Outsourcing Back To America

[Apollo]

Well It seems because of rising oil prices, companies are moving manufactering back to America. It was just on World News Tonight With Charles Gibson. I will try and find a story explaining it, but for now. Cool.

 

[EvilForce]

Well It seems because of rising oil prices, companies are moving manufactering back to America. It was just on World News Tonight With Charles Gibson. I will try and find a story explaining it, but for now. Cool.

Not to mention the 30% drop in the value of the dollar.

Ebbs and flows. It's a market based economy doing what it was designed to do. Promote efficiencies.

 

[Apollo]

Not to mention the 30% drop in the value of the dollar.

Ebbs and flows. It's a market based economy doing what it was designed to do. Promote efficiencies.

True, a weak currency means an increase in exports.

I say the Fed pulls a China and influences the market to bring up the value of the dollar. But that is illegal for a good reason I guess.

 

[Spiff]

I'm not an economist. But I don't understand how a weakening dollar and rising oil prices would make outsourcing less profitable. It would seem the opposite to me. A weakening dollar means that American companies can do more with a dollar overseas than it can in the US. Rising oil prices means higher production costs, which means cuts in labor costs to offset. I must be missing something here. Still, it's good news to hear, whatever the reasoning is.

 

[Apollo]

I'm not an economist. But I don't understand how a weakening dollar and rising oil prices would make outsourcing less profitable. It would seem the opposite to me. A weakening dollar means that American companies can do more with a dollar overseas than it can in the US. Rising oil prices means higher production costs, which means cuts in labor costs to offset. I must be missing something here. Still, it's good news to hear, whatever the reasoning is.

Higher oil prices drives the cost of transporting the stuff much harder. It is a lot cheaper to build it here and move it to your stores or warehouses which are only a few miles away.

In the story, it talked about when oil was still $50 it only cost $3,000 to ship from China to America. Now it is $8,000.

Also, with the weakened dollar, it takes more dollars to buy the same thing that might even be at the same price which means it is costing you more.

 

[Elworth]

Also Qixote, if the dollar is worth less, that means that when you import goods, if the price remains the same, it is more costly to produce them and you make less money.

 

[Croynan]

do you think any of us will live long enough to really see this happen?

eM.

 

[drhladnjak]

A weak dollar helps exports and hurts imports. If the dollar weakens by 30%, it takes 30% more dollars to buy the same amount of euros/yuan/rubles/etc. That means overseas manufacturers need to raise their prices in dollars to keep the prices in their home currencies constant. Conversely, US exporters can drop their prices by 30% and still bring in just as many dollars before, which makes those exports cheaper.

Also, world manufacturing and economic activity is not a zero sum game. Just because we start making more things here does not mean China will make any less or that workers overseas will lose their jobs. It's possible for everybody to produce and consume more wealth at the same time. That's really what economic growth is all about.

 

[Apollo]

I wonder if this will effect the economies of the people losing these jobs when the jobs come back here.

It isn't a mass exodus, but I imagine a few can get their jobs back.

 

[AsianDream]

I'm not an economist. But I don't understand how a weakening dollar and rising oil prices would make outsourcing less profitable. It would seem the opposite to me. A weakening dollar means that American companies can do more with a dollar overseas than it can in the US. Rising oil prices means higher production costs, which means cuts in labor costs to offset. I must be missing something here. Still, it's good news to hear, whatever the reasoning is.

In this case the economics aren't too complicated - but you do need to have some math knowledge - specifically you need to understand the difference between multiplication and division.

If you look at buying 100 hours of foreign labour for $100 - if the dollar becomes worth 30% less - then your $100 will only buy 70 hours of foreign labour. Therefore outsourcing (and imports) would cost more.

In many countries this basic level of math knowledge is taught at an early age - in the USA it seems that their standards of education are increasingly falling.

 

[Apollo]

In this case the economics aren't too complicated - but you do need to have some math knowledge - specifically you need to understand the difference between multiplication and division.

If you look at buying 100 hours of foreign labour for $100 - if the dollar becomes worth 30% less - then your $100 will only buy 70 hours of foreign labour. Therefore outsourcing (and imports) would cost more.

In many countries this basic level of math knowledge is taught at an early age - in the USA it seems that their standards of education are increasingly falling.

Actually not true, the economics is heavy on the math and graphs. But it doesn;t mean we are going to remember all the details for life.

And you don't need math to explain his question at all, as we have proven.

 

[JR]

Dear Customer:

In order to serve you better, we are making adjustments to how we serve you during these economically challenging times.

We have been listening to your comments and responded accordingly. For all of you who told us that the Indian Call Center was about as valuable as having no customer service at all, you will pleased to know we will be hiring 2 Americans to replace the 5,000-person center in Bombay.

Now that the US dollar is effectively worthless and no one expects benefits any more, we can abuse Americans right here at home.

-The Management

 

[metta]

Higher oil prices drives the cost of transporting the stuff much harder. It is a lot cheaper to build it here and move it to your stores or warehouses which are only a few miles away.

In the story, it talked about when oil was still $50 it only cost $3,000 to ship from China to America. Now it is $8,000.

Also, with the weakened dollar, it takes more dollars to buy the same thing that might even be at the same price which means it is costing you more.

There are also environmental benefits to doing things closer to home. Less transportation also means less harm to the environment. In addition, the US often times has higher environmental standards than many of the other countries where most of the products are imported from.

 

[Apollo]

There are also environmental benefits to doing things closer to home. Less transportation also means less harm to the environment. In addition, the US often times has higher environmental standards than many of the other countries where most of the products are imported from.

Well that is a good unintended side effect of bringing it back to America. If one of these companies is smart, they will try to use the green thing to sell more product. lol