THE GLOBAL FINANCIAL SYSTEM: TO PLOUGH INTO GOLD OR TO PLOUGH SEED?

Hi Rick,

Again, as I've repeatedly stated in the past, it is certainly possible to make gains by ploughing fiat currency into gold, implying a speculative ploy or that gold may prove to be, in the coming years and perhaps decades, a store of value with respect to obtaining goods and services in the global market in the future, or some combination of speculative ploy and store of value.

No doubt that policy-makers, especially in the United States, to a lesser extent in Europe, have debased the currency, with real inflation rates of probably 10%, perhaps higher, instead of the stated 3% or so.

Let's look at a few fundamentals.

The leaders of the one-party Chinese hold something like 1,300,000,000 people under their sway, the population is relatively young, they are growing, they are educating themselves in fields like engineering, and they are industrializing rapidly.

The leaders of the United States have around 300,000,000 under their sway, the population is aging, and though the economy is officially growing the industrial base is not self-sufficient, being geared towards a few high-tech industries (many of which dedicated to an aging population), housing construction, and services (including financial services - like you and me), and relatively few people pursue the hard sciences (like you and me) and a significant portion of those that do are foreigners from east Asia.

Similar statements can be made of Europe. We can also say of the United States and Europe that any population growth is based on immigration from regions with poorly educated populations (Latin America in the case of the US, Africa and central Asia in the case of Europe).

The Muslims, and other "problematic" countries like Venezuela, still sit atop what is still for now the most economical source of energy.

The east Asians and the so-called West are both cooperating and competing in the process of determining the new allocation of global industry and division of labor, not to mention wealth and political power. Meanwhile, the Muslims seem to hate everybody.

The global industrial system can only go so far as the real economic cost of energy for production and transportation: it would be useless for the Chinese to produce shoes for the world and for the US to produce corn for the world, for example, if we do not have the fuel to ship the goods to one another.

Politics, and sometimes war, determine the global allocation of resources and political power itself.

Now, the financial system is also to a large extent a function of the economy of energy as well as political economy.

Yes, the world is transitioning, and gold may be a profitable speculative ploy and/or store of value during the years of the transition, or it may also prove to be one vehicle of speculation and/or store of value competing with many others, recently the housing market, previously the stock market.

There also used to be something, and there still is something, known as forming and running an economically viable enterprise, producing real products and services, as an ongoing concern, based on hard work.

Do you or any American or European or Japanese (or even an African or Muslim for that matter) really relish the idea of being second class citizens in a world dominated by an east Asia-based global Chinese empire? Think about the 1,300,000,000 for a moment: they could send a 1,000,000-man army like throwing water at flames. And then do it again and again and again while the fuel to fire the flames runs out. It would be like another Flood, in terms of the vicissitudes of the various human civilizations that have come and gone throughout just recorded history; it has happened before and it is likely to happen again. But so what?

So this: the question is, from the US or European or Japanese perspective, for example, to what extent do we believe in our own ability to maintain productive enterprises on our own soil, to discover and/or invent new forms of energy, renewable energy, and protect that technology from those that would do us harm?

No doubt the war-based strategy to seize oil assets has been a disaster for the moral fabric of the US and all which that implies for the industrial and financial systems. There really were and are better alternatives, but we are governed by the powers that be, whether we like it or not, and so, as individuals, we better learn to like it, just as a matter of personal peace of mind, even as we seem to be gearing for a shooting war with the would-be Persian empire, aiming to expand to the shores of the eastern Mediterranean, like it did in the days of old.

Are we heading for a corporatist fascist system in the US and Europe? As a matter of a global trend, in the face of Chinese competition and some of the other phenomena we have been experiencing and reading and writing about, it indeed may be the case. So what? This is the underlying trend in the cycles of history; democracy, whatever that is, is the exceptional cyclical peak, not the norm.

I have always firmly believed that the best investment is in one's own culture, the product of real work, real love.

If by doing this we can also contribute to the world so much the better. If not, it really is none of our business anyway.

To answer your query in more "concrete" terms, then, it may not be a bad idea to allocate one's surplus money a bit into Asian currencies (the yuan in particular), gold, energy exploration, and good old-fashion, economically viable, producing enterprises, no matter what means of exchange they use, while at the same time hoping that the global energy and financial systems hold up and that the US army doesn't, at the least, lose the war.

Because, otherwise, even if you "invest" in gold, if there is no underlying global energy and industrial and financial system in which the US remains a major player, what are you going to do with the gold you "invested" in, grow tomatoes in your back yard? Because, in that case, it would have been better to plough your excess money into an investment in good old-fashioned seed, because growing tomatoes in our back yards would be what we would need to do to survive.

Thanks for the stimulation to write something meaningful.

Sincerely,

Steve