Most people I know who’ve paid attention and lived through the 60s and 70s know that you don’t borrow money to fund a war!

We’re living well without.

Charles
Walla Walla

Different between 70’s and now:
70’s inflation was internal. NOW, the entire world is “expanding” ( except US : India, China etc) and comsuming more and more “stuff”. 20 yrs ago no one in China had a car. Now they want Levi’s , soybeans, oil etc and BTW – they are doing fine. Did you see the show on PBS ( Frontline ?) where they visited India. They went to the IT center – Bangalore where they spoke to all of the remote support IT folks that “stole the laid-off Americans jobs” ( how it was worded to them). Those folks said ” Well it’s too bad – that’s they way it has always been and NOW that we’re growing and the US isn’t you think WE should feel bad ? ” TOO BAD. Sorry.

For your guest that says that it is “good for us to comsume less oil”. I agree but does he propose that we SHOULD have done this ( by raising tax) 10 years ago ? As for US vs Europe oil consumption/prices , Europe decided LONG long ago to build train infrastructure – we didn’t. Tell someone in Kansas that you want to cut back on gas by doubling the price of gas ? He uses a LOT on his farm and to even get to the nearest town.

I’m in IT field. My last two companies outsourced IT support to India where:
$5,400 = Average annual entry-level salary for Indian information technology graduates.
If you did not see this show, check it out:
http://www.pbs.org/wnet/wideangle/episodes/1-800-india/data-india-america-and-outsourcing/104/

Ask your guest how “the demand” will soon cause my salary to go up ? Looks like I made a mistake by getting into computer filed, huh ? Should have stayed in warehouse work rather than going to college.

I’m in IT field. My last two companies outsourced IT support to India where:
$5,400 = Average annual entry-level salary for Indian information technology graduates.

I’m not sure what your point is (or what it has to do with inflation) but doesn’t the $5400 / yr Indian have just as much right to that job as you do? Americans seem to get upset that Indians and Chinese are taking “their” jobs – but what makes these “our” jobs?

Another thing – I’m an engineer and I’ve been on the interview teams for my last 2 companies, hiring mainly scientists and engineers. We’ve been hiring a lot of Indians and Chinese. Why? Because we only want the best people with the most advanced skills and we can’t find enough Americans with those sorts of advanced skills!

Yet here you are, an unemployed IT person. You could become a software engineer – you could learn some advanced skills like signal processing or database design or the math used in 3D graphics – matrix math, ray-tracing algorithms, etc – and you’d be hirable, and at a fat salary, too. And the great thing about software engineering is that you don’t need to go to school. They didn’t have ANY of the things I mentioned above when I was in college so to keep my skills up I’ve been going to bookstores (which we have a lot of in the Boston area, including good college ones!) for years and attending the occasional night class and I haven’t been unemployed in 30 years – not that this couldn’t change in an instant, but if I did lose my job I’d have more time to study new skills!

There is no question that inflation is a more pernicious threat than a mere recession. In a recession you might lose your job but you’ll get a new one when the recession ends. However you cannot recapture the lost value of your assets. People who have been dutifully saving for retirement for decades could have their nest eggs wiped out in a few years of high inflation.

The US central bank (the Fed) is unique among the central banks of major economies in that its charter does NOT place fighting inflation at the top of its priorities. Instead, it has dual (one might say cross-) purposes – fighting inflation AND encouraging growth.

As others here have pointed out, we have fewer weapons to use against inflation today because much of it is generated by outside forces. But the US IS still the world’s largest consumer economy so a tightening here will reduce demand somewhat, and coupled with the EU apparently slipping into recession, would probably help reduce worldwide demand, thus undercutting inflation. Furthermore a Fed interest-rate increae would strengthen the dollar (because dollar-denominated interest-bearing securities would be more attractive) and that, too, would reduce inflation. A domestic recession would also reduce upward wage pressure, which would help fight inflation. So for all these reasons I think a Fed rate increase would be a good idea.

The current economy really is the “school of hard knocks” that was the alma mater of our grandparents who grew up in the Depression. And a degree from that college might be quite salubrious for our economy.

Among the lessons taught by that esteemed institution are:

Save up. For years Americans have had the lowest savings rate among the major economies. In recent years it has been, for all practical purposes, zero. This means that few Americans have a cushion of rainy-day funds to fall back on if they become unemployed.

Never (or hardly ever) a borrower be. US consumer debt is at record highs and is used to fund everything from cars to vacations to TV’s to school. And even items, such as houses, which may actually require a bit of debt, were funded foolishly, with little or no down payment, “interest only” mortgages, and hallucinatory ideas about future price appreciation. And proving that we have a government “of by and for the people”, our federal debt is also sky-high and Americans don’t care at all about this! We truly deserve the government (and currency) we get.

Live frugally. You don’t need to have the latest, best, newest or most fashionable item. And some things may be bought used. Drive your car into the ground, repair rather than replace, and if you can’t afford something don’t buy it.

Work hard and compete. The dirty little secret of US jobs going to Indians and Chinese is that it’s not merely a matter of money – they are producing more people with the skills needed for the future in science and engineering. Hard-science and engineering programs in US universities are actually declining and our grad schools are filled with foreign students who value advanced education more than Americans.

I hope in a few years, when Americans in their tattered caps and gowns graduate from the hallowed halls of the School of Hard Knocks, they will have learned a few lessons.

I agree with Mr.Neslon, people should stop whining about jobs going to India and China. By the way they are dealing with a rising economic classes as well which in turn is making them less competitive.

Guess who’s competing with the Chinese, Vietnam and Thailand to name a few. The cost of doing manufacturing in China has gone up a fair amount recently.

Boston IT person your whining is not going to find you a job. I used to work in web design, I am not working in that field anymore due to the same reasons your stating.

Did I whine about, at first I had some of the reactions you had. I went back and trained some more, but after the tech bubble burst it became clear to me that web design was not a lucrative avenue for me.

If your smart enough to learn programing do it.
If not there is a shortage of plumbers, electricians, and HVAC technicians. These are jobs that can’t be outsourced and they pay well, very well.
The last time I hired a plumber it cost me $85 per hour.

Not saying you should become a plumber, but IT jobs are going to be history. The only job growth in this country is in the high tech, medical fields and the service industries.

If not there is a shortage of plumbers, electricians, and HVAC technicians.

I’d like to second this. My wife and I are currently having major renovations done to our house – new windows all around, reconstruction and alterations in our garage and basement, and some redesign of our kitchen that will requite skilled cabinetry. We’ve had nine contractors come over to give us quotes (three for each job) over the last month and so far we’ve had THREE quotes, total! The rest all say thay are so swamped that it will be awhile before they even get the quote in. One contractor we contacted(Maynard Door and Window) said and they can’t even send someone around to take measurements for a quote for 3 more weeks!

Building trades contractors are just swamped with work right now! I would have guessed that with real estate and new construction in the dumpster, and people finding it so hard to get financing for home improvement, building trades would be sitting around waiting for the phone to ring, so
since my wife an I are paying cash on the barrelhead for all this we figured to take advantage of the situation. But no – there is no recession in residential carpentry, plumbing, HVAC or electrical work right now in my area (Rt 495 NW of Boston)

IT jobs are going to be history

I think there are certain categories of IT work, or quasi-IT work, that will remain.

1. Local server support. Any company that maintains lots of servers and networks and video-conference facilities needs on-site people to support these. At my company our servers are in use 24/7 supporting a worldwide network and they have a staff for this.

2. (quasi-IT) Tools support. The tools that we use to do our jobs – sw build tools, source control, database software, etc, need to be supported. This does not require hard-core programming (e.g., C#, C++) but it does require the ability to write simple shell scripts, install patches, and configure the tools (e.g., Clearcase), and help the R&D staff configure our systems and get out of inevitable jams.

WRT web design – the cheap, cookie-cutter part of the market (which is the bulk of it) has fled to Asia but the premium work will always stay local. This is because to do a seriously good web design you need to meet with the client, understand his/her business and his customers and work regularly with him/her to keep the site fresh. Also, it requires lots of collaboration with graphic designers, ad agencies, etc, because modern web designs are integrated with other company media – ad campaigns, letterheads, logos, marketing material, etc. These things just can’t be done remotely because they require lots of human interaction.

WRT web design, true to a point.
I worked for years in this area. What happened is that everyone wanted it done for less, designers who could not do programing were squeezed out.

I have not done this kind of work for years, but I have a few friends who still do. Most are having a hard time and there rates have dropped a lot.

Your right about the high end work, but this is still being farmed out.

I know a Chinese web designer, who lives here but deals with Chinese designers and programmers from China. This person contracts worth are just as good if not better than programmers and flash designers here in the states.
They get less than half per hour for the same work and her enterprise is thriving. She does the front end work and the grunt work is done in China.

Sorry for the typos…

WRT web design, true to a point.
I worked for years in this area. What happened is that everyone wanted it done for less, designers who could not do programing were squeezed out.

I have not done this kind of work for years, but I have a few friends who still do. Most are having a hard time and there rates have dropped a lot. These freelancers are hurting. I left this arena due to the issue of companies wanting one person to do the job of 2 or 3.
This is not only dumb, it’s not cost effective due to all the mistakes that are made by overworked ‘web designers’.

Your right about the high end work, but this is still being farmed out.

I know a Chinese web designer, who lives here but deals with designers and programmers from China. The people this person contracts with are just as good if not better than programmers and flash designers here in the states.

They get less than half per hour for the same work and her enterprise is thriving. She does the front end work and the grunt work is done in China.

The unemployed IT professional in Boston makes a good point.

Global competition for jobs is putting a downward pressure on many people’s salaries in the US.

Information Technology is not the only field that is off-shoring major high skill tasks. Accounting, legal and investment banking analysis fields are increasingly sending high skilled jobs offshore also.

With increased global competition for service jobs, wages in the US are stagnating, and inflation is only eroding people’s standards of living further.

I think that the majority of people in the US need to adjust their expectations. Their standard of living will keep getting lower in the foreseeable future.

They get less than half per hour for the same work and her enterprise is thriving. She does the front end work and the grunt work is done in China.

That’s a good point – I know an Indian who does that, too. The back-end database stuff is done in Bangalore.

On the other hand this could be due to lack of local (US) talent – my company had an opening for a SQL/C++ database programmer open so long we finally convinced someone to come out of retirement to fill the spot!

But it’s also true that modern websites require extensive programming – we’re long past the day when websites could be built with DHTML and CSS.

And to bring this back to the original inflation topic – one advantage of outsourcing work to cheaper Indians and Chinese is that it keeps costs down and so it dampens inflationary forces.

“Information Technology is not the only field that is off-shoring major high skill tasks. Accounting, legal and investment banking analysis fields are increasingly sending high skilled jobs offshore also.”

Very true and another category many people are unaware of is that diagnostic medical images are increasingly being read and interpreted by radiologists overseas. This is significant because a radiologist is a board-certified MD, which is as high as it goes on educational/professional ladder. This flies in the face of people who have been saying we can stay ahead of offshoring by just climbing the skill ladder.

I think that the majority of people in the US need to adjust their expectations. Their standard of living will keep getting lower in the foreseeable future.

Very true and it’s amazing how few people in the US grasp this! We live in a global economy and we are expensive.

Now, to be fair, there are always transactional costs – time delays, communication breakdowns, difficulty in monitoring QC from a distance, etc. Also, a falling dollar makes offshoring more expensive. And booming economies in China and India make it harder to hire and hold workers there. Plus Indian and Chinese wages are rising rapidly. And the US is more politically stable and has a more predictable legal framework. So for all the above reasons, domestic companies will still be willing to pay a premium to keep the work here, but just not the premium we’re used to.

My wife and I are both high-tech professionals for different companies and we’re been amazed for years that our jobs haven’t been offshored. But we’ve been preparing – we’ve got our living expenses down to 70% of the lower of our two salaries (mine) and we’ll have our house paid off in 2 years which will knock it down some more. We’ve been working on this for years! We simply cannot believe that our contemporaries can’t see the handwriing on the wall.

The problem is if enough people lose jobs or if wages become more stagnant, the economy will keep falling apart.

Do we want to have a collapse as Argentina had from 1999 through 2002? I don’t think so.

It’s great that Mr.Nelson is hedging his bets, but if a collapse on the level of Argentina’s happens this wont help. At least by paying off the house he wont become homeless.

The other issue is that the vast majority of Americans are not as prudent as Nelson is. He sounds like the ant from the Grasshopper and the Ant children’s story.

I think we should all be downsizing and living within our means. Of course somethings are designed to keep us spending. Computers for instance, we have to buy new ones every 3 to 5 years, keep upgrading the OS’s and so on.

In my area I don’t see people downsizing there cars, yet the price of gas is not going to go down much. It seems to me that most Americans seems to thrive on the reptilian part of our brains.

It will be interesting to see how this all plays out.

Everyone should read this article from Sundays NY times
http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html?ref=magazine
about Nouriel Roubini who is an economics professor at New York University. He predicted the exact conditions we are experiencing now 2 years ago.

Actually, the IT outsourcing era is ending. The cost of an engineer in India has sky rocketed over the last several years and comes now to (roughly) 35% to 65% of comparable local (i.e. US) one. China is not there yet, but the trend is very similar. The real issue, though, is quality. The quality of the code produced by overseas engineers remains questionable – and for a bunch of good reasons. So, believe it or not, a lot of American companies are actually looking at bringing the IT work back home. The trouble is, though, there is not enough qualified engineers in the US to fill in the emerging jobs. And the numerical caps on work visas and employer-sponsored green cards are not helping at all.
One can argue that there has been (or still is) a way of layoffs in large companies (not only financial ones, but also the IT enterprises like HP, IBM or EMC that sell massively to those financial institutions). This is a valid argument in itself, but the truth is that almost all the engineers laid off by those big monsters were almost immediately hired by smaller start-ups and growing companies.
The crash of the real estate market, among other things, pushed investors towards alternatives, one of which is the venture capital funds. This, in turn, caused a hight tide in start-up investments, which translated immediately into accelerated hiring.
Prof. Bodie has mentioned that there has to be sectoral wage growth and it looks like one of such sectors is the IT (or, rather, high-tech).
I am not suggesting that we are approaching yet another round of go-go-90-s, but I do not see a sustained living standards decrease among real IT professionals either. I would say that we have experienced a certain correction, which is somewhat normal to the market, but in a longer run we will probably see a plateau followed by moderate growth.
This all said, I must admit that the inflation remains the biggest risk and challenge, while responsible fiscal policy becomes a paramount in battling it. Which brings me to the real question that has to be asked during these coming elections: is the person and/or party people are casting their voice for a champion of fiscal responsibility, or an agent of uncontrollable spending. In my opinion, the right answer to this question will determine not only economical, but also geo-political future of each and every American and the US as a whole.

“The trouble is, though, there is not enough qualified engineers in the US to fill in the emerging jobs.”

Yes! this is very true. It’s a huge problem – I’ve seen projects languish because we simply cannot fill the open req’s. And now we’re at a point where older engineers and scientists are retiring (I mentioned above that we managed to drag one database expert out of retirement, and thank God for that!)

Engineering jobs are great jobs with good pay and benefits, flexible hours, and the opportunity to work on really creative tasks and solve interesting problems. Those of us who are science and technology geeks often feel like we’re being paid to do our hobbies. If I ever get laid off I’m sure not going to stop programming or designing circuits.

It mystifies me why kids going into college are majoring in political science or art history (or whatever) and graduating with $40K of debt and no job when they could have better pay, better job security and more interesting work. My theory is that US parents and teachers don’t have a CLUE what engineering and science actually consist of so the kids never get the message.

It mystifies me why kids going into college are majoring in political science or art history (or whatever)

Not everyone is smart enough or even if they are interested in this field. Getting an art history degree is maybe not a great idea. There are other degrees, such as political science, which is great if you want to go into government or law. Not everyone can be a IT geek.

Well, being myself a geek I used to wonder, why would one go into an endeavor of a history or political science degree. Things like this seemed to me pretty useless – up to a point when I realized that in this country a lot of kids actually pick the college based on the colors of its athletic team uniform. So, the question of usefulness (or lack thereof) of their major does not even approach their mind until graduation. That’s when they realized how deep into trouble they are. Guess what they do then – at least the smart ones. Right, they get an MBA degree and manage the geeks (or should I say herd the sheep). No wonder, they fail spectacularly most of the times, but since their bosses usually are no better, they survive and prosper.
If there is anything that is going to bring to an end American leadership in the area of science and technology, it is the waste incompetence of the middle management.

I think making sweeping judgments on the degrees people choose when they are 18, 19 years old is absurd.
Most people will end up in jobs that have nothing to do with the degrees they went to college for.

Like I said not everyone can be a programer.
With all due respect Ilya your response shows me the reason that we need people with well rounded Liberal Arts degrees, you show a complete lack of imagination.

Good managers should probably have a major in Psychology and Political Science, and then get an MBA.

Bad middle managers say more about the company then anything else. If they hire idiots then this is what happens.

If you want to become a lawyer majoring in Philosophy would be a good idea. I can see some of the people who put down Liberal art degrees calling a degree like this useless. Far from it. A good trial lawyer better had better able to debate issues clearly, logically and rationally. The best pre-law school method to learn how to do this is in good Philosophy class.

Not everyone is smart enough or even if they are interested in this field. Getting an art history degree is maybe not a great idea. There are other degrees, such as political science, which is great if you want to go into government or law.

But how many of them actually do go into government? What I see among many friends’ kids is lots of humanities and liberals arts majors who graduate and don’t know what they want to do with their lives.

Look, I think humanities and liberal arts are great topics. I’m also an artist and poet, and I fill up my iPod with lectures and podcasts on history and culture. But these are subjects to study and absorb and enjoy over a long lifetime, not preparation for a career unless you’re planning to get an advanced degree and teach or do original research.

The fact is that the world of the future will require great advances in science and engineering, and those who can supply them will have a bright economic future. And I think a LOT more kids are capable of success in those fields provided that . . .

1. They discover while still in K-12 how much FUN it is to create or discover something on your own! Kids today get too many of their experiences pre-packaged.

2. They are willing to WORK hard. Edison was right that “Genius is one percent inspiration, ninety-nine percent perspiration”. We have a society of ADD kids who can’t stay focussed long enough to compete with the Chinese and Indians.

I think making sweeping judgments on the degrees people choose when they are 18, 19 years old is absurd.
Most people will end up in jobs that have nothing to do with the degrees they went to college for.
. . .
Good managers should probably have a major in Psychology and Political Science, and then get an MBA.

I think the reason why kids end up in jobs unrelated to their major is because they, or the adults advising them, did not give adequate thought to choosing a major.

I totally disagree with managers having PoliSci or Psych degrees – those fields just do not have enough useful systematic knowledge to inform day-to-day management decisions. I think managers should have a degree in a discipline related to whatever project or task they are managing. For example, my boss has a PhD in Physics from Caltech, (but, of course, he’s had management training, too) and is managing a team of physicists, mathematicians and engineers. We think he does a great job.

I would also add that a key requirement for management success is that the people being managed respect the intelligence of the manager. Since engineers and scientists tend to have more respect for engineering and hard-science disciplines I don’t think you could have much success managing them if all you had was a humanities degree with an MBA. I’ve worked in this field for 31 years (and about 6 companies) and I think almost all my bosses were from hard-science or engineering backgrounds, and generally they’ve been good-to-great.

Your talking about a very specific area.
I was being more general and I was not talking about IT or tech. I was talking about broader businesses.
I think that having knowledge on how Psychology and politics work is an asset in being a manager. Again it’s a broad idea.

If your in a job that you went to college for good for you. Right now the idea of a job for life is over.
What I was speaking to is the idea of having a good inquisitive mind and to be flexible so can move to different jobs. Having a Liberal Arts Degree is not the issue the issue is kids who are just not using there minds.

Your in engineering so it’s a no brainier that people would move up the ladder to become managers.
I bet your CEO has an MBA.

I agree with K through 12 issue however.
In Germany by the time your in middle school you know what direction your going into. Only the best and brightest go on to the Gymnasiums and then on to universities. Germany has a great tradition with trade schools so if your not the right kind of academic person then you are guided towards a trade.

We could use a system like this here.

Also as I said not everyone is cut out for becoming engineer or a computer scientist. It would be a boring world if they did. You can’t force people to do what they are not good at doing. Education is this country is a joke however and I agree with on this topic. Still I don’t think kids coming out of high school should all need to know what it is they want to be. That’s what the first 18 months or two years of college are for.

You seem to put down the idea of getting a Liberal Arts education yet you say your an ‘artist’ and ‘poet’.
The two ideas are not making sense.