Titanic Shift In the American Economy?

An interesting piece from the Economist--

--but I have my doubts.

~String

 

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At the current exchange rates American and EU and Japanese workers at all skill and education levels could have their salaries reduced by 50% and they still would be over priced workers compared to the rest of the world's workers.

Until people looking for secure places to park their money stop overvaluing first world currencies or until free trade is abandoned, Outsourcing will continue.

Growth in US exports could come from taking market share from Japan and Europe, or from a temporary heating up of the global business cycle or from export of raw materials but Jobs that can be outsourced will eventually be outsourced if something does not change. Most of the USA's remaining jobs can be outsourced.

There is no reason why a human sitting at a computer in Peru can't drive a fork lift in an American warehouse. There is no reason for your tax accountant to be in the USA. One Lawyer with a License to practice Law could have assistants in India doing much of his work.

Much of our paper shuffling and information processing could be outsourced.

There is also no reason for Wall Street to be in New York. Dubai wanted Wall Street but I think some place cheaper than New York, Dubai, London, Mumbai, Singapore, Shanghai and Hong Kong would make more sense if Wall Street needs to be centralized at all due to the need for fancy restaurants and high class hookers.

America business schools and law schools teach Americans how to make money from gimmicks on the edges of the real economy. Medicine, the IT industry and this work at making money from parasitic financial gimmicks has been the growth industries in the USA over the past thirty years but except for portions of the medical industry there is no reasons that these industries can't be profitably outsourced.

The developing world does not have the infrastructure and workers to take all these jobs now but their infrastructure and supply of educated skilled workers is growing exponentially. American corporate management does not have the skills to outsource everything now but those skills are also increasing. When your competitor outsources you had better outsource too because if you don't you rick being driven out of business by your competitors lower costs.

This is America's real economic problem. The unregulated Wall Street Ponzi schemes are just a side show.

In post 2 I copied Warren Buffett's "Squanderville" article. http://67.205.94.94/showthread.php?t=46977

Warren Buffett understands because Warren Buffet sees when the Emperor has no clothes. That has been the secret to Buffett's success.

The American's worker not being able to compete with a comparable worker earning less than one fifth his wage is not complex economics. I don't know why Clinton and Gingrich could not understand that.

Most smart people just repeat whatever cliches are fashionable in their social circles because this helps them win approval and get ahead. Spouting fashionable cliches is like dressing for success; it may not have anything to do with whether or not you are competent but dressing well makes you look more competent and spouting the fashionable cliches at the appropriate times makes you sound more competent. The average smart person uses their logical intelligence in their narrow area of detailed localized expertize and on subjects where their is not an existing body of prevailing cliches. That is my explanation of how so many smart people can fail to understand that the USA is allowing it's economy to be slowly destroyed by a glitch in the currency markets.

When David Ricardo wrote about "comparative advantage" I doubt that he ever anticipated a situation where people bought the illusion of financial stability to the point where the overvaluing of the presumed stable currency threatened to destroy most of the nation's comparative advantages.

The Economist writer is lost in cliche world if he expects the American economy 10 year from now to be better than it is now. There should be a positive blip as the global business cycle moves from trough to peak but there is always another trough coming. For the USA each trough will probably be worse than the previous trough until their is a correction in the currency markets. Actually the article is not all that rosy; the writer is just looking for the silver lining in the economic cloud.

The current account deficit graph looks hopeful but I expect that to get worse again. I don't know why the graph looks as nice as it does. The dollar was falling and that might have helped the USA take market share from other developed nations. GDP had a strange permanent spike during one of the quarters in 2006. It looks like the government recalculated how GDP is measured but I don't remember hearing anything about that.
From the Chart below you can see that US current account deficit as a percent of GDP always improves in recessions.


Current Account Deficit as a percent of GDP

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Yes there is. First off, it would be illegal.

[everything else you said, sounded very reasonable, though]

~String

 

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Nor is there any reason for him to do so - a Mexican in the actual warehouse will drive it better, and at less cost.

Technically true, but there are a lot of quite strong incentives to keep him there. In the first place, he needs to be a CPA, and it is a difficult to matter to obtain and maintain such a certification without being in the particular state granting it - let alone, another country entirely. It can be done, but won't be in any real numbers.

This has been happening for years.

Already is.

Which is exactly what the author is proposing will happen.

 

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Surgeon sits with his head inside the hole - does not even see the patient directly; he could be on the other side of the Earth from patient.
(If he were, he would need to proceed slightly slower because of the time delays.)

This industry is no exception.
Robotic remote surgery already is in wide use, and is much better than when the surgeon is sticking his hands in the patient.
See: http://www.davincisurgery.com/
Robotic surgery is especially good at delicate operations like removal of the prostate.
Studies have shown much better preservation of nerves, so less post-op problems with inconstancy and erectile dysfunction.

The video at the above link is mainly testimonials from patients telling how little it hurt, how quickly they left the hospital, etc.

Also note that for quite a few years now Indian MDs have been reading routine check-up X-rays at less than half the cost of a US MD. The X-ray goes thru the internet is read and the report written and back at the clinic in its computer the next AM, before the clinic is even open. (The time differential often allows the Indian Doctor's report to be available before a locally read X-ray report is, especially when the X-ray is taken after lunch time.) This is all transparent to the patient - he does not normally know who or where his X-ray was read. His local doctor uses it, not the patient.

 

Extending my prior post: I was at their site today and copied their claims:

" The da Vinci(R) System is a breakthrough surgical platform designed to enable complex surgery using a minimally invasive approach. The da Vinci(R) System consists of an ergonomic surgeon console, a patient-side cart with four interactive robotic arms, a high-performance vision system and proprietary EndoWrist(R) instruments. Powered by state-of-the-art robotic and computer technology, the da Vinci(R) System is designed to scale, filter and seamlessly translate the surgeon's hand movements into more precise movements of the EndoWrist(R) instruments. The net result is an intuitive interface with breakthrough surgical capabilities. By providing surgeons with superior visualization, enhanced dexterity, greater precision and ergonomic comfort, the da Vinci(R) Surgical System makes it possible for more surgeons to perform minimally invasive procedures involving complex dissection or reconstruction. This ultimately has the potential to raise the standard of care for complex surgeries, translating into numerous potential patient benefits, including less pain, a shorter recovery and quicker return to normal daily activities. ..."

 

some guys seem to think, that somebody who is cheaper has the same level of quality. it may sometimes be the case, but often enough, it isn´t.

-> a call-center in india? i don´t know how you handle it over there, but in europe, we like to get annoyed at least without some funny accent.

-> a human sitting at a computer in Peru driving a fork lift in an American warehouse ? yeah, as if they have such a low ping

-> robot surgery done by somebody 1000 km away? i´m sure most people like to speak with their doctor - the man who has your life in his hand - vis-a-vis! where do i complain if something should go wrong ... at&t !?


outsourcing was a stupid idea. have heard about so many companys that jumped on that wagon years ago, and have now regretted their move. if workers in other countries are dirty cheap, than this often has a good reason - they deserve less. america shouldn´t give up the industrial base.

 

Yeah, communications latency and error control would be very serious considerations in such an application - and two factors that are opposed in engineering terms. It is far too blase to suggest that this could be handled by the surgeon "going slower" as Billy suggests, and a short communications outage at a critical moment could prove fatal in such a setting.

Possibly these issues could be addressed to some extent, allowing for at least certain types of surgery to be done remotely. But I have a hard time seeing how the costs of a workable, reliable system would be lower than an on-site surgeon. The robotic apparatus itself will cost a small fortune (and require expensive maintenance), let alone the complex communications system you'd need. And you still have to pay a surgeon somewhere, as well as all the people to operate and maintain the systems.

I think the main application for telesurgery will not be cost reduction but rather applications where it's currently impossible to get a surgeon where you need them - rapid-deployment disaster relief, in-field combat surgery, provision of urgent surgery to astronauts, etc. Basically, areas where the extra cost would be justified and the extra risks acceptable.

 

I did not make any "its cheaper" argument. I only noted that robotic surgery is already widely used because it is much better in many surgical procedures.

The machines are expensive and yet according to the company (and their rapid sales of machines seem to support the claim) they do save the buyer (a hospital) a lot of money by reducing time any one patient occupies a bed. Also the hospital that buys one has a great competitive advantage. - Patients do tell their friends with some pride that they were only one night in the hospital, were jogging two days later, had very little pain and only a tiny scar, etc.

I was merely pointing out that even the exception of surgery, which nirarkar listed, was not necessarily true. Surgery could be outsourced but for reason listed, probably airplanes will be remotely piloted first. (Some already are but well call them drones and mainly crash them into their targets of fire hellfire missiles from them.)

I think none of the application you listed are practical - it takes much longer to setup the operational part of the machine, get it calibrated and tested, make it sterile, etc than to send a surgeon to the disaster area, bring the patient from the field of combat or even return an astronaut from space to a hospital. You certainly cannot have these machine "pre-deployed" at the unknowm next disaster area, some field of combat, or in space.

I think it could be practical (may even be done now sometimes) for the surgeon to avoid the need to scrub up (and save the time lost doing so as to let him do a couple more procedures each day.) I.e. he could stay outside of the sterile operating area, perhaps next door.

 

billy, i was under the impression this thread is about jobs that move in another country, not another room

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You posted in response to an assertion that surgery would not be outsourced, and then went on to discuss how this could extend the current cost-driven outsourcing of X-ray reading to India.

Is there any reason to outsource surgeons to another country other than cost?

If not, your previous post was off-topic, and you should be deleting it instead of criticizing me for responding in good faith to your apparent point.

You were quite explicit in discussing not only robotic surgery, but specifically remote surgery, and its implications for outsourcing.

Not necessarily the case, if research is invested into a mobile platform for the device. I.e., you could install it in a sealed transportainer that is pre-sterilized at a factory, and then airlifted to a disaster.

Again, you'd presumably have a stash of these things pre-deployed near a combat zone. And the military is already working on remote field medicine robots that can perform life-saving functions such as stabilizing the wounded or doing triage assessments.

Not true on long space missions, where such a system would presumably be installed in the space craft or station before the start of the mission.

With the exception of the unknown disaster area, I don't see why not. We tend to know where our troops will be fighting well in advance, as well as where our space craft will be going. And we install all manner of other infrastructure and machinery based on that; why would this be any different?

Which, again, has no bearing on offshoring of American jobs. On the contrary, you'd be making American surgeons more efficient.

 

To Quad:

I won’t reply in detail but just note that my first post had two counter examples to narakar’s explicit statement that surgery could not be outsourced and his implicit statement of the same about other medical services.

In the first, I cited the fact that already there is no need for the surgeon to be close enough to stick his hands in the patient as a robotic interface was in wide spread use and generally yielding better results than surgery the old fashioned way. In this case I did not claim any economy (for the patient, but in a later post I did note this slightly remote robotic surgery saves the machine owner, the hospital, quite a lot – Less patient time in bed effectively expands the hospital without buying any bricks, etc. I also noted that the surgeon might be able to do a couple more operations each day if he does not need to scrub up before each.)

I was merely trying to correct narakar’s implicit assumption that surgery required the surgeon to be next to the patient. I did not suggest that there was any advantage to having surgeon on the other side of the world – only suggested that if he proceeded slightly more slowly in could be possible.

I think correcting a prior poster’s errors (or false implicit assumption) is a perfectly acceptable post in a thread even if it does not address the thread’s main theme. (Cause of outsourcing is lower cost for this thread.) I often make posts which are mainly efforts to correct or modify an earlier post’s statements and frequently these posts do not discuss the thread’s subject and see nothing wrong with that.


In the second case I was pointing out that quite a few routine X-rays already are outsourced to an Indian doctors to read and write the report because it is significantly cheaper. This too was partially an educational effort, as few know this has been happening for several years; however, in this case it was also directly on the thread’s subject – out sourcing due to cost savings.

 

“… In March, The Wall Street Journal hailed a new trend in dollar devaluation, called variously "insourcing" or "onshoring." … The reasons are legion, including the rising cost of foreign labor, the always high cost of shipping goods from one market to another, the complexity of managing inventories when warehouses and customers are located oceans apart, and nagging issues of quality control when your worker bees are located far from the attentive eye of corporate management.

Caterpillar recently announced the relocation of some of its heavy-equipment manufacturing from Japan to Chicago, reaping multiple benefits in the process. … Nor is Cat alone in seeing the logic of this move. General Electric announced a shift of its own last year, moving certain manufacturing operations from China to Louisville, and taking advantage of a Great Recession-inspired 35% drop in labor costs in Kentucky. In recent years, we've seen the cost advantages of offshoring business evaporate. Software firms, heavily reliant on Indian outsourcing, are seeing price advantages vaporized by rising labor costs there. The call-center employee in Bangalore … is now seeing his wages rise 15% to 30% annually.

Foreign-based companies may be looking on with envy at the cheaper dollar-denominated prices of labor and raw material. {in USA} Toyota, Honda, and Nissan are the most obvious examples … to benefit further from a declining dollar. …”
From: http://www.fool.com/investing/general/2010/04/13/hip-hip-hurray-its-dollar-doomsday.aspx

Billy T notes:
Factory workers in China had ~15% REAL hike in salaries (benefits like lunch, bus tickets, health care plans, etc. included) in 2009. Probably even more in 2010 as there is a shortage of factory workers now that rural folk are staying at home. A few years ago, 1 million of them were moving to the cities each month seeking the “better life.” However, before you get too excited, note there is a lot of Asia other than China and Japan with cheaper labor still.}

 

I barely read any of this lol.
But why dont we just stick with Obamas econamic ideas?
Spend a lot of money... to get out of debt.
Makes sence right?

 

No, but it gets votes and is a long standing political tradition. - Part of the culture hard to change, although Clinton did run some surplus, breaking with the George I's record setting deficits. (Mainly, I think, because unlike GII, Clinton did not start any wars, which are still costing a lot under Obama, but he is trying to wind them down.)

 

And also to the Asian Economies:

“…Old assumptions about innovation are also being challenged. People in the West like to believe that their companies cook up new ideas in their laboratories at home and then export them to the developing world, which makes it easier to accept job losses in manufacturing. But this is proving less true by the day. Western companies are embracing “polycentric innovation” as they spread their R&D centres around the world. And non-Western companies are becoming powerhouses of innovation in everything from telecoms to computers.

Companies in the Fortune 500 list have 98 R&D facilities in China and 63 in India. Some have more than one. General Electric’s health-care arm has spent more than $50m in the past few years to build a vast R&D centre in India’s Bangalore, its biggest anywhere in the world. Cisco is splashing out more than $1 billion on a second global headquarters—Cisco East—in Bangalore, now nearing completion. Microsoft’s R&D centre in Beijing is its largest outside its American headquarters in Redmond. Knowledge-intensive companies such as IT specialists and consultancies have hugely stepped up the number of people they employ in developing countries. For example, a quarter of Accenture’s workforce is in India. …”

From (current issue): http://www.economist.com/specialreports/displayStory.cfm?story_id=15879369&source=hptextfeature

 

Here is a gutsy backward looking POV, especially publishing it just before Treasury offers a record setting 129 billion in new paper next week (all with less than 10years to maturity):

“The bond vigilantes who punished governments for profligate spending in past years have gone into hiding. … Demand for U.S. government bonds is increasing. On average, the Treasury received $3.21 in bids for each dollar sold at 10- year auctions this year, …”

From: http://www.bloomberg.com/apps/news?pid=20601087&sid=apFOAsUrgOyw&pos=3

Billy T comment:
Either he or I will be will be wiping some egg off their face a week from now as on the seven year notes, longest maturity offered, I suspect they will sell only with significant increase in interest rates. I.e. I think the bond vigilantes are alive and well and coming out of hiding. It is a little gutsy and perhaps foolish for me to stick my neck out too with a less than 10 day prediction.

The bond vigilantes can make a "Titantic shift" in the American economy. I think they will soon, but am keeping a moist towel handy for egg wiping.

 

Yes a "Titanic Shift in the American Economy" is coming.

I predicted a run on the dollar before Halloween 2014 quickly followed by US and EU sinking into the world's worst depression several years ago. (GWB was the cause and still had more than a year as POTUS when I predicted it, based on his many very destructive policies.)

Interestingly, others are coming to think the same now (although not yet using the "D word"). Hear this seven minute round table of experts agree that stocks will go up a little longer, then crash as US debt becomes obviously unpayable at:

http://www.zacks.com/commentary/14376/Double Dip Recession in our Future?

Today: "The path forward contains many difficult trade offs and choices, but postponing those choices and failing to put the nation's finances on a sustainable long-run trajectory would ultimately do great damage to our economy," Bernanke said.

Why is it that no one, especially Bernanke, will say the "D word" ? He is an expert on the "D era" of 1929.

On a human level that "great damage" is already happening. See photos & read short facts about seven who are long term without work and are now losing unemployment help at: http://money.cnn.com/galleries/2010/autos/1004/gallery.longterm_unemployed_benefits/index.html

 

"... The jobless rate increased to 9.9%, up from 9.7% in March. However, an extra 290,000 jobs were created in April, mainly in manufacturing, healthcare and hospitality, the Labor Department said.

... The total number of people unemployed in April was 15.3 million.
'Employment growth.' The government hired 66,000 extra workers during April to help conduct the 2010 Census, which helped to boost the jobs total.

The manufacturing sector employed an additional 44,000 workers, while the leisure and hospitality industry took on 45,000 workers. ..."

From: http://news.bbc.co.uk/2/hi/business/10102740.stm

Billy T comments: Something smells fishy here. 66K +44K +45K = 155K. So 290K - 155K = 135K "mystery jobs" much more than the two largest blocks of real economy jobs combined were created.

I think the government use increased bank loans, etc. to "infer" jobs of construction workers, truck drivers, new mom& pop stores, etc. who can not be readily counted. Frankly, I am losing faith in the honesty of the US government when they have fudge factors to play with. Does anyone know where these 135,000 mystery jobs were created?

Also why would the unemployed "Not looking for job" switch now to "Looking for job but can't find one" in numbers great enough to over come / fill the claimed 290,000 jobs added and still boost the the total number of "unemployment and looking for a job" to make the unemployed index go from 9.7 to 9.9% ???