Could the weak dollar have the effect of reducing the incentive to outsource capital and labor? If so, would that create a political incentive to maintain it through monetary policy? Declan McCullagh writes (on ZDNet):
“Because U.S. tech firms have been shifting operations outside the country, a weak dollar means that those facilities are more expensive to operate and that those workers cost more to employ. Seagate has moved some hard-drive manufacturing overseas, and Advanced Micro Devices’ next microprocessor fabrication facility is being built near Dresden, Germany. Intel said in August that it would build a microprocessor-testing and assembly plant in the Chinese city of Chengdu, following one it already operates near Shanghai.
“Over time, a sliding dollar will reduce the cost savings U.S. firms might enjoy when moving operations overseas. This may help employees of technology firms in the United States in the short term, of course, but not shareholders, who will not gain as much value, or consumers, who will pay higher prices.”
