>
I just gave an example but meant all kinds of non-essential things that
people splurge on.

> > and all kinds of electronic gadgets.
>
> Well, the electronic gadgets are very cheap compared to cars. Who spends
> much more than $300-500 per year on such things? Only the rich.
>
no -it doesn't work that way. When you increase purchasing power, you
subsidize non-essentials at the expense of cost of living. Whether the
non-eseentials happen to be gadgets or diamond necklaces or anything
else is secondary.

> When your std of living comes
> > down, you won't have to shift to a smaller apt or eat less food.
>
> I still think you are being obsessive about our standard of living needing
> to come down. Market forces will change our spending patterns, that is
> all.
>
yes -and offshoring is a case of market forces coming back to haint the
strong dollar policy. Im just saying that the social upheaval is for
sure -and this is the only escape hatchet available for the working
class in the US.

> You
> > will just find these things unaffordable as they must have been a few
> > decades back (ot whenever the USD was not finalted) or at least they
> > will cost a multiple of the basic necessities of life.
>
> Just today, I see several of our periodicals talking about how our economy
> is roaring ahead just fine. Perhaps they are wrong. What if they are
> right? I think there will be a correction in the future. And, there will
> be losers here.
>
It has improved considerably over the past few yrs and there is always
the possibility that some new avenues for employment could spring up to
offset job losses from offshoring. Im just pointing to the worst case
scenario and don't have a problem if things happened to be better than
that for you. That said, the US deficit is for real and just as Vietnam
caused yrs of double digit inflation, Iraq could very well put you in
serious trouble.


> When that
> > happens, the labour market will become competitive and employers will
> > not shift out work to cheaper locations -because the basic necessities
> > cost the same across countries.
>
> I still think there will be limits to how much offshoring there will be.
looks like the job market for outsourced work is exploding and
companies arebuying huge tracts of land for developing industrial
campuses here. The failures you have pointed to -don't seem to have
affected their plans yet.

> And, there will be corrections all by themselves. Its just my "faith" that
> this will happen.
if things can even out in terms of wages across countries -that would
be my deficinition of a correction. You cannot possibly have 2
different prices for goods/services one in each country -in a unified
global economy.

>
> >
> >> The cost of living is where the whole debate is. Whose cost of living? Why
> >> is it different? When will it re-adjust? We can speculate endlessly on
> >> this. One thing I see in all of the curves of past data on prices, and all
> >
> > Your cost of living is much higher than that of the countries to which
> > work is being offshored.
>
> Our whole economy is more expensive. So what?
>
so that puts american workers at a competitive disadvantage vis-a-vis
other countries and it compels executives to move work to cheaper
locations.

> It can adjust either because the USD gets
> > devalued or because other countries experience tremendous wage
> > inflation. The latter means that as salaries go up, the rents/mortgage
> > prices go up, triggering even more salary hikes and so forth till the
> > cost advantage of shifting work to these cheaper locations diminishes
> > drastically. That is what happened to Japan but it took about 20 yrs to
> > happen. And unlike Japan, India is huge.
>
> Yeah, I know all that. But, you are overlooking lots of problems in India.
> Even if we took all the money in the USA it would barely affect India
> because of the size of its population and the problems it has.
>
if labour in India is cheap -then that is a problem for you not us.
> >
> >> economic and banking curves is that none of them are flat lines. They are
> >> curves that go up and down, sometimes slowly and sometimes rapidly. The
> >> problems are when everyone suffers like recessions and depressions. I see
> >> no one successfully predicting these and most of the "patchwork" to fix
> >> the problems are temporary and partial fixes.
> >>
> > You are referring to intra-country issues, and Im referring to
> > inter-country issues.
>
> I am refering to data in books and articles that deal with the USA as well
> as other dynamic economies all over the world.
>
doesn't seem to refer to how US can stem shift of industries/jobs to
cheaper locations.

> >> Another solid criticism of your posts is that you still ignore the rest of
> >> the world. I have no idea why you think only in the US the standard of
> >> living must fall. Japan and Europe are also high standard of living areas
> >> and I can assure you that they will not like the idea of a decrease. In
> >
> > I do not know much of these countries to make a comment -but I don't
> > deny that this is a problem that confronts all rich countries.
>
> Then you should start learning that these other countries exist, their
> standards of living are high, and their costs of living are hight, too.
>
I know that -but I do not have first hand information about the
economic topography there to make a comment. Many of the things I have
said about India & USA are based on first hand experiences and not by
refering to books.

> >> China, their standard of living is going up. In the lase 1-2 years, from
> >> statistics I've read, they are now consuming 8% of the worlds oil while we
> >> are consuming 20%. The Chinese have certainly come up in the world and
> >> very rapidly. When India gets its economy better developed, do you think
> >
> > Yes -but their economy is heavily dependent on supplying goods to the
> > US. If the USD loses its purchasing power, they will not be able to
> > sustain their growth i.e their major customer will stop importing goods
> > or default on his bills.
>
> Yes. And, so they want to keep the value of the yaun low and thus they
> manipulate their currency.
>
but the same doesn't hold true of India. most of the job losses in IT
result from transferring work to India not China.

> >> lots of people will not buy cars? I know of no society in past history
> >> which _voluntarily_ took cuts in standard of living.
> >>
> > Umm. to give you a similar but not the same example -England was in the
> > same position a few decades(?) back. The British pound was heavily
> > inflated and unemployment was rife.
>
> And, you would have to tell me how this came about. Did they vote for
> this, _voluntarily_ (as I said above) or did it come about through some
> circumstance beyond their control or through some other cause?
>
see below. George Soros borrowed money to short the British pound and
the bank of England caved in to his shorting -and that made him one of
the richest persons on Earth.

> George Soros shorted the British
> > Pound in the currency market and made his fortunes from that. At that
> > time, they were living extravagantly beyond their means and it kind of
> > came down crashing. (This info is gleanded theough what I read about
> > George Soros and not about the British economy -so it may not be
> > entirely accurate).
>
> And, where is it back to today? Is it still low, or did it recover?
>
not sure. You may want to research that yourself.

>
> >>> does not mean that mddle class people ithe US will end up in ghettos.
> >>
> >> I think many people would say that we will no longer get all that cheap
> >> manufactured goods that are imported from everywhere but now mostly China.
> >> So, in terms of a material life, yes, that will represent a decrease in
> >> standard of living. And, it will represent some decline in our economy
> >> (more expensive goods will not sell as much, thus fewer salespeople,
> >> fewer stores).
> >
> > .. but when foreign goods become unaffordable -locally made goods will
> > become affordable and more americans at the low end will find jobs i.e.
> > the size of the lower & middle class will increase at the expense of
> > those who could do with the current import binge.
>
> OK, isn't that pretty close to what I just said?
>
maybe. I just emphasized the advantages of devaluation. It turns out
that devaluation works like a feedback loop, opposing the intent to
bring down std of living by boosting employment. The thing that does go
down is splurging and disparity of income.

> >>
> >>> Their counterparts taking up offshored jobs are also living middle
> >>> class lifestyles -but with lower purchasing power.
> >>
> >> Well, if I understand your sentence, then that is not my problem unless we
> >> talk about what do our guys do after their job goes out of the USA and
> >> they still have to pay bills and the only US jobs left are jobs that pay
> >> less.
> >
> > you didn't understand my sentence. If your purchasing power is to drop,
> > it will not require living in ghettos to retain your job.
>
> If our purchasing power drops, then some fraction of people will have to
> move out of higher price rent districts and move to lower price rent
> districts. i.e. from middle class to ghettos.
>
no -rents/mortgages are denominated in USD and strongly related to
price of land (which cannot be subsidized/imported by an inflated
currency). Rents can increase if the no. of high paying jobs in a
particular region increases or if infrastructure in that region
improves.

> You will
> > still be able to live a middle class lifestyle as we do, but with a lot
> > less purchasing power.
>
> Does not make sense.
>
yes -better than being unemployed. If vested interests wouldn't allow
you to do that -americans can follow a steadily increasing stream of
workers lining up to work in India. It will still result in them
earning a lot less in terms of purchasing power, but they will live a
middle class lifestyle in India -which is better than being unemployed
back home.

> A merc would be affordable to a company owner
> > and not to a worker.
>
> "merc" what?
>
mercedes benz.

> >>>>
> >>>> When costs of production are cheaper, not higher productivity. YOu can
> >>>> measure productivity either: i) output per person, or ii) output per cost
> >>>> (forget the person). It would also be better to concentrate on not
> >>>> purchasing power but shift in ownership of assets (as in Indian ownership
> >>>> of US securities, US real estate, US corporations).
> >>>>
> >>> no for the working class -cost of lving which translates to cost of
> >>> labour and consequently a financially unviable labour market for
> >>> employers is what matters.
> >>
> >> Kamal, fifty years ago the USA made almost everything it needed.
> >> Everything was fine. We have been over this before. It all boils down to
> >> technology allows certain kinds of work to be exported, and many kinds of
> >> factory products to be made more inexpensively in certain countries
> >
> > No -technology can export work only if there are cheaper locations to
> > export to.
>
> This sentence really needs more careful construction. You can export
> anywhere if there is money to pay. Exporting works well if at the
> destination there is no local source for the product regardless of if it
> is cheap location. Exporting works well if your product is cheaper than at
> the destination. Not what you said.
>
I meant export jobs -not products. Offshoring is a case of exporting
jobs to cheaper locations. The internet is just a tool to help in
coordinating with the remotely employed staff. If it wasn't cheaper to
get work done in india -the internet would not have made a difference.


> Also, long ago we were not exporting that much either way.
>
> > As you said down this thread, it is a tool which can be used
> > for both good and bad purposes. The notion of a cheaper location
> > becomes true once the currency is inflated -but seldom otherwise. As
> > long as 1$ can buy more in India than it can in the US -it can said
> > safely that there is no parity.
>
> Fine, and India likes it that way. They can get USD easily.
>
No -we can do with a stronger Rupee too i.e. it will drive demand in
India for products/servuces made in India and you will have fewer
reasons to call us parasitic. It is possible to call us parasite only
by concentrating purchasing power in the hanfs of a few by manipulation
& fraud.

> >
> >> both because of cheap labor. And, the 3rd world countries all LOVE to get
> >> USD. All of these countries could NOT have seen their own economies grow
> >> without not only help from the USA but _business_ from the USA.
> >>
> > true for small economies i.e countries with smaller
> > populations/geographies. Large countries have a better shot at being
> > self-contained.
>
> Japan and Europe also have very significant flows of money and trade both
> in and out of their areas. I hardly think very many of them are
> "self-contained."
>
Japan isa small country. The EU system is large and has potential to be
self-contained. They probably have a system of tariffs/movement of
personnel -which makes it possible for it to be a self-contained
economic bloc. India is huge and has the potential to be
self-contained. Despite being the second fastest growing economy on
earth, India's portion of international trade is less than that of S.
Korea or Taiwan. All of that talk of cutting of India's air supply and
starving a billion people to death is just not grounded in reality.

> >>
> >> Cheapest price.
> >>
> >> But, what matters to me (and lots of the rest of us) is what else happens:
> >> the loss of our middle class, the decrease in the number of jobs that are
> >> needed to feed the greater number of people who have no jobs. That is what
> >> matters to me.
> >>
> > and to fix that you need to restore the competitiveness of the labour
> > market. if americans can offer better productivity than overseas,
> > employers (no matter how much of a devil they might be) will continue
> > to retain americans in the workplace.
>
> We've been over this. I can't fix it. It is a creature out of the exchange
> rates and the fact that Indians getting USD will spend them as USD rather
> than convert to rupees. Otherwise the value of the rupee will go up and
> then Indians won't have the "cheap labor" advantage any more. So, its like
> YOU guys are also "manipulating" your currency to benefit YOU.
>
no -the US govt has a strong dollar policy which is the cause of that
manipulation. Individuals don't hold much wealth, but hedge fund
managers or central banks own a lot. That aside, India has huge
reserves of foreign exchange which the central bank can use anytime it
likes to arrest the slide of the rupee.

> >>>>> bothering about having their job offshored to a cheaper location -as
> >>>>> there won't be one:-)
> >>>>
> >>>> I won't make such a prediction. I would like everyone to have a job if
> >>>> they want to work and can educate themselves for that work and I would
> >>>> like that they make enough money to have a decent standard of living (not
> >>>> a luxurious standard of living).
> >>>>
> >>> your std of living is nothing but splurge by other people's standards
> >>> and reverting to what t used to be in USA 20-30 yrs back is what i
> >>> meant.
> >>
> >> We have a lot of silly things in the USA (SUVs and cell phones and video
> >> games) and a lot of silly trends (more people going for plastic surgery
> >> instead of the pursuit of healthy living) and we have a small number of
> >> rich people becomeing even more obscenely rich than ever before, but other
> >> than that, I see nothing wrong with having a car, a decent house,
> >> plumbing, electricity, and a whole lot of other things we have, including
> >> the internet. And, I think it is fine for all of the other people in the
> >
> > if you lead a lifestyle in excess of what your productivity entitles
> > you to, you risk losing your job to someone who lives a more modest
> > lifestyle.
>
> Well, so far, it sure looks like only a fairly small fraction of our
> population (the office workers) are going to lose their jobs. I don't see
> anyone in the USA shipping their car that needs work to India for repairs
> and then ship the fixed car back to the USA. Similarly, I can think of a
> lot of jobs where the jobs will never go to India.
>
good for you in that case.

> The fact that numerous jobs have already been lost on this
> > count is proof that what Im saying is true.
>
> The latest projections are that a maximum of 3 mil jobs will be offshored.
> And, with a workforce of about 140 mil, its pretty small. But, I will
> offer my sympathy to those who lose their jobs here.
>
you may want to look at future trends in addition to statistics from
the past in arriving at that conclusion.


regards
-kamal

.

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