The black swan of this decade is an accelerated currency crisis. In 1 year, multiple major currencies are down 15.62-20.26% – CAD, EUR, JPY, AUD, and NZD. It could significantly escalate as currencies default and there is a flight to safety.
Category: Economics
Categories
Most Currencies are Flawed
Most national currencies are flawed for several reasons including the following:
- Mechanism of creation: since the central bank, a non-elected body, can decide on the quantity of money supply, it’s underlying value can be manipulated. If there’s too much supply, the value can be significantly undermined.
- Currency wars: since each country, with exceptions like the European Union, can choose to print as much currency as they want. They have an incentive to lower the value of their currency to make sales of their countries’ goods and services relatively less expensive.
- Movement of money and taxation laws: Governments can decide to significantly affect the value of many people’s savings by deciding to heavily tax corporations and individuals where it be challenging for corporations and individuals to switch to more favorable governments
Why are/will PIIGS (Portugual, Ireland, Iceland, Greece, and Spain) / Countries Get Bailed Out
The following is my hypothesis on the cycle:
- System design flaws (eg. rules to keep a balanced budget are not sufficiently enforced)
- Misinformed voters
- Unqualified Candidates
- Fiscal Irresponsibility
- Debt crisis
- Bailout, default, or debt restructuring
- Currency Crisis
- Inevitable Outcome: System reforms
The key is to do system reforms as soon as possible so the issues don’t escalate. Decisions need to be made fool-proof with more checks and balances. It’s an iterative process to get capitalism to function appropriately. We don’t need to make the same mistake multiple times.
Work-in-progress Proposed solutions:
- Make it a criminal offense to not run a balanced budget unless there is a direct, and immediate threat to national sovereignty.
- Reforms currencies and back currencies by widely traded, liquid securities with fundametals (eg. commodity futures)
- Educate the public better so they can make decisions based on understand how capitalism works
- Cut out advertising completely in the voting process and create one website that hosts all candidates policies to eliminate waste, unfair advantages from better funded candidates, and allow an equal platform for sharing critical data in a more objective manner