Greetings,
I respect Ed Weick's economic analysis, but want to clarify and elaborate
on this:
"The point is that each of these various kinds of investments needs to be
treated differently when the stability or humanity of the economic world is
at issue. It would seem that the most disruptive type of capital flow is
currency speculation. If the concern is disruption, this type of flow must
be the focus."
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There is a massive misunderstanding about currency speculation - by
economists, journalists, politicos, indeed all who haven't played 'the
game'.
1. No money is made on a net basis, except commissions(mark-up/mark-down)
paid to brokers (bankers often act as brokers). It is a zero sum game, with
the net P&L of all players actually ALWAYS totaling a loss. (of precisely
the commissions and their personal expenses-phone,computer...)
2. The choice to trade requires a voluntary, profit seeking counterparty
who freely takes the other side of the trade. The poor cannot play, and
cannot lose money which they never had to begin with.
3. A government can choose to not freely float it's currency, or to have
both a domestic version and an international one. The Belgian Franc was so
divided into a convertible and a non-convertible one(with import/export
'real business'transfers or hedging need required for trade in the
convertible version.(as recently as the 1970's, I believe)
And there have been others.
4. The daily volume in the currency mkts is huge - BUT - I venture that
less than 5% of that is in the form of "open positions" at any point in
time. That means that the vast majority of traders open & close position
within minutes or hours,(as well as days...) A position (hot potato) is
passed from hand to hand.
5. Yes, a panic can send prices in one direction or another as in any mkt.
But, unlike trading in goods that are produced/grown in which there can be
net losers; in currencies all that changes is a ratio of one to all others,
and a shifting of some 'tokens' (like poker chips) from one player to
another.
6. Yes, the relative value of a currency affects trade & material well
being. But speculators are looking for artifically high/low values and
seeking to profit from re-adjustment. All speculators cannot sell currency
"X" for other currencies; whomever takes the other side of the trade is
speculating that "X" will RISE against the specific counter-currency, or
they wouldn't choose to buy it at that exchange rate!
7. If a central bank chooses to take on the whole world to support a rate
of exchange, and the rate/value is perceived by the majority of players as
out of line, the bank KNOWS IT WILL FAIL to hold the rate. The US$ is no
exception.
8. Few complain when money flows into a country (except those who perceive
resultant environmentally damaging development as outweighing monetary
wages/profits) Most people scream 'unfair', 'unjust'...when the money flows
out of the country. I'm not defending "the game". Debt based growth/profit
economies are strangling the planet along with us 6 Billion humans. (2
Billion as recently as 1930) But the superrich who play monopoly with the
planet love to see speculators take the heat. The superrich don't need to
gamble; they just freely bribe and steal. Remember, currency speculators in
toto LOSE MONEY!!
9. Corrupt governments and colluding TNC developers attempt to rig exchange
rates which benefit the exporting of profits made within the country in
question to foreign (incl offshore havens) institutions, usually exchanged
for one of the "reserve quality" currencies. (The Euro will soon rival the
$, Br.Pound, DM, SF, & Yen) Thus speculators can sometimes judge developing
country currencies artificially OVERVALUED due to the desires of the elite
skimming profits to maximize their converted fortunes in SF, $, etc.
10. As a human endeavor, currency speculation consumes far less
resources/energy than nearly any other business. As a group, they *must*
live off savings if all they do is currency spec. If you're not doing
permaculture/sust. agric...., or some socially beneficial work like
education..., you are likely speeding humanity toward 'the wall of systems
crash' at a faster rate by producing whatever than are the specs doing
their activity. Consupmtion habits are a separate issue! :-)
To conclude, I wish for & am working for a steady state economy (H. Daly)
which demands a steady state human population.(ZPG) Debt/money dynamics
will undoubtedly change if that ever becomes a reality.
Comments welcome.
Steve
