Monday, June 14, 2010

All the Money in the World Can't Buy My Bread: Yin Yang Economics Part 1

I never paid much attention to the concept of yin and yang until recently when I realized that wealth moves in circles/spheres and
also tends to move in pendulum swings or wave forms, kind of like frequency or sinusoidal waves.  When I realized that,  I started noticing patterns everywhere I look.  Here's what I like to call Yin Yang Economics and why I say "All the money in the world can't buy my bread."

As I said before I firmly believe that wealth/money whatever you want to call it is both finite and infinite at the same time. Depending on what time you look at the financial markets it is either more finite, or more infinite.   If it's in a fairly easily reproducible form like paper money, it's fairly infinite. If it's in a fairly difficult to reproduce form such as gold, it's fairly finite. How long something remains in the infinite state is dependent upon how much trust the people who are using it for trade give it. One such example is the US dollar.  How long something remains in the finite state is dependent upon how difficult it is to trade with. I would think that the currency of choice would be likely something that lends itself to quick, easy, fast monetary trades especially since with increased globalization this has led to millions of monetary transactions taking place overseas and over millions of miles of land every single second of every day.  However, during times of severe financial stress and uncertainty, I would think that traditional forms of currency like gold would take priority until the fever dies down and a new form of currency is found to rely upon for easy global transactions. 

The reason why I say wealth moves in a sphere is because if you look at the total amount of wealth all the countries of the world has to share, monetary transactions take place through shipping routes, highways, roads, railway, cable, wires, and now wirelessly through satellite. Cities are hubs where majority of the trading takes place between not only local people with in the those cities but also between countries. 


On a smaller scale, the most basic circle consists of two people who are both a buyer and a seller at the same time.  Here you have a barter system where you trade one car for one fridge for example.  A step up, you got a buyer and a seller but instead of bartering they have a good and currency that both parties have defined as valuable.  The price of the good depends upon how important the good is it to the buyer and seller, not the currency.  The only reason why they have currency is to make monetary transactions easier in the event that a equal barter can not take place. Currency itself is actually worthless if the people involved in the monetary exchange don't trust each other and don't think that they can find anyone else they can unload their currency to in the future.  If the seller deems the good extremely valuable, the more currency the buyer will have to borrow or have to have to get that good.  That is why food is ultimately more valuable than gold, silver, diamonds, a USD, a renminbi, etc... because it sustains life.   Everyone needs to eat, and you can't eat gold. Food is thankfully, relatively infinite most of the time. But during times of food riots, even gold becomes relatively worthless.  So if someone were to ask me if I would sell my bread during a time where there was no more food left for my starving child to eat except for the one piece of bread I had, I would say "All the money in the world can't buy my bread."

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