Friday, July 7, 2017

Welcome ...

To the REAL world ... No matter how the masters of our derivative world try to shape global events through their derived futures probability system, the real world keeps interfering through the cause and effect of a most improbable "here and now".

Exorbitant privilege spawns a global "consumer class". Exchange rate opportunities send production to relative low wage countries. Wages and opportunities for the consumer class dwindle as their economy is drained of equity. Producer economies see substantial wage growth. The world transitions to new systems, new consumers and a need for new "relative low wage" producers.

When the American people are truly ready, they can again be the world class super producers of the WWII economy, without WWIII. But their "relative production cost" (including labor cost) must be weak in oil and gold. That is to say, as priced in real world necessities, not paper.
... all economies today are truly equal in production as the exchange rates are the manufactures of profit!"
Where productivity is relatively equal, labor arbitrage is the profit opportunity, and exchange rates "manufacture" that profit.This is true of course if and when the currencies are "still working."

As the currencies stop working ("as they always used to" - a relative term) it will become more and more meaningless to compare them to one another, or to real things. Then we will compare real things like "relative production cost" to real things like wheat, gold, pork bellies and oil, and these calculations will then re-inform us of a national currency value.

The point being ... the 8 key factors which most impact exchange rates today have little to do with available resources and comparative production costs. These will be key factors tomorrow. What is this country's available energy, wealth and food resources and their capacity to maintain flow of same? The military is a factor here.

The American economy is ripe for change. The companies, and the workers have no interest in gold, and the factories can run on cheap shale oil (compared to what will be expensive foreign oil). The question is, will the American work at all? And if he doesn't, what will his dollar debt be worth?

In the end, if a Malaysian will work hard all day for six meals and a roof over his head for 2 nights, but an American will only work half an hour for the same things, how can the American currency unit be worth so much more? We don't ask that question today. But tomorrow - other factors be damned - we will.

We are lucky, some of us, to escape the real world for almost an entire lifetime. Once in a lifetime, to reprice this world and reset reality, is enough.

6 comments:

  1. One of the stimuli of internet content I truly appreciate is your column. You are a good hiking companion.
    When I look at the Real World, I see that sheeple do or do not have employment(happiness in slavery). On a grand scale it doesn't matter. Social services supply existence-enabling provisions for sheeple who don't have work. For 'intellectual' needs of the masses, MSMedia supplies content individualized to feel 'special'. Anybody can be an electronic hero. And if the sheeple are hungry and difficult, the MIC will be delighted to help.
    So, the re-set will not be initiated by the masses.
    At the same time, the lions have their meetings, and behave in concerted manner. Hey, there's still plenty of real assets to be made with the 'trickle up' banking system of compound interest, right?
    The lions' tool is the US dollar (incl. its exorbitant privilege of 'creation-out-of-thin-air'), but make no mistake, for the lions it still only is/was a tool.
    When will 'they' let the $ crumble? Many think when there is no more 'trickle up' for the lion cabal or when one of them lions goes psycho, throwing a greed tantrum for not being able to acquire the shiny.
    I go for the latter. Lions are cats and cats can go a bit psycho.
    F.O.E.

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    1. Always the discussion is stimulating ;0)

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  2. "In the end, if a Malaysian will work hard all day for six meals and a roof over his head for 2 nights, but an American will only work half an hour for the same things, how can the American currency unit be worth so much more? We don't ask that question today. But tomorrow - other factors be damned - we will."

    Let me rephrase that: "we" ---much more than enough pundits and commentators--- have asked that question for well over 3 decades. F.O.E. above has identified 2 parties who won't transition the currency and trade system from current nominal factors (the 8 quoted) and geopolitics, to one reflecting/rewarding the most efficient, prudent and preserving resource usage (a rephrasing of "available energy, wealth and food resources" and "relative production cost") --- neither the poor welfare class nor the elite welfare class. I can submit that "the Malaysian" / Eastern / Southern shop worker and the dwindling Anglo-sphere middle classes also won't, they've been boiled soft for decades. Eurozone won't go "rogue", they've set up the € to handle "both worlds" sufficiently well within the common market. I see Russia/China as "doing better" accumulating at production costs than repricing their stash for "half an eternity if that's what it takes". Dollar hyperinflation doesn't help the rest of the world if it means even exponentially more dollars than today for exports. Dollar-only hyperinflation against gold-only helps in as far as that bullion is imported from and flown out of the US.

    Best bet today is gulf countries with LBMA holdings having or faking a serious spat, demanding delivery "for geopolitical worries" reasons and energy-pricing-system transition.

    Energy (current and future flows-not-stocks) prices the currencies and the assets in a roundabout indirect manner, no?

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    1. It may well be that the so called factors which impact exchange rates are different than what they say they are. It is a world of illusion - a derived world - that imparts "value" in many ways.

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  3. These will be key factors tomorrow. What is this country's available energy, wealth and food resources and their capacity to maintain flow of same? The military is a factor here.

    US have an abundance of all three. While energy and food are self-explanatory, US 'wealth' is in the ground, ready to be extracted when and if needed.

    While understandably current IMFS and $ hegemony can't last forever , it doesn't change the fact that post needed adjustments, dollar will still be 'primus inter pares' of modern currencies.

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    1. In our lifetimes perhaps, but thoughts about value and wealth can change quickly. Dollar denominated contracts can keep many lawyers and accountants busy for many years as they rush to become "something else".

      "Gold priced in the thousands of USDs does not change this currency, it changes your perception of wealth"

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