[PLUG-TALK] Dollars (was Bank fraud)

[Keith Lofstrom]

> On Sat, 12 Jan 2013, Keith Lofstrom wrote:
> >As backing assets, I prefer gold, land, or capital equipment like
> >somebody's dental equipment, which doesn't depreciate or go obsolete
> >very fast.

On Sat, Jan 12, 2013 at 03:39:33PM -0800, Rich Shepard wrote:
>   All of which have value only in terms of money that can be exchanged for
> them. ;-)

Au contraire, my esteemed friend, though your smiley suggests
sarcasm rather than your actual opinions.

<rant>
Land grows the food that rots holes our teeth, and dental equipment
is used to put gold (or cheaper stuff) in the holes.  That is value.
Paper money, and bits on a disk, are more transportable, but they
have no intrinsic value beyond our faith in them.

Money without backing assets is paper plus faith.  Faith in 
paper comes and goes.  Gold has gone from $400 to $1700 per
ounce in the last 10 years, and not because gold became 4.25x
more intrinsically valuable.  Instead, that is loss of faith
in the dollar in particular, and all floating currencies in
general, relative to real goods and production capacity. 
Your dollars have evaporated 75% in real value over a decade. 
How long will the remaining 25% last?

We use dollars because they are more convenient to carry around,
and because our banking system (with all its faults) is more
reliable than all other national banking systems available. 
But think of paypal, and think of the cell-phone mediated
currencies now sweeping the third world, and imagine how
quickly the situation can change. 

I see why John is enamored of bitcoin.  He is aware that big
changes are coming, and bitcoin has high visibility in our
circles.  But bitcoin is a flub.  Most new things are.  Not
all new things.

The same effort that went into bitcoin will go into something
commodity-backed.  If such a currency fails, you still have
exchangeable food, land, metals, capital goods, etc. which
can move on to back a better medium of exchange.  Such a
"currency" can displace dollars in a few years, if the tools
that go with it are attractive enough.

Some smart cookie will use the good ideas of the bitcoin
infrastructure, and mash them up with other good ideas,
then dominate the world until an even better idea pushes
her off the pedestal.  I may have met her, she managed a
similar magic feat in Afghanistan, seemingly an unlikely
place to begin a global transformation.  But then, so is
a kid's bedroom in a single mom's apartment in Helsinki.

Currencies compete and displace each other.  British gold
sovereigns were the exchange standard 100 years ago, in a
colonial age when the world only trusted gold.  They were
spread around the world by coal-powered British gunboats,
the underlying commodity.

The dollar represents American industrial power, which
smashed the German and Japanese empires (twice each). 
It was reinvented, and now represents American creative
power, science and engineering and art, so its run on
the world stage has been extended. 

Now China puts astronauts in space and makes most of the
world's consumer goods; we no longer have a monopoly on
that.  China can't make good jet planes - yet - but they
are working on it.  Soon after the People's Liberation
Army relaxes its deadening grip on Chinese airspace,
the Chinese aviation industry will skyrocket.

Over the last two evenings, my wife and I watched Lagaan,
a 2001 Bollywood blockbuster.  I realized that if Bollywood
chose to make movies for the American market, using American
actors, plentiful production talent, and cheap CGI, they
could put Hollywood out of business, globally and domestically.

Our largest remaining value to the world is that billions of
people still want to come here.  But our insanely xenophobic
response to 9/11 has convinced the world's best and brightest
to stay at home and fix things there.  Those few silly enough
to come here, but who fail to jump through all the hoops, get
sent home.  Much like Gilbert, who volunteered time at Free
Geek and taught others at Linux Clinic before he was forced
back to Guatemala.  He teaches their children now.

China's new general secretary, Xi Jinping, trained as a
chemical engineer.  South Korea's incoming president, Ms. Park
Geun-hye, trained as an electrical engineer.  We elect smooth
talking lawyers instead, and vilify "nerds" in grade school.

Dr. A.P.J. Abdul Kalam trained in physics and engineering,
and was India's most transformative president between 2002
and 2007.  He remains the most beloved.  Idiots at Continental
Airlines frisked him in 2009, and he was frisked AGAIN in
New York in 2011.  Dumb moves.  Who will frisk who in 2030?

Fundamentally, the enduring values are skill, attention,
and time, which are transformed into all the other things we
want and need.  These real values flow one way, and (for now)
dollars flow the other way, but value will respond to other
flows when those become more trustworthy.  That can change
at internet speed.

I don't say these things because I fear the future.  
Quite the contrary, the future will be bright for most of
the seven billion of us on the planet, including Americans
who wise up and buckle down.

Please do not rely on your "birthright" as a dollar-
wielding American.  America was blessed by millions who
abandoned their birthright to Pounds and Marks and Lire
and Kroner for a chance to freely earn a living here.  Many
of their great grandchildren are emigrating in pursuit of
greater opportunities overseas.  If we want them to be here
for our old age, we must create real opportunity and value
at home, not wave dollars like flags over a dying corpse.
</rant>

Keith

-- 
Keith Lofstrom          keithl at keithl.com         Voice (503)-520-1993