Will More Companies Seek Bankruptcy As Opening Up Continues?

Before the COVID-19 pandemic hit and the U.S. vs China trade war, JIT (Just in Time) or also known as the Lean Manufacturing method was the way to finish up production of a product line that is fast to bring the products to the market. JIT was made popular by Toyota in the 1930’s “The Toyota Way” production method. This method allows any company not to stock up raw materials and be overburdened with materials and parts in the production chain inventory, but instead, any company that uses JIT can just rely on an overseas or local third party to quickly deliver whatever stuff that a company needs to finish up production of a product line. JIT saves time, cost, and improves the efficiency of manufacturing. Unfortunately, the pandemic hit in early 2020 led to the shutdown of most parts of the world, and JIT isn’t viable as before. Shipping became more difficult, and shipping costs were rising tremendously. Furthermore, companies rather cut costs and shored up cash to protect the business during the uncertainty of the pandemic COVID-19. This pushed the JIT supply chain to the brink of collapse since companies weren’t ordered raw materials and whatever parts so freely as before.

The U.S. vs China trade war is still an ongoing thing, and JIT won’t be taken up favorably by the United States. The United States doesn’t want to be overly dependent on China for crucial and mission-critical materials and parts. One perfect example of this is rare earth minerals. China has cornered the rare earth mineral market, and with such influence, China could always use its power to subdue the United States to China’s demand by not selling rare earth minerals to the United States. Rare earth minerals, although the market isn’t big, these minerals are the absolute must for most electronic stuff that every country needs. To produce an electronic vehicle, smart TV, or just about any other electronic thing — rare earth materials must be present for such a thing to be successfully made. JIT is all about relying on a third partner/country to provide the raw materials and parts, but this could become a security nightmare for the United States in the rare earth mineral example. The pandemic has had only increased the divide between the United States and China in regards to how a global supply chain should be reformed onward.

As the United States and China try to promote different supply chain routes and methods for the globe, locally located companies aren’t yet weaning off the crisis of shortage of materials and parts such as microchip shortage — due to shipping difficulty and countries’ shutdowns across the globe — due to the pandemic is still an ongoing thing since many countries have yet to adequately allow the populations to be vaccinated with COVID-19 vaccines. While the shortages of everything are on the menu, companies are trying to alleviate many shortages as possible by hoarding raw materials and parts. Some companies are trying to overproduce the finished products as these companies have seen the demands of goods rising to an unseen level since the pandemic hit. Thus, rising demands produce rising inflationary prices of finished goods. Shortages of raw materials also push the prices of raw materials to be more expensive such as lumbers. As raw materials get expensive, the expense would pass on to the customers in the finished goods. In general, finished goods are more costly as the demands are high and raw materials’ shortage. With high demands come shrewd business sense, and so companies would go overdrive in producing more finished goods, The question is then when the COVID-19 pandemic slowly goes away and the world is opening up again just like how it was in 2019, services will come back to life, and customers would spend less on goods but more on services — how are the demand bubbles of physical goods would fare in such a scenario?

I think as the opening up roaring back, the inflation would collapse into deflation in how physical goods are being priced — while innovation would continue to drive the costs down of stuff such as electronic — and so many companies that overly produce the finished goods will face the glut of inventory. This could be so inefficient that these companies may wish JIT would become fashionable again. Thus, I think the future earnings of such companies will be way less impressive than most investors would have liked to see. The service sector may pick up again, but companies that are in this sector may still have to face bankruptcy since these companies borrowed a lot of debts during the pandemic COVID-19 service shutdown across the globe. Thus, I don’t think we will see the normal as how we had gotten used to before 2020. Companies with heavy debts should be valued less even if these companies fall into the value investing category. This could be an opportunity or a value trap kind of thing. We could not know an overly burdened indebted company is a bargain or a value trap since such a company could file bankruptcy easily.

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.

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!!!