by J John Swanko
11/23/10 (People Port)Chairman Bernanke's speech was an eye-opener. From the graphs, background provided, we are acting as if we were on the gold standard. Recent analysis of derivative markets could signal, we are in transition to replacing gold with commodities in general.
I covered the possibility during events leading up to the problems in Greece (see Notes). Outcomes were in line with what one would expect the gold standard to deliver. Fortunately, It is Chairman Bernanke at the Federal Reserve's helm. His speech pointed to the outcome when currencies are kept artificially low (as in France). Here is where it gets a little tricky.
Adam Smith followers -relating back to gold, assume, He who has the gold makes the rules. Popular notion. Those in the Michael Porter camp, assume a population's productivity is tied to that population. Productivity is wealth. Gold is wealth (Assuming capital flows indicate market participants choices).
On examining the Chairman's graph, it seems to indicate a deflationary bias. His argument is valid. China, the largest country with a trade surplus seems to have cornered the market on productivity, much like France took over gold (with their low currency). I can hear the gold bugs cheering right now.
A little too soon. China has taken big steps increasing wages. Her Banks now must increase capital. It appears, on the surface, these together would balance. The two problems left, huge trade deficit nations, increasing commodity prices while gross OTC derivative market value of commodities declined.
The higher price for some commodities may serve many nations well. Cocoa gives those poor nations producing it real stability, slavery surely will not find a hold, any time soon. Using anything other than productivity as a standard (I like GDP, farmers may argue for cotton production), on the surface, looks like we can assume all the negatives associated with a gold standard (or any other).
The U.S. does farm production well. If you forget how we got here, We moved production off shore to better serve our customers. We did make mistakes, Not keepping a portion of plant productivity, cutting or eliminating R&D here. These are easily solved. Many firms have reopened plants here.
This, the previous, Administrations keep auto manufacturers open. That offer was extended to transplants.
So why does it still seem market participants are acting as though we are back on some type of standard?
Markets are made of people. Those people respond to events. The big -recent- event, Our Tea Party Movement. All quoting Libertarian, Jeffersonian, Constitutional (including our Declaration Of Independence) philosophy, and the Founding Fathers.
These notions about community -entered the markets. Those arguments left out the -correct- unemployment associated with each. While I am sure a Hamiltonian approach (i.e, factories spread across the land, allow farmers to increase income during bad years) may have its own downsides. As we see in China, Their conversion to capitalism, has kept their people employed, there standard of living increasing.
If one listened to the Tea Party members, as they were learning the politics that gave them a voice, you may have heard some very American sentiment. One example concerned ACORN. A young person commented at a leadership get-together, I have nothing against ACORN, if those reports were right, ACORN served a valuable function. He liked them because they were a non-government entity. He did not like the perception, It is Okay to break the law. It did well, encouraging homeownership.
We just spent a small fortune on political campaigns. More than enough to create a gold standard, any other perception.
Note:
Did not want to run this article. Thought the same thing when I ran China, US tensions Could Result In Gold Bubble Burst
Article by
People Port
Did not want to run this article. Thought the same thing when I ran China, US tensions Could Result In Gold Bubble Burst
Article by
People Port
Copyrighted, 2010, J John Swanko, All rights reserved. This work is licensed under a Creative Commons Attribution 3.0 Unported, It may not be published, broadcated, redistributed, rewritten, without meeting the terms and conditions.
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