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US Fiscal Deficit and Offshore Outsourcing ...

The Million Dollars Per Minute Borrower

Benefit From Gray Arrow A Kaytek Offsourcing Consulting Insight

The Million Dollars Per Minute Borrower

Joseph Stiglitz, winner of the Nobel Prize in Economics in 2001 has been highlighting the main economic problems in the US today.

In his viewpoint, the first Big problem was that the US Government borrows US 1.5 Billion Dollars a Day from the outside world.

A Rough Back of the Envelope Calculation for a Borrowing of 1.5 Billion US $ per Day is Roughly A Million Dollars Per Minute.

Wow ! Most of us do not see that money in a lifetime !

Since this borrowing is mainly from the external world (Non-US Sources), and has to be repaid in the future with interest, it is a huge gigantic problem for not only the US but for the rest of the world which depends on the US for future economic growth.

Even the legendary Warren Buffet has expressed concern on the same problem.

If the richest man (the US) in town (the World) goes bankrupt, every body needs to worry (not only the bankers and financiers ) !

The popular US movie Twister very vividly depicted the destructive damage that could be done by an unleashed tornado.

Working in a continuous gigantic spiral fashion, it sucks up any object that it finds in it's path and hurls it towards destruction.

Borrowing at a Million Dollars Per Minute is like being on a reckless tornado.

What does Borrowing have to do with Outsourcing ?

Because the more you borrow as a country, the more you become weaker financially if you are not able to leverage your borrowings effectively.

Joseph Stiglitz also mentioned that 90% of the Internet Investments in the US are dead, with Zero (yes, 0) financial return.

Various studies predict a decline in the value of the US Dollar

against other major currencies over the next few years.

For instance, today 1 US $ is approximately equal to Rupees (Rs) 44.

If the US Dollar Declines, the Indian currency may appreciate (depending on India's Central Bank - Reserve Bank of India's intervention and currency market conditions).

Once that happens, the attractiveness of the current arbitrage differences between the US $ and non-US currencies will reduce quite a bit.

This may naturally work Against Offsourcing and Offshoring since it may not be as attractive for US companies to send work overseas.

Similarly, exporters in cheaper countries have to ensure that they have factored in future currency declines in their operations.

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Updated on 4th March 2009
Posted on 11th February 2005

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