Bear Flag Republic Radio Weblog

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One item that may mitigate the worry about this number is that the US dollar is still on the way down.  This will make American goods and services (and by extension American workers) more competitive.  However, how low will it need to go to stop this amazing growth rate in the deficit?  Can the deficit be reversed through a fall in the dollar?  Unfortunately, the data indicates that it may be in for a big fall before we are competitive globally again.  The dollar has already fallen for two years, but there still is significant growth in the trade deficit (we hit a new record in December). 

One thing to really worry about is that if it takes another 30-40% drop in the dollar to make us competitive again, what will the OPEC nations do?  They sell their oil for dollars (which is very good for the US since it makes the dollar a reserve currency).  IF the dollar drops that much, will OPEC bolt?  Given that they could get 40-50% more for their product if they sell it in Euros, they might.  That would be a disaster (it would cause huge inflationary pressures in the US).

Don't worry about the details of offshoring/outsourcing.  The real worry is whether or not the US's lack of competitiveness in trade will translate into a loss of the dollars role as a reserve currency.  My question:  how do we balance the trade deficit without tarriffs or a massive fall in the dollar? 

One way was proposed by Warren Buffett late last year (Fortune:  premium content, I can send the article to you if you want) is market-based import credits.  He was so convinced the dollar was going to drop markedly (knowing the returns he expects, he anticipates the dollar will drop 30-40% over the next two to three years) he bet against the dollar and America for the first time in his life.  Here's how it would work.  Every dollar of export would award a dollar of "import credit" to the exporter.  These import credits would then be sold in the market to any company that wanted to export to the US.  This would zero out the balance of trade, force Americans to live within their means, and provide the US an opportunity to regain its competitiveness.   However, at what cost?? [John Robb's Weblog]

comments < 12:35:52 PM        >

Karl Rove's favorite person.  There is a case that can be made that zealots like Nader make hay (raise more money, supporters, and media attention) when "a devil" is in office.  So, spoiling the election and putting Bush back in office (again) for another four years is in his self-interest. [John Robb's Weblog]
comments < 12:35:32 PM        >

Will We All Be Unemployed?. Sample quote, from Tom Peters: "I think we're entering a 50-, 60-, 70-, 80-year period of instability, where I can well imagine the great American economy being surpassed by the Chinese or the Indians".

Everyone says the solution is "more education" and "continuous re-invention" of ourselves. What everyone also omits is that this means, logically, a much larger investment in ourselves with lower returns on investment than we have received in the past. Since it seems that many of us will be educating ourselves more than ever for the same or declining future pay.

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Funny line I spotted somewhere the past couple of days: Bush Administration to introduce the "No Jobs Left Behind in the USA Act" to promote further offshoring. If a little offshoring is good, then a lot of offshoring must be really good!

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Good references, from the India perspective via India Times:
India Job Market.
Business Process Outsourcing to India news items [Edward Mitchell: Common Sense Technology]
comments < 12:34:38 PM        >

Mars Rover's Latest Find: Shiny Pebbles in a Crater [New York Times: Technology]
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