Re: Kiss U.S. Hi-tech goodbye


Straydog wrote:
> On Mon, 19 Dec 2005, Old Pif wrote:
>
> >
> > Straydog wrote:
> >>
> >> China is also in trade deficit with all of its surrounding business
> >> partners in its surrounding countries. China also needs to understand that
> >> it _needs_ the USA or its economy will collapse.
> >>
> >> Since $ billions of USD flow into India, and buy up jobs of 5-10X as many
> >> Indians, and if that flow stops, its going to hurt more Indians than
> >> people in the US. Better think about that.
> >>
> >
> > That is what I am desperately trying to explain to Kamal. The best
> > under the circumstances India can do is to create its own internal
> > consumer market and involve most of the population in productive
> > economy. The worst it can do is to rely on only one or two market
> > segments like IT. In the later it could face all banana republics
> > problems that stem from undiversified economy. If as reported lately
> > Romanian Gypsies started programming it is only a matter of time when
> > others bite a pies of pie from Tata, Inforsys and alike.
> >
> > Old Pif
> >
>
> Well, ... maybe .... yes. I'm still trying to read broadly on economics
> and banking. Just in today's WSJ an article on how if our consumer economy
> slumps and there is a fairly big cutback in our buying, it will hit
> China's exports to the US much harder than our mostly service economy.
> However, also, if we (the USA) have a lot of layoffs, then all those
> people (except for COBRA) will lose their company sponsored health plans
> (also, many companies, in tightening their belts, are already dropping
> company sponsored health plans). So, what that means is less insurance
> plan members, thus, less work at offshore sites like India. You can come
> up with a lot of these qualitative scenarios where all those nice big new
> impressive Bangalore buildings get emptied out if _our_ economy slumps.
> And, where will Indian IT workers go looking for jobs?

what you are saying applies for those jobs that depend directly on
consumer spending in the USA. Call centre work probabyl falls in that
category -but I wouldn't say the buildings will eb emptied out due to
the US tanking. Someone will have to do that work and cost being the
major factor -it may not go back to the US (but could to some cheaper
location).
OTOH, engineering work depends on corporate health -and may not be
eliminated as you say. It requires expertise at an affordable price.

>
> Kamal is limited by his knowledge of only a part of the worlds flows of
> money. He bashes our high cost of living (and its associated high standard
> of living) without realizing that in a society like ours, the prices of

I am not bashing. I am pointing to a competitive disadvantage that the
american worker suffers from. When companies decide to send work to a
cheaper location -they don't ask em for an opinion. The thing that
compels them to send work overseas -are the factors that I am pointing
out to.

> EVERYTHING (products, services, and salary) are higher while in his
> society the prices of EVERYTHING are lower and the only time you can
> make a comparison is if you can trasport work from one place to another
> place and pay less in India for some small part of our service economy.
> Otherwise you can't even say costs in India are lower. Indians make less,
> so they can't buy more, and so prices are lower. They don't notice this
> uless they look at the exchange rate or what we have and our costs.
>
tehnically -it means that the Indian consumer does not have good
purchasing power.

> They key that makes labor cheaper in India compared to the USA is the
> exchange rate. The only time costs for a given parcel of work done can be
> lower is if the work can be shipped to India. Look around the USA, out on
> the street, and ask how many of those jobs can be shipped to India. Not

Higher up the value chain -a lot can be.

> that many. And why don't the Indians making lots of $USD want to convert
> to rupees? Because if they start buying rupees with all the tons of USD,
> then rupees go out of circulation thus boosting the price of
> rupees, thus spoiling the nice exchange rate that makes it easy to
> get work pushed at them. So, they have almost no choice but to take the

No -the reserve bank of India has one of the highest reserves of USD
and these reserves accumulate when exporters convert dollars to rupees
(called inward remittances). The reason for the inflated USD lies not
with India but with the US govt. The strong dollar policy has been in
existence and stated on US govt paper -without the consent of other
central banks.

> excess USD that they have and start buying US assets (treasury bills,
> collateralized debt obligations, and land/companies/buildings and hire
> anyone, including US guys or Indian guys in the USA, to work in the USA
> and pay them USD). Just like China: take the excess USD and start buying
> up assets in the US (treasury bills, cdos, and land/comapnies/etc).

I am not aware of Indian govt buying into the US economy the chinese
have. India actually exports v little to the USA compared to china.

> And that line of thinking is the basis for a large part
> of the world "debt crisis and debt financing (i.e. USD coming back into
> the USA to finance our debt)" Even in a couple of the books I'm reading
> it says that the USD has become the new "gold standard" (and its been that
> way since everyone went off the Bretton Woods system). And, nobody has any
> solution that might bring the new situation back into equilibrium. But,

It hasn't become the new gold standard -but it has earned a reputation
for being a stable & appreciating currency. The strong dollar policy of
the US govt is an assurance to investors that things will remain that
way. Technically -the USD is just a piece of paper with 0 residual
value.

> all the while, all these 3rd world countries are experiencing remarkable
> increases in their own material standard of living, going into debt
> themselves, etc. Also in today's WSJ an article on how our stupid potatoe
> chips are selling like mad in China. A couple of days ago it was AIG

You must mean 3rd world countries are making the same mistake of living
beyond their means as americans do. Its too generic a statement and
even if it applies to a few bourgeoise people --it doesn''t apply to an
entire country. The US is without doubt the biggest debtor on earth
-with no competition from anybody else.

regards
-kamal

.

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