Weekly Musings 37 9/17/11
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For those who are new to the Musings: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights, and thank you for supporting the site.
What is "value-added" here?
Self-doubt is an intrinsic feature of creating original content in any media. Not only do I constantly question the value of what I write in the Musings and the blog, I even question whether it is seemingly to reveal the constancy of self-doubt in the process of deciding what to present to an audience: either the select audience of the Musings or the unrestricted public audience of the blog.
In other words, does confession of self-doubt detract from the "value added" of my writings in a culture which worships swaggering confidence and fears introspection? Or does the honesty of self-doubt "add value" by exposing the machinery of analysis?
I have no idea, just as I have no idea what readers are seeking in the Musings and the blog. I reckon some readers are seeking financial understanding which can be applied to conserving or building their wealth and financial security. Others, I suspect, are seeking a broader understanding of the present and future.
When I confess I don't know what my readers expect or want, people generally suggest I survey readers. But surveys are inherently suspect, I think, as people tend to report what they think is expected of them, or whatever reflects their self-image. We don't always know precisely why we're drawn to some topics, or what we're seeking. I end up concluding that the only "value added" here comes from the honesty of my own search for the hidden, and decisive, dynamics of our era. But I may be completely wrong about that....
Profiting from the Demise of the Eurozone
It may seem ghoulish to speculate on how we can profit individually from the devolution/demise of the Eurozone, but since that process is a fait accompli in my view, it will unfold regardless of our views. In that sense, we might as well profit from what is inevitable.
My technical instinct is that the euro will eventually retrace to its low point around .9 to the US dollar, though it is quite possible that what's left of the euro after the current crisis resolves itself (messily, no doubt) could fall much lower in asecondary crisis.
One dynamic which rarely appears in the Mainstream financial media is the extremely negative impact on Germany as the nations which imported vast quantities of German exports within the Eurozone reduce their spending and eventually see their currencies devalued.
As I have reported before, fully 60% of Germany's GDP is export-dependent. Compare this to Japan or the U.S., large economies with around 10%-15% exposure to exports.
The majority of German exports are naturally to other EU nations, so the austerity and financial crisis will savage German exports to its primary market.
Even the German people seem blind to the devastating domestic consequences of cutting off credit to their profligate, free-spending neighbors; the German attitude may well be those lazy louts should live within their means, but the direct result of that morally virtuous austerity will be a massive reduction in exports from the virtuous, hard-working Germans.
To a great degree, the euro was a construct to aid the German integration of Eastern Germany and the former Eastern bloc in general. The euro awarded tremendous buying power to marginal nations, giving them the the purchasing power to buy German goods, while at the same time lowering the relative value of German goods.
Germany benefitted greatly from the artifice of the euro, and now it will suffer in equal measure as the euro removes the twin advantages it bestowed on export-powerhouse Germany,
The basic investment strategy here is very simple: do not try to "catch the falling knife" by guessing when the euro bottoms, but simply hold US dollars rather than euros. Exit investments denominated in euros and vulnerable emerging-market currencies such as the Brazilian real.
I know this runs counter to the dominant meme that the US dollar is doomed, but it is now obvious that what is doomed is not the USD but the euro.
The Failure of Current Models
I have been thinking a lot about the failure of current models--of economic growth, of employment and even of global advanced capitalism. My sense is that the innovations which will have the most impact are not technological, but social innovations that are enabled by the technological revolution of the World Wide Web.
I have been thinking about "the end of work," and just how unprepared we are as a nation and a world for the breakdown of the Socialist/Capitalist model of work and pay. This model is so embedded in our understanding of "how the world works" and the way we derive meaning and identity from "work" that it is like the air we breathe, invisible and unremarked until it is no longer present.
For example, our only alternative for a dearth of private paid work is paying people to stay home and be unproductive. The model is based on an implicit expectation that the private economy will eventually absorb all the people being paid to be idle. If this fails to occur, then the model breaks down.
The negative consequences on the people who are marginalized and without paid work is profound. Clearly, we need new models or work that are community-based. This is a model that has no foundation in our current thinking or economic models, be they Socialist or capitalist.
From Left Field
"Among the 20,000 Chinese with at least 100 million yuan ($15 million) in individual investment assets, 27 percent have already emigrated and 47 percent are considering it,
according to a report by China Merchants Bank and U.S. consultants Bain & Co."
"However, as we see next, more than 80% of China’s high technology exports are actually produced by foreign companies operating in China. Moreover, these foreign companies have significantly increased their control over this production. In 2002 foreign owned firms that were 100% foreign owned (which means that they had no Chinese partner) accounted for only 55% of Chinese high technology exports. In 2009 they accounted for 68%." ..
Thank you for your readership and support--
charles