Good Evening Folks,
Well now, after 20 years of contemplating the Global Economy and arguing with liberals, conservatives and libertarians, I have finally digested my thoughts down to a very simple prediction of the next evolutionary plateau in the Global Economy.
What I think is the most important goal of every industrialized nation; is to become energy independent.
That means a sustained, persistent, and abundant supply. It doesn’t matter if it is renewable or finite, as long as the supply is very long term. Certainly as we move forward, more and more of the supply should be renewable. With one notable exception, Fusion, Fusion is not exactly renewable, but the fuel source here on Earth will last for billions of years. Anyway disregard for a moment the method we will need to use, let’s just say that Energy Independence is the goal.
Once the major Nations are all off the international fuel markets it will free currencies to float. Many people erroneously believe that money should be “backed’ by a commodity, this is one of the worst things that can happen. In most of the world in the last several hundred years it was gold (actually throughout history various items of value have been used) and as of the last part of the twentieth century to the present; it is Oil.
It tends to make exchange rates fixed to currencies that have more commerce with the oil producing nations. If Oil ceases to be the global commodity, it will lose its anchoring affect on the major currencies.
In reality currency is an IOU; if I produce a service for you, you give me this IOU, I can then use it to acquire services from others. So obviously attaching it to a commodity fixes the price. Very bad, as you will see.
How does this help?
Once currencies are a pure marker of the desirability of the producing nation’s products, all currencies in the world will fluctuate according to the creativity and efficiency of the components of the world market.
So as a nation imports more than it exports its currency will fall until it balances with the rest of the world. The same will apply to countries that don’t import enough, their currency will automatically rise. Now if they produce the very finest products, than the system will support a higher value to that currency.
For a start, this will have an effect of minimizing labor rate disparities; it will also keep nations from perpetuating large government deficits which lead to out of balance debt. This will happen because in the absence of reserve currency (based on oil) countries that accumulate too much debt will need to create more currency, which will devalue their currency. This will reduce the return on bonds bought on the international market.
In conclusion, I see the nations of the world becoming obsessed with energy independence.
Remember Energy is the key to everything, and by proxy, currency exchange.
Well now, after 20 years of contemplating the Global Economy and arguing with liberals, conservatives and libertarians, I have finally digested my thoughts down to a very simple prediction of the next evolutionary plateau in the Global Economy.
What I think is the most important goal of every industrialized nation; is to become energy independent.
That means a sustained, persistent, and abundant supply. It doesn’t matter if it is renewable or finite, as long as the supply is very long term. Certainly as we move forward, more and more of the supply should be renewable. With one notable exception, Fusion, Fusion is not exactly renewable, but the fuel source here on Earth will last for billions of years. Anyway disregard for a moment the method we will need to use, let’s just say that Energy Independence is the goal.
Once the major Nations are all off the international fuel markets it will free currencies to float. Many people erroneously believe that money should be “backed’ by a commodity, this is one of the worst things that can happen. In most of the world in the last several hundred years it was gold (actually throughout history various items of value have been used) and as of the last part of the twentieth century to the present; it is Oil.
It tends to make exchange rates fixed to currencies that have more commerce with the oil producing nations. If Oil ceases to be the global commodity, it will lose its anchoring affect on the major currencies.
In reality currency is an IOU; if I produce a service for you, you give me this IOU, I can then use it to acquire services from others. So obviously attaching it to a commodity fixes the price. Very bad, as you will see.
How does this help?
Once currencies are a pure marker of the desirability of the producing nation’s products, all currencies in the world will fluctuate according to the creativity and efficiency of the components of the world market.
So as a nation imports more than it exports its currency will fall until it balances with the rest of the world. The same will apply to countries that don’t import enough, their currency will automatically rise. Now if they produce the very finest products, than the system will support a higher value to that currency.
For a start, this will have an effect of minimizing labor rate disparities; it will also keep nations from perpetuating large government deficits which lead to out of balance debt. This will happen because in the absence of reserve currency (based on oil) countries that accumulate too much debt will need to create more currency, which will devalue their currency. This will reduce the return on bonds bought on the international market.
In conclusion, I see the nations of the world becoming obsessed with energy independence.
Remember Energy is the key to everything, and by proxy, currency exchange.
