Will China Force The World To Trade In Yuan?

Dr. Mahathir Mohamad thinks that the richer the Chinese get, they will not accept the domination of the Dollar.  He thinks that China may force the world to trade in Yuan.  This is certainly a scary thing for the United States!

If China could force the world to trade in Yuan, people like me who are living in the United States would have to face many scary outcomes of a much weaker Dollar.  Just imagine if the world decides to drop the U.S. Dollar as the reserve currency, the United States then has to worry about the balance of trade even more than ever before.

A country in some ways is not that different than a normal household.  Besides getting loans, what you make is what you have got to spend.  Nonetheless, a normal household got bills to pay, and so what you make is what you have got to save somehow.  Without enough saving, you don’t have enough money to spend.  Living beyond one’s means will get one into huge debts.

Dr. Mahathir Mohamad hints that if China forces the world to abandon Dollar for Yuan, the United States won’t have enough gold and whatever to pay back debts and could declare bankruptcy overnight.  I’m an American and so I don’t want to see something like this to occur, but we’re not Chinese and so we can’t really know what the Chinese would do when they get even richer.

Check out the video right after the break to see Dr. Mahathir Mohamad — current Malaysia’s prime minister — speaks on how the Chinese may drop the Dollar in the near future and force the world to trade in Yuan.

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Short Thought: Can Labor Cost And Related Costs Speed Up Automation And Artificial Intelligence To Out Compete Competitors?

Here are few sentences that I want to express in short thought on the matter of automation/AI.  I think labor cost and other costs that impose on innovation, manufacturing, and whatnot would speed up automation and artificial intelligence a great deal, because countries such as the United States would like to outdo countries such as China in term of trade and other economic factors.  For your information, I think as now China still has labor cost advantage over the United States.  I see though that the United States could try really hard to push for automation and artificial intelligence, because in this way the United States can gain a competitive edge in trade such as in labor cost and whatnot.  Nonetheless, if I’m China, I would do the same, and this vicious cycle would only speed up automation and artificial intelligence.  I don’t have a crystal ball, but I think we may live in the future sooner than we would have like or prepare for.  Furthermore, automation and artificial intelligence will only increase job losses, but it will take a much longer time for people to find new jobs.  After all, getting a new job in a totally different field requires retraining and relearn.  Before you know it, the whole world will try to push for automation and artificial intelligence.  It’s coming sooner than you think!

What Will Happen If The World Uses One World Currency?

What will happen if the whole world is going to use the same currency?  Imagine if the whole world only has one currency, the economy would behave rather differently than how it is now.  Currency war would be history.  Trade war through currency manipulation might not be easily executed as now.  Is it really that positive to have one world currency?  If you’re reading on, you might see that I’m not so sure about this idea.  Nonetheless, the idea is interesting and provocative.

Saying is easy, but having one currency for the whole world would be difficult.  Our world is made of countries with histories and sovereignties.  Thus, each country has its own financial and currency systems.  Except the Eurozone member states, most countries are able in printing their own currency for whatever purposes.  Since each country is being ruled by a specific umbrella system that supports the financial and currency systems, and so it’s rather difficult to have any country in such situation to give up their right to print their own currency.

Nonetheless, let’s say the whole world gets together and decides to have one currency for all countries in the world, the question is how one world currency system would behave?  Perhaps, it’s like a democracy, because each country should have the right amount of currency printing privilege in percentage quota.  The world could use the population size of a country to determine how much percentage quota for the right to printing the one world currency a country should have.

The idea of one world currency is just too radical, because nothing like this has ever happened in the human recorded history.  Since this is too radical and has never happened before, I don’t think anyone is clever enough to see the consequences if one world currency is actually taking place.

My suggestion — if this scenario takes place, the country’s population size should determine the percentage quota of right to printing the one world currency — is having many flaws.  On the top of my head, a flaw of this suggestion is noticeable in regarding to how a country should prioritize their policies, because the larger the population size the bigger the percentage quota would be for printing the one world currency.  In a competitive world with one currency, poverty might be increasing instead of decreasing.  If a country decides to make policies that encourage population growth but without policies to help keep the population stays competitive in the world market, it’s a disaster in the making since bigger population means more mouths to feed.  In one world currency system, wrong prioritization of policies can encourage a disaster on a very large scale.

I think there are positives and negatives in regarding to have one world currency.  The positives are cohesive world monetary system, less aggressive trade and currency manipulations, and so forth.  The negatives are poverty might be increasing in uncompetitive countries/regions, losing sovereignty, democratization of currency printing is still going to be dictated under one central umbrella govern body which oversights the regulatory bodies of how one world currency should work, and so forth.

Since I’m just a puny human, I don’t really know all of the negative consequences might bear fruit if one world currency system is actually taking place.  One thing I do know is that most things are possible, and so you would never know that one day the whole world might band together to come up with one world currency.  Who could have thought Eurozone would be possible, right?  Nonetheless, the jury is still out in regarding to how effective and prosperous the Euro has been for the Eurozone member states.  After all, Eurozone as a whole is facing greater uncertainty in regarding to the increase of financial instability within several Eurozone member states.  Greece comes to mind in this regard.

I don’t particularly side with the idea of one world currency, because seeing how Eurozone member states are facing the problem of not having to be able to print their own currency to support their uncompetitive trade markets.  Still, seeing how one country can manipulate her own currency to boost trade competitiveness at the cost of other countries’ trade welfares, perhaps one world currency might be able to stem this problem.  To sum things up, I’m not sure having one world currency can solve the world’s financial uncertainties, because Eurozone member states have shown that even they are not immune to the financial uncertainties even though they are using one currency (i.e., the Euro) to trade with each other.

What Is The Future Market?

Don’t you hate to hear the future market this and that when you read or listen to the news?  Well, if you understand what future market is, you probably don’t mind hearing news on it.  Some people though, they may not know what the heck is the future market.  Thus, future market seems like a big mystery that will forever be a mystery into the future for these people.  Nonetheless, if you are one of those people who wants to understand what the future market is, then just check out the video right after the break.  In short though, future market is gambling, because you are betting on a contract price that represents for whatever it is in the market.

Dr. Ron Paul On China’s Currency Devaluation And Currency War

Dr. Ron Paul warns more bad time to come as China is now beginning to participate in currency war.  Today, as it’s happening now, China devalues its currency to 1.9% weaker than the pegged Dollar (USA) (according to WSJ).  Market in the USA goes negative, and the world is actively watching China’s movements.  Dr. Ron Paul thinks what China is doing cannot solve China’s slow down in the long run, because the market eventually will force other countries to do the same thing which negates the benefits of what China is doing now.  Since China is devaluing its currency as we speak, can the FED in USA be able to raise interest rate?  Is China sending a message to the IMF and USA for not including China’s Yuan in SDR basket thus far?  How far China will devalue her currency?  Anyhow, check out Dr. Ron Paul’s message on China’s currency devaluation in the video right after the break.  Enjoy!!!

Per Capita Income Cannot Be Used To Compare How Wealthy A Country Has Become

I’ve seen some people used per capita income as an argument for how progressive an economy has been.  Nonetheless, these people could have been deluding themselves with this argument all along.  Perhaps, if they’ve known the truth, they might want to visit the past to wipe off their smirks on this very topic.  How come?  Per capita income is very distorted in my opinion.

Per capita income equation is PCI = TPI/P.  TPI is total personal incomes of everyone in a country and P is the population of a country.  So, let’s assume a fictional country A has 4 trillion TPI and the population of 80 millions, then the per capita income for the fictional country A is 50 thousands.  We can safely assume that this fictional country A has a high per capita income.  In a perfect world where a country has everyone makes the same amount of income per year, it means each and everyone in this fictional country has the ability to make 50 thousands (money) per year.

Some people like to use the per capita income to boast about one’s own country wealth and progressiveness.  Nonetheless, the simplistic per capita income equation doesn’t account for inflation.  Since inflation isn’t being included in per capita income equation, per capita income cannot really be used to compare the wealth and progressiveness of countries.

Why inflation is important?  Inflation is super important in an interconnected contemporary world like ours.  Countries are trading with each other a lot more so than ever before, thus each country relies on endless information that come out from other countries that are known as global trade partners.  Inflation is one of the important information that can help one country to assess a global trade partner’s economic stability.

Since inflation is important, we need to understand the simple concept which inflation represents.  According to my layman conception of inflation, inflation is a measurement of the strength of market prices according to supply and demand.  Although a currency for a country isn’t exactly meant to be a commodity in a market, but it’s too being affected by inflation.  Since currency is too being affected by inflation, thus inflation can measure the implicit innate price of a currency.

For an example for why inflation is an important measurement of a country’s economic stability, let’s assume a fictional country A got into too much debts and has lost the trust from global trade partners.  Since the fictional country A doesn’t have a stable economy and clean national budget, the global trade partners aren’t willing to lend the fictional country A some money, fearing the fictional country A cannot repay the future loans.  Since each country has different currency, thus there must be a conduit to allow the measurement of currency exchange to occur.  Once the conduit exists, each country can then use the currency exchange rates to decide how much a country’s currency is worth globally.  Let’s assume the fictional country A has lost the trust of global trade partners and can’t receive more foreign loans, the demand for the currency of the fictional country A is shrinking massively on a global scale.  Less demand for a country’s currency in the global market means the currency of such a country cannot be used effectively to bargain for global goods.  Since nowadays, all countries are relying on global goods than ever before, thus local inflation can now be imported and exported.  By this I mean although inflation can be used to measure the strength of prices for local goods and currency, but in the interconnected global world like ours inflation can also be used to measure the prices of goods and currency that are meant to be imported and exported for a country.  The fictional country A is going to have to adapt to high inflation since the demand for its currency is very weak globally.

High inflation means too much money is chasing after a product, thus weakening the strength of the money and strengthening the strength of the price of a product.  In the currency situation, high inflation means too much currency is chasing after a global trust.  If the world decides to not trade with the fictional country A unless the fictional country A uses some hard assets or whatever that is valuable to exchange with another country’s reserve currency for the purpose of foreign trades, then the fictional country A’s local currency has become totally useless for global trade.  This means high inflation for the fictional country A.  People who are living in the country A can make 50 thousands (money) a year, but their 50 thousands income cannot really afford them to buy goods abroad, because the local currency is too weak to have a fair exchange rate in the global market.  The fictional country A has to promise hard assets or whatever that is valuable to be traded with foreign loans (in a reserve currency) so the fictional country A can have some money to import global goods such as anything that needs to be imported.

In the interconnected world like ours, the fictional country A cannot be counted as a wealthy country, because its currency is too weak to be used as money for global goods.  With high inflation, the fictional country A’s per capita income becomes meaningless unless the fictional country A’s currency is the most valuable and sought after for global exchange and reserve currency purposes.