Tuesday, January 14, 2014

Supply Ying, Demand Yang

They seem symbiotic, and yet ... these are two COMPLETELY different animals that have been "systemically" altered to occupy an analogous plane.

Supply of a real world commodity, whether it be natural gas, oil, copper, corn, platinum, pork bellies, coal or gold, is part of the PHYSICAL plane. Take a single barrel of oil. It is tactile and measurable, it occupies the 3 dimensions of our physical world (space) and is subject to gravity and inertia. It requires energy to transport from one place to another. It is, in a word, "real".

Demand however is psychological. It occupies the plane of thoughts and emotions and desires. The psychological plane is manipulable, through marketing, advertising and propagandizing. It is subject to "change in sentiment" for any number of reasons, including macro and micro events. It is purely a human element, not subject to the laws of physics.

This piece of paper still scares the shit out of me ...
Or ... so it would seem in a world that can provide for itself. Demand takes on another meaning out of necessity, and that necessity may take many forms.

The manipulation of demand by various means has long held half the key to the Kingdom. It's what governments, corporations, hedge funds, financial investment firms, corporatist centers of influence and ministries of propaganda do. And it has served them well, as the debt based system has grown.

For many centuries, charlatans, alchemists and metaphysical hopefuls have attempted to manipulate physical matter as well - in the manner of the "philosopher's stone", i.e. turning base metal into silver or gold. But to no avail.

That is, until we combined the two planes to form financial derivatives. With derivatives, a paper proxy can be leveraged into an unlimited supply of anything in the physical plane which people are willing to wager demand upon.

This gives us the present so called "gold market" whereby lead is not turned to gold, but rather where an ounce of gold is turned into 100 (or more) ounces of "promised gold" held to be (in the psychological plane) "as good as" 100 (or more) ounces of real gold in the physical plane.

Now, with both supply AND demand (of anything) being completely manipulable, you have the "artificial" markets as they are referred to often times today.

Let this concept sink in, along with all it's far reaching implications as you observe the incredulous markets of our modern era, and their ability to suspend market fundamentals seemingly endlessly.

Because in time we will discuss how the incredible rise of "use value" in the current international and monetary financial system (as in fiat "currency" system) is being further buoyed by the incredible resilience of "suspension of fundamentals value" (SOFV).

SOFV is the newly developing value imparted to the current international reserve currency which sustains it far beyond what might be called voluntary "use value" now gradually losing international support. SOFV commands the fear element that sustains the dollar above and beyond Another's recognition of "use value". If you do not think that SOFV has a psychological impact on China's monetary positioning, I suggest you read between the lines of Koos Jansen's recent findings.

The longer the present global IMF$ defies fundamentals, the stronger the dollar's SOFV becomes, in self perpetuating fashion. Yes, unlike those elements of the physical plane which have physical limitations, SOFV is infinitely sustainable, and infinitely manipulable as long as the laws of physics can be held at bay.

But they cannot be held at bay forever. For any battle raging between the physical plane and the psychological plane is guaranteed to have the same outcome in our human ecosystem. Human beings cannot survive on hopes and dreams and ideals alone. They must have food and shelter, clothing and other real world things which, for now, are priced using rehypothecated supply, and manipulated demand.

When this physical world of ours comes crashing through the veneer of the psychological, these prices will be radically altered.

Time will of course make this point. Wish all we want for more of it, it's supply is also bound by our physical plane.

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