Middle Class Is The Saint Of The World

I think the middle class is the saint of world economy.  Middle class’ population is always going to be more abundant than the top 1% and 2% elite classes’ populations of the world.  Why?  It is obvious that it will always be a lot harder and rarer for anyone to make to the top of the class, because the higher you go the more competition you have to face.  This means, it’s harder for anyone to make into the top 1% or 2% of the elite classes.  Thus, my conclusion on this point is that the middle class is the middle way and  the best way to attain the abundance of wealth.  Why?  The more people that are wealthy, the more people can spend the money to promote consumerism, consequently boosting businesses in our small world (i.e., globalization).

Basically, I’m not worrying how wealthier a top 1% or 2% elite class has gotten, but I’m more worrying about how poorer the middle class has gotten.  The middle class is the middle way, and it can either go up or down.  Going up is a positive movement, but going down can only increase the population of the poor.  The poorer people get, the more desperate the people are.  The more desperate people get, the more dangerous people are.  By dangerous I mean people can do just about anything to survive.

History has shown us that the heads of elite classes were guillotined just because the poor were abundant.  Someone got to take the blame for all of the sorrows in the world.  Within our history, the elite classes might not have been so ruthless, but their heads were severed from their bodies for being so wealthy.  Lands and wealth were confiscated by new power and sometimes were distributed in the wrong ways that would not elevate society in general.

Within our history, the poor had made wrong decisions that could shatter earth.  One perfect example would be Hitler’s rise.  I could be wrong as I’m not an expert in the history of World War II and Germany in general, but I think the poor elevated Hitler rise for they had believed in his positive persuasion of making Germany more prosperous in the time in which Germany was experiencing poverty and pessimism.  As we all have known by now that Hitler’s rise gave way to an earth shattering war known as World War II.  Millions of people died in such a war.  Roughly around 60 millions people were killed in WWII?

Can we blame the poor for their desperations?  I think not!  The poor don’t have a choice.  The poor have to take desperate measures so they can survive.  Desperation is not a choice!

I think the world will be better off if the middle class can be enlarged.  The larger the middle class gets, the smaller the number of the poor gets.  I think the elites will sleep better when knowing there will be less riots and less people will go after their heads.  Of course, their wealth will always be a big target for everybody no matter the state of the world is in, but at least they won’t see desperate people go after their heads as well.

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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.

Population Size Advantages Plus Productivity Equal Wealth And Glory?

Everyday in the news, we’re seeing more reports on the growths of China and India. Nowadays, the citizens of the West are not of one mind whenever they discuss whatever in regarding to these two countries. Some people in the West appreciate the rises of China and India. Some people are fearful of the rises of these two countries. Understandably so, because these two countries, although geographically close by, these two countries have very different cultures and politics, and these two countries have even less commonalities with the West. With the eyes of outsiders, West populations are wearied of these two rising giants, because these two giants’ economies and militaries are growing in bounds and leaps as each day goes by.

There are people out there believing that these two giants are just recapturing their past glories, because these two giants’ had been the global economic engines before. In fact, China in particular, had been the world economic engine for centuries. Before industrialization, even through tough times and regime changes, China had always been able to recapture her world standing as a global economic powerhouse or superpower. Only when the industrial age had come which then the West was able to subdue China. If I’m not wrong, there were eight countries from the West and elsewhere that came to divide and conquer China in late 1800s and early 1900s.

The people who are supporting China and India rises probably believe that these two countries are just recapturing their old glories. Nonetheless, others are fearing that China and India rises will change the world order’s status quo. So far, China and India are still developing, but they are developing at breakneck speeds. On the other hand, the rest of the world are stood still in regarding to economic activities. The fears of China and India rises exacerbate as China and India continue to expand economically and militarily. What worse is that China and India are competing against each other for world’s resources. Rich resource countries are loving to attract these two giants’ capitals, but the rest of the world is fearing the competition between the two giants might get out of hand and launch the world into wars and destructions.

People are wondering why China is not a democracy, but yet this country is able to rise from ash and go on to capture the world’s wealth (or recapturing her past glories). India is growing fast, but when comparing India against China, India’s development is decades behind China. Infrastructure wise, China is urbanizing and developing at breakneck speed while India is trying too hard to mimic China’s infrastructure developing progress. In short, India wants to overtake China in developing in everything, but at the moment China is ahead by miles. In term of population though, if I’m not wrong India is growing her population faster than China each year. This means India might be able to catch up to China in population size.

In the TEDx Talks video right after the break, Rush Doshi explains why China and India for so long had been rich and powerful; although China and India were subdued by the West and elsewhere when the industrial age arrived, there are signs that China and India once again recapture past wealths and glories. Rush Doshi looks at the world through the geographical lens, and so he claims that geographically advantages allow China and India to develop huge populations. Rush Doshi then proclaims that at any point in history whenever China and India could be just as productive as the rest of the world, due to huge population sizes, China and India could lead in wealths and glories. Check out the video right after the break and enjoy!!!

 

Can Bitcoin Be Real Money?

The bitcoin logo

The bitcoin logo (Photo credit: Wikipedia)

Bitcoin is all the rage recently as value per Bitcoin has climbed really high.  As I’m writing this blog post, it’s about $866 per Bitcoin.  Furthermore, more reputable businesses are beginning to join the fun by accepting Bitcoin as payment for business transactions.  With Bitcoin is moving toward mainstream or so as people think it is doing so, we have to wonder how long will Bitcoin would shine right?

As we all know, money has to be backed by something.  Sure, money can be in various currencies, but all currencies have to be backed by something.  In the antiquity time, countries accepted all sorts of bartering items as currencies.  Nonetheless, most of those bartering items could not withstand the test of time.  Gold is one of those few bartering items that have withstood the test of time thus far.  Gold could be used as money in the antiquity time, and even today some parts of the world are still accepting gold as real money.

How can gold be so resilient against time?  For obvious reasons such as scarcity and so forth, gold cannot be seen as just another bartering item.  Scarcity is important, but gold has one more trait that is very very important.  People have often overlooked that gold has always been special throughout the globe and through time.  By special I meant since the antiquity people have found gold to be valuable and sexy.  Since the whole world is being captivated by gold since the antiquity, therefore gold cannot be easily discarded in time.

Bitcoin might have the appealing of gold if it can convince people that it too can be valuable and sexy, worldwide.  As I have mentioned earlier, money (currencies) have to be backed by something, and so we have to wonder what is backing Bitcoin, right?  I think what is backing Bitcoin is how people put Bitcoin into practice throughout the world.

Nonetheless, without a specific government endorsement, can Bitcoin last?  I think Bitcoin is special in that it’s not being bounded or controlled by a specific government, and yet the people throughout the world are willing to have faith in Bitcoin.  With that being said, if Bitcoin doesn’t have the appealing of scarcity, it would probably be just another funny money (i.e., monopoly money).

Bitcoin can be scarce since it does require tremendous amount of effort in mining it.  For an example, one has to be spending real money to buy expensive hardware before one can mine Bitcoin effectively.  One might have to mine 24/7 for months and years before one can have few Bitcoins.  Now, if one is really rich and wealthy, one can build many Bitcoin mining rigs that can churn out Bitcoin really fast.  It is all about being rich in the first place, right?  There is a saying and it might go like this, the rich get richer and the poor get poorer.

In summary, I think Bitcoin can be real money, but for how long I won’t know.  I know though that if people around the world use Bitcoin as money, then Bitcoin won’t easily be discarded.  If the whole world is using Bitcoin, then not a single country can stop Bitcoin from being used as money.  If the whole world is using Bitcoin, then politics will become less important when it comes down to currency manipulation.  Bitcoin can be traced just like how cash can be traced, but both Bitcoin and cash can be way more stealthy than most forms of currencies.  With stealth as one of its awesome traits, Bitcoin can definitely be facilitated as cash-like money.  With all of that being said, Bitcoin isn’t cash since it’s not physical.  Since Bitcoin has to be used in a digital form, it might just be inconvenient enough that some people will not want to use Bitcoin as their money.  Invention such as smartphone apps to facilitate the Bitcoin transactions might help Bitcoin to be seen as physical cash, because there are so many people who carry their smartphones around.