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India outsourcing jobs to US for cheaper labor? Assuming it's true. how long before China does likewise?

Is this a taste of the future? Outsourcing goes full circle as Indian firms look to the U.S. for cheap labour

Indian firms look to U.S. for cheap labour as outsourcing goes full circle | Mail Online

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I didn't read the article, but this is why free floating currency is important. If China didn't peg the yuan to the dollar in a way that makes it ridiculously underpriced, then labor wouldn't be so cheap and Chinese imports wouldn't be artificially priced below US products. At some point, you hit an equilibirum- but only if the currency can float. The yuan needs to continue to move. Yes, things will get more expensive in WalMart. But that's how it works. China can't pile up US currency forever. I think they're now sitting on $3,000,000,000,000.

Being a goldbug, I thought you'd find it interesting that China is now buying gold mines around the world with some of that currency that is wasting away. Its really putting a bid under some of these mining companies. Since our fiat currency is losing value daily, they're purchasing the source of real money.

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Being a goldbug, I thought you'd find it interesting that China is now buying gold mines around the world with some of that currency that is wasting away. Its really putting a bid under some of these mining companies. Since our fiat currency is losing value daily, they're purchasing the source of real money.

That's true. Also, the Chinese are now the largest buyers of gold and are buying trillions less US debt (bonds).

I've found Chinese acquisitions questionable since they gained control of the port in California and the Panama Canal in the '90s, not to mention their buying mineral and oil reserves all over the world. It makes sense from their standpoint, but basically, we're funding our own demise.

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I wouldn't say demise, just an ongoing erosion of American hegemony. It happens to all superpowers eventually because they can't control themselves. The Roman empire in the 3rd and 4th century comes to mind. So does 20th century England who began the century as a dominant world power. China is still buying T bonds, but has made a decision to diversify into a basket of assets. So the net open positions of US bonds held by China is steady to slightly declining. The numbers are published monthly. They've been harping about QE and deficits crushing the value of the dollar for three years now, so it wasn't like they didn't telegraph this move. :)

I read an article recently about how Mexican companies use Guatemalan labor because it is so much cheaper. I guess cheap labor is relative. If the dollar continues to tank, we'll become cheap labor. In fact, my stepbrother is a photographer who spends about 6 months per year doing shoots in Denmark and Sweden. His employers in northern Europe not only love his work but they told him that because of current exchange rates, they save a bundle by flying in American photographers and putting them up in hotels rather than to pay local photographers. So maybe in some cases it has gone full circle!

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The end of US hegemony may be more accurate, jq. I'm curious what you think will be the result if (when?) the USD is no longer the world reserve currency and we start buying yuan, or whatever, to do business or pay US debt owed to foreign countries?

I am of the opinion that the primary reason we've been somewhat insulated is our ability to print endless amounts of money, with no backing except "the full faith and credit of the Federal Reserve", and most the rest of the world having to convert to USD to do business.

Edited by Goldbug
clarity

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I am of the opinion that the primary reason we've been somewhat insulated is our ability to print endless amounts of money, with no backing except "the full faith and credit of the Federal Reserve", and most the rest of the world having to convert to USD to do business.
Agreed!!!! This is what it feels like to become a poorer nation. It hurts, and hurts some more than others.

Regarding not being the reserve currency, things will deteriorate and I think we see continuing inflation with nominal wage growth below that rate. Its unfortunate but inevitable. If Europe wasn't imploding, the dollar would be in much worse shape. But investors are still happy to plow into 10yr treasury notes at just over a 3.0% yield. I think they're nuts, but by doing so they're keeping the debt ponzi scheme going a few more years.

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China needs their laborers to keep making cheap knock offs of EVERYTHING lol

The big trouble with that is that some companies in China are actually producing some quality products.

BTW, there's now some ongoing shift of outsourcing to Africa (south of the Sahara). Luanda has been experiencing an economic boom since the Angolan civil war ended in 2002.

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A few things:

1) Mexico has used Guatemala for cheaper labor for years now.

2) Because of exchange rates, Sweden has been using Americans and others for cheaper labor in the past two years.

3) Chinese wage inflation in combination with a weakening dollar vs. the yuan is completely eliminating the expense reduction by sending manufacturing to China.

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As they say, after all the running around here there, they all end up coming back to where they started. This is so funny to hear, I wonder what would happen if Robert De Nero becomes the President.

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The next big outsourcing location is central and western Africa. After that, we're pretty much done.

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