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Currency, Deficit and global economy

02/04/2018
The ideas about trade deficit and currency value importance are left overs of times of national and marcentile economies, where commerce and capital flow was limited and restrained. (historically the last marcantilism was the British colonial empire). This times are long time over, even if prevails certain nostalgia in GB for those times. (viz. Brexit). The global markets and global capital took over the lead, (unless some crazy president will be successful turning back the time). In global economy the capital flows to places, where primarily it promises highest political and legal security and stability, and secondarily it promises the highest yields. This is why US can maintain its huge trade deficit already three decades, and China has outflow of capital. This may change if the position of US dollar will change. There are several threats on the horizon, that may endanger the US dollar position. The most important is Trumpamania. But there are others:
A. The first and imediate threat is making the Chinese RMB a freely convertible currency. On one hand China measured in merchandise production performance, has become the biggest economy in the world, yet it always will be an underdog to US or Euro based economies, until its currency will not be freely exchangable and its exchange value will not float freely. What gives strength to US and the European economies is not their production capacity, (that is still there even if not fully used), but their financial system, supporting their markets.
B. The cryptocurrencies. Even if still marginal, and all the governments and financial institutions try to keep it marginalized, the idea of blockchain and smart contract technology can become a leading intermediation tool as value of exchange. I can imagine an economy, based on idea of barter commerce, where no intermediating money is involved, and products are exchanged against other products, for contracted exchange value, without money as intermediator. I heard about a platform, where plumbers, electricians, any other kind of technicians, dentists, cleaning ladies, etc. exchanging their services as mutual help. Instead of price, the exchange value will be agreed in blockchain-smart contract system, eventually the exchange value of different products will be normalized, exactly like the exchange value of currencies, and there is no need for price. But this is just one idea among many others, that can appear in the new crypto-backchain-smart contract economy. 
Of course it would have catastrophic consequences to the banks, but also to the governments, who will have difficulty to collect taxes, and their (banks and governments) monopoly on money creation will be endangered. In Davos we could see the carefully formulated reservation of major representatives of the existing financial system, to what is happening. But it seems, since 2008, the fraud foundation of the existing monetary system was exposed to the public, that felt to be deceived, and reacted with refusing to continue to accept the legitimacy of the existing political and social system, based on tight collaboration between the governments and the financial barons and big publicly traded corporations management. It resulted Brexit and Trump, but also the new phenomena of cryptocurrencies, and investment platforms of crowd financing, that became certain alternative to the existing financial institutions. It seems no power can push back the Genie to the bottle.
3 Comments
  1. Nice!…that platform of free trade amongst tradespeople sounds interesting too! Real solutions require real (analytical) thinking.

    Unfortunately not all politicians ate REAL thinkers and only do patchwork….or in some cases, just strive to remove work done by others to selfishly create a legacy for themselves only…

    Like

    • If such a platform wouldn’t exist, i would create it myself as a startup, or someone could pick up on it, and share with me the start up, for the idea. As to politicians it is becoming worse and worse from one election to other. Mainly in US. Bush was a catastrophy, Obama a failure, if compared his performance to the expectations from him. He had at the beginning of his presidency the super majority, in the Senate and the Congress. And waisted it on negotiations with the Republicans who wanted only one thing, to see his failure. And he gave them just what they wanted. Trump is just reaction to disappointment from Obama. Those who want change, that would give chance for future generations to live a decent life, after nominating Hillary Clinton, they just abstained from voting.

      Like

      • Well said and unfortunately the politics gets in the way of real work – agree 100%!

        Good luck with investigation into the platform and let me know if you need help promoting it if you were to get into developing one! We are always happy to promote things that actually serve a useful purpose :-)

        Like

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