Outsourcing helps emerging economies by providing more jobs for their country. A large corporation may decide to outsource their manufacturing in order to save hundreds of thousands of dollars and sometimes millions. The value of the currency is what will make the largest impact on a corporation. It would cost one tenth of the normal labor wages to manufacture in a country such as India versus manufacturing in the United States. The wages the corporation will be paying the local people in India will be equivalent to what the US workers would have made but cost a lot less to do it. Many people in the United States frown on corporations that outsource. I personally do not see it as a negative; however the loss of jobs from the corporation leaving the country could cause some issues. This is where corporate outsourcing may or may not help them develop country it is leaving.
At first glance it seems the corporation is costing the developed country or let’s says the United States, thousands of jobs. Americans will begin thinking that these thousands of people are now left without a job but then the corporation hires thousands of non-Americans. I can see how this can be bad PR in the United States. There are a lot statistics and research’s that support outsourcing for the developed country. Many say that the re-movement of the corporation will open up doors for the employees left behind. In fact the majority of jobs in the United States is created by small businesses and the outsourcing will provide a much lower price of products to sell which also combats national inflation. Patrick Dixon form Global Change stated that “research shows some of the new economic activity generated in developing countries by outsourcing will generate new demand for goods and services in the country where the jobs have moved from the developed countries. It has been estimated that every dollar that US corporations spend on outsourcing to India gets $0.33 cents and the US economy benefits by $1.14.”
The gold standard monetary global system was the most prolific system ever created. From 1870-1914 the gold standard showed large GDP numbers around the world. Practically every country was showing growth in numbers not comparable today. In fact the comparison is not even in the same ball park. During this time, actual gold coins were being used for sell and trade. Most of the countries in the world had the same currency “gold” and would have no problem investing in other countries. GDP high numbers were a norm back then with percentages as high as 6-9% with various countries seeing even higher. Let’s look at China’s GDP before their recent crash; they were at a steady 7% and 9%. This was looked at by the world as amazing and un-speakable growth. Well before World War I, these numbers were the norm for every country. The gold standard is recognized as the most perfect system ever created.
The Bretton Woods monetary system was created after World War II and to address the economic difficulties some countries were partaking in. This system was to establish commercial and financial relations among countries in 1945. I wasn’t until 1971 when the United States terminated the convertibility of the USD to gold which is known as the “Nixon shock” and ended the Bretton Woods system. the USD was considered a flat currency while states began reserving the US dollar. This began a process of free-floating currencies, the US dollar and the Britain pound began the Floating Rate System where the market forces are what determine the exchange rate between two currencies. The floating system naturally adjusts and is isolated from shocks created from other countries. This gives government’s economic independence without the effects of external economic performances.
As we all know, China has seen better days. The stocks in China have fallen so hard that it is said to be the “weakest economic growth in a quarter century.” The yuan has continued to depreciate while the world is wondering if they will be dragging the entire world down with them. The economic exposure is so severe, people have worried about the end of days or the end of the world. For those reading these words who live in the United States of America, China’s collapse will not put us in a worse economic position. The United States is a $15 trillion dollar economy; that is $15 trillion coming in and $15 trillion going out. The business Unites States has with China is only $150 billion, not to say it’s not a lot of money, but $150 billion dollars is only 1% of our economic prowess.
The economic exposure has set Hang Seng China Enterprises Index on a trading level that puts a lot of pressure on future options mostly held by large banks like Bank of America and Merrill Lynch. It is possible the investors will begin to lose their principal if the levels of stock continue to fall. The stocks are predicted to fall even faster very soon. The large banks will respond to this economic risk and sell their futures to reduce their hedge. William Chan, the head of Asia Pacific equity derivatives research said “as the market goes lower from here, the downward move may accelerate. There will be a large amount of hedging in futures which dealers need to unwind.” The economic exposure could be seeing more economic crashing in the near future for China. We can only hope China will listen to the market and use their prideful communistic pressure against the market.
Investing in the biotech industry will take an aggressive investor at heart with the patience that will last a long time. The biotech industry takes about 10-15 years of development and research to complete, compared to the Pharmaceutical industry which is typically half the time to the end result. An investor in the biotech industry will have a blind period of testing as the company uses research and development. There seems to be high risk involved for the investment of biotechnology. As an investor it is hard to compare profit ratios like net profit margin, return on equity, and return on assets. The main reason these ratio will not help an investor make a decision is because the biotech company will not see the profits until they are successful with the end product. If the end product is deemed successful, the company can see profits of two and three times. However, if the company’s end product is not successful, the company can lose just as much as it can gain. Typically the biotech industry will use ratio’s such as price-to-sales ratio which is the value of each dollar of a company’s sales and revenues. Ultimately I would consider investing in the biotech industry to develop a chemical-based compound to reduce the effects or onset of Alzheimer’s Disease because if successful, the investment could prove very lucrative. I will also be seen as someone looking to better the world.