I realized today that Democrats are complaining about outsourcing. What is outsourcing? Companies realize that they can send certain jobs overseas to make more money. This is stupid if you're making a profit already, but if you're taking losses (like the Tech sector was not to long ago) it's a typical thing. The upside tothis is that once a company makes a profit it can create more jobs locally. Problem is that this takes time.
Basically it is the destroy to create principle.
But look who we have complaining about it: the Democrats, the modern free trade pioneers! This is the party who brought us NAFTA. Something I'm perfectly okay with by the way.
So now they're s aying "We're still for free trade, we're just against outsourcing!" What a crock.
Posted by Skywalker at October 11, 2004 11:53 PM | TrackBack"Companies realize that they can send certain jobs overseas to make more money."
I thought I even read an article somewhere (can't think of where right now or if I could even find it again) where the percentage of companies going overseas was a very small percentage anyway. Barely even 2%....does that sound familiar to you?
Posted by: mrs. muddy at October 12, 2004 12:36 AMYeah it's stupid. The real problem is the fact that the dollar is overvalued and the asian currencies are undervalued.
The problem is that the only way to correct this overevaluation/underevaluation is through more saving in the US and less spending (thus more export, less import), and more spending in Asia, less saving.
The problem being : these adjustments will probably not go smoothly. The US can not export what asians primary need, asian production has been meant primarily to meet western demand, not its own. And worst of all, spending and investing as been driven by growth in debt, not by growth in revenue...
So some recession is needed on the way back to market equilibrium.
Unfortunately, US voters don't understand the whole idea of destroy to create so if there is a recession, despite an occassional recession being a Good Thing (tm), it becomes a political hey day.
I'm not sure that I agree the dollar is over valued and asian currency is undervalued. But I will agree that the debt driven economy isn't a permanent fix.
Posted by: skywalker at October 12, 2004 07:09 PMbasics of economic theory : if you're running a deficit with a foreign country, then by adjusting the relative price of the currencies, you can fix it.
US has a huge deficit with asia. If US dollar would go down relative to yen and remnibi (china's currency) then asian prices would be more expansive, US would import less and export more.
China and japan do everything to keep their currency low, so they can export always more to the USA...
It may work now and for a while, but the all thing is bound to explode, sooner or later, probably sooner than later.
I know this. But, the problem is also that we have a services based economy. The US does hardly any manufacturing. We simply do not have much to export.
Posted by: skywalker at October 15, 2004 08:41 AM