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To: AntiGuv
So let me get this straight.

A company that would employ such foreign workers in the U.S. will now just move to India or wherever. Since they can't get enough skilled U.S. workers (so they say), they will move their operations to a foreign country where wages are much lower and the workers will pay no U.S. taxes.

Yep, a win for the American worker and the U.S. tax base!

39 posted on 09/22/2003 12:46:26 PM PDT by Anitius Severinus Boethius
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To: Anitius Severinus Boethius
And your solution is?
64 posted on 09/22/2003 1:08:04 PM PDT by null and void (If they didn't want a Crusade, why did they start one?)
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To: Anitius Severinus Boethius; Lazamataz; Willie Green
"A company that would employ such foreign workers in the U.S. will now just move to India or wherever. Since they can't get enough skilled U.S. workers (so they say), they will move their operations to a foreign country where wages are much lower and the workers will pay no U.S. taxes."

No, the whole idea of outsourcing high-tech work offshore is built upon a logical house of cards.

You see, you pay foreign employees in their local currency. An Indian programmer will be paid in Rupees. A Chinese programmer will be paid in Yuans. A Japanese gamer will be paid in Yen, etc.

So if you move your work offshore (either by contracting it or by setting up your own local company or subsidiary), then you've got to take into account how the U.S. Dollar trades versus the local currency.

In addition, you have to take into account whether or not the local **economy** is majority-export-oriented.

You see, an export-oriented economy will generate a perpetual surplus of U.S. Dollars that can't be spent and must be hoarded by the local central bank in question, otherwise the value of the U.S. Dollar would plummet against said curency, destroying said export-based economy overnight.

And it is this dependency upon the exchange-traded value of the U.S. Dollar versus the local currency that makes the whole offshore outsourcing concept so risky, fragile, and essentially doomed.

If the Dollar goes down, after all, that makes all existing contracts with the Americans worth less in terms of the local currency.

If the Dollar goes down, that makes all future exports of goods and services to the U.S. cost more to the American customers.

If the Dollar goes down, then that makes all American goods and services cheaper in comparison.

To fight this trend, central banks in export-based economies have to continually buy and hoard U.S. Dollars. If these Dollars are ever spent (i.e. put back into circulation), then the value of the Dollar plummets, and you already know what happens when the U.S. Dollar goes down in value...

Likewise, such offshore ventures are vulnerable if the U.S. decides to pump more U.S. Dollars into global circulation. To counter this downside, export-based economies must demand that their central banks buy even more U.S. Dollars to forever hold.

But they can't buy and hold as many Dollars as we can print.

This presents an enormous and insurmountable problem for these offshore ventures and partnerships, simply because the only reason that offshore outsourcing appears to be profitable is because the U.S. Dollar has been over-valued for so many decades.

But past performance is a poor guarantee of future conditions.

There is very little incentive for the U.S. to continue to allow the U.S. Dollar to remain wildly over-valued.

And if the Dollar drops in value, then these offshore ventures are going to become cost-prohibitive.

100 posted on 09/22/2003 1:45:20 PM PDT by Southack (Media bias means that Castro won't be punished for Cuban war crimes against Black Angolans in Africa)
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