One of the most flawed arguments present in America is the one where citizens blame the rich for sending jobs overseas, therefore, putting millions of Americans out of work. The people are actually clueless in the matter, but its not their fault, because the government and politicians are continuously filling American citizens' heads up with this garbage. But I'm gonna tell you WHY the jobs are overseas and WHY the government wants you to blame the owners of companies.
The government, mistakenly believes that inflation is a good thing. They see higher prices as a sign of progression. Some of you may be thinking along those same lines (because they continue to shove that line of thinking down your throats), but that's not how that works. In our current economy, interest rates are artificially low. With these low interest rates, there is more money in the economy which creates cheaper money. In turn, cheaper money means a higher price for everything --- inflation. In fact, The Federal Reserve aims for an annual inflation target of 2-3% a year. If that's not a flawed way of doing economics, I don't know what is. But in reality, we've been seeing inflation at probably closer to 6-7%, but "they" do a good job of keeping that hidden. Its not a secret, however, to those that are paying attention.
Now you're probably wondering why the government sees inflation as growth, despite its detrimental effect on the economy. Here's why --- at the end of each quarter, we receive the GDP report a.k.a our economic report card. GDP (Gross Domestic Product) is the total dollar value of all the products and services sold/produced in a country. If our GDP continues to rise, showing a 3% gain, it looks as if our economy is growing. But hold on! The GDP report may show a rise, but at what cost? Are we selling and producing more products/services? Or, are we selling/producing the same amount of products/services, except people are paying higher prices? The answer is the latter! Because of that, it may appear on the surface that the economy is growing if you look at the GDP numbers. But when you dig deeper and see that we're not selling and producing more, but simply paying higher prices, that explains why the GDP numbers give the illusion of economic growth. Now that we've cleared that up, let's proceed.
In reality, The Federal Reserve should let interest rates rise to where they should naturally be (probably around 7-8%), which would contract the economy's money supply, making the dollar stronger. That would in turn lead to deflation. Deflation is the opposite of inflation --- when the price of everything goes down because there are fewer dollars chasing goods. But not our government! They'd never let a thing like deflation occur. As I mentioned earlier, they believe that prices are only supposed to go up (remember they said the same thing about housing until the 2008 meltdown hit). But how would you, as a consumer, love for your hard-earned money to be able to purchase more? I'm sure you'd love it a lot. We live in a society in which there is no way to justify the high cost of living we presently experience. In a slow economy, there's no reason for inflation to rear its ugly head. In a previous article, we talked about how this occurs by defining stagflation. As an added bonus, I'm gonna throw in a historical fact: from the 1700s up until 1913 (when the Federal Reserve was created), prices in America have always gone down. And during time, we experienced the greatest economic expansion ever seen. Now you're probably wondering, what does this have to do with jobs going overseas? Here it is:
In a deflationary environment, not only would the price of everything go down, wages would also fall. I know some of you are reading this and you don't want to hear that! But that's what needs to happen --- wages, along with the price of everything else, needs to come down. This could happen, but the government is fighting hard to keep this from happening. Because the government wants to keep the price of everything artificially high, wages included, that makes it more beneficial for companies to hire employees overseas where wages are lower. In an inflationary environment, this makes the costs of doing business overall higher. Companies pay more for raw materials, property and their overall day-to-day operational costs. If deflation were to occur, it'd be more advantageous for companies to not only hire locally, but to keep their businesses here in America. With all of this talk about inflation, you may have noticed that wages aren't really going up. That's because, with companies paying more to do business in America, its hard to pay workers more AND keep up with the cost of doing business (a cost, which by the way, continues to rise) all while production and revenues are also shrinking. Some of you are probably thinking what I'm saying has no merit, so let me ask you something: How many times have you gone on eBay to shop for an item, and chose to buy from a merchant in China as opposed to a U.S. seller because the Chinese merchant's product was less than half the price? The same thing applies here.
But wages and the high cost of doing business aren't the only thing keeping companies away from America. There's also excessive government regulation. Because of the over-regulation, the biggest overhead cost a company incurs is that of hiring an employee. There are a lot of different expenses a company has to pay just to hire someone, expenses which I won't go into because that's another article by itself, but you get the point. Some of these costs are things that you enjoy having, but you'd have to give these things up if you want jobs to come back home. Congress has threatened to tax U.S. based companies who send jobs overseas, yet these companies don't give a fuck what congress says. If companies are willing to suffer a tax increase (assuming congress isn't just bluffing) just to keep jobs overseas, that only shows you how much of a disadvantage it is for big companies to do business on American soil. Do you get the point now?
Then there's also the issue of American workers being severely under-skilled. Despite paying high (and rising) costs for higher education, the skill level of American workers has actually declined a lot! While Americans are severely lacking in skills, you have people overseas learning to become the most proficient Mathematicians, Engineers, Scientists, etc. With that being the case, America has not only a lack of jobs at home to worry about, pretty soon, a lack of innovation at home could become a problem.
There you have it. That's the real reason why jobs are going overseas --- because The Federal Reserve along with the government insists on artificially inflating our economy, making everything more expensive, all to put on a charade that everything is fine and growing. But you won't see any politician discuss that. As you can now see, its in the government's best interest to get you to believe that companies are only thinking of themselves when they send jobs overseas. They aren't going to tell you that its because of the inflationary environment in which we live and the excessive regulation.
Sean T. Alexandre is an experienced investor, entrepreneur, research and writer for First Point Capital, LLC, a company formed to serve the needs of up and coming entrepreneurs, investors, and scholars who wish to reach opulent goals and stay consciously afloat in these fast changing times.
Visit Sean at: [http://seanalexandre.com]
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