Read that again and again until it sinks in.
$12USD in India equals $40USD in the U.S.????
That is most interesting! The purchasing power of our currency varies with geography. In India, the $USD is stronger than it is here. Why might that be? Money is credit, and money enters the economy where the banks are when loans are made. Most $USD loans originate in the US when J6P gets a home equity loan or a car loan, or some other loan. Also when businesses borrow for business purposes. It is obvious how easy it is to borrow money, to go into debt. Checked the interest rates lately? Checked the national debt lately? Checked consumer debt levels lately? How much "equity" was extracted from homes in the last three years and converted into interest bearing debt? So America is like a fountain of US dollars. For some reason, those dollars are in demand in foreign countries by foreign workers who view 12 of them the same way our people locally view 40 of them. Neglecting living conditions and infrastructure for a moment, you could still make the case that the differential in value is analagous to the situation where the man who lives near a source of clean water is not as careful to conserve it as those who live far away from the source. Hence, the man will wash his car while those further away exercise water conservation measures. If a source of water were suddenly discovered in that distant land so that people didn't need to come with containers to get it from the source near our proverbial man, you would find that they themselves relax their conservation efforts in step with their newfound abundance. The more they have, the more uses they'll find for it that would once have been considered wasteful.
Since we live on top of the dollar well, we value the dollars flowing from it less than those in foreign lands who have accepted it as money but who live in distant lands. That is why we demand 40 of them for a unit of work of a certain kind, but those far away in other countries are happy with 12 of them.
It might be safe to say that 12 will buy there what 40 will buy here simply because they are downstream where it is dry, and here, we are up to our necks in dollars.
I believe the name for this process is "exporting inflation," and "importing deflation." We are exporting inflation to India, and India is exporting defation to us. They experience their inflation as we did our previous boom, low or lessening unemployment, feelings of hope and optimism, increasing prosperity, increasing prices as the the prices of commodities go up in dollars, which progressively lose their value over time as more arrive on the scene.
Meanwhile we experience our deflation as increasing permanent unemployment or underemployment, a feeling of decreasing prosperity, prices of luxuries dropping as prices of necessities increase, feelings of fear and pessimism about the future, business failures, mortgage foreclosures, personal bankruptcies, a shift in careers as "your services are no longer needed," to whatever work one can get for whatever wage to pay a bill.
Isn't it possible that our problem comes the fact that our government creates inflation? The reason the Indians appear to be "cheap" labor is not because they are cheap and allow themselves to be exploited, but it is because our dollars are indeed cheap here, but strong over there. This creates the opportunity for international companies to take cheap dollars they obtained here probably through borrowing from a bank, or selling bonds, or profits from sales, and transfer them overseas where they are spent to produce things that are consumed here. But they are not spent there as freely as they are here. They are held back somewhat. Instead of paying them $40, we pay them $12. There is an advantage to having access to a source of money where money is cheap, so that you can take it and spend it where money is dear, but our whole system is based on this dynamic and it is what is responsible for the deflationary effects (rising prices of energy and other important things like medical notwithstanding) we experience here. I think you will find the more inflation there is out of the dollar well that is the Federal Reserve, the more pronounced the problem will become. Making our dollar weaker here will only serve to encourage internationals to take the dollars and spend them overseas where the dollar is stronger for geographical reasons...thus, making foreigners busy, while Americans grow more idle and suffer deflationary effect.
But what if there were something that was valued equally by US citizens and Indians and generally well distributed throughout the world? Then the amount of that substance that the Indian would be pleased to accept for a given service should be equal to the amount of that same substance that a U.S. citizen would be pleased to accept for providing the same service. The world at one time used such a substance as money. It is called gold.
If our money was gold (and silver for small change) instead of debt, then our government could not engage in inflation by "monetary policy" and deficit spending. And then by not engaging in inflation, it could not export inflation to other countries and import deflation to us. As long as Americans continue to accept the US government's unconstitutional practice of using things other than precious metals as symbols of value, i.e. money, then you can expect these sorts of dislocations to continue.
And as long as the government tries to fight the effects of deflation here by increasing inflation here, the dollar will only look stronger "over there" and labor look more attractive "over there," and attract business away from here at a faster rate.
This is the proverbial vicious cycle unfolding before your eyes.
If wishes were horses...
If I only had a brain...
If a face could launch a thousand ships, then why can't I see you?
If, If, If
There is also an accelerant -- the executives and bankers have learned to chase this fiat money differential very well, and the elephants of peer-group competition are now in stampede of so doing. The number doing so seems to have hit a critical mass or something some dozen or more months ago. It's now a rapidly accelerating reaction. What dampers are there on it?