Markets Moving

The politics of this moment have little space for something as esoteric as market forces. In much of the developed world, popular media and politicians alike seem to have run back to the safety of a warmed-over 19th century discussion. Is the way forward based on industrial nationalism or international socialism? The language has been updated, but the basic platforms have not.

It seems particularly strange given that half of our waking hours are at work, and for most people the world of work has nothing to do with either view. It is changing, yes, and may not seem to have a coherent vision of just what is happening in any way that affects politics. That disconnect is certainly the first problem.

But there are lessons to learn from the one force which does indeed shape the world of work and directly affects the daily routine of hundreds of millions of people in the developed world. These are the forces of the global market, and they are not going away.

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Grabbing Globalization

So what’s wrong with the world?

If you’re a longtime reader of Barataria, you know that I have more than a few quirks. One is that in times of trouble, I always go back to the basics, the fundamental. This is part of my instinct as an engineer to hunt out the errant assumptions or whatever caused the problem.

Before I go much further in the topic I am considering, introduced in the last post, I’d like to lead you down my trail of logic – or lack thereof. Feel free to comment on any point of this which you think is weak or just plain wrong.

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Knowledge Economy, Connected Economy

This piece is a re-run from over nine years ago, but it has been fleshed out considerably as People’s Economics.  The topic at hand is 52 years old, so none of this is new.  And yet we still aren’t exactly sure as to how we need to implement this “knowledge economy” in a way that truly benefits everyone.  This was part of a series from 2009 entitled “Systemic Connections” and if you have some time the whole series is still worth a read.

The art and skill needed to put knowledge to practical use is more than just what technology is really about – it’s generally seen an increasing share of our economy.    The term “Knowledge Economy” comes from Peter Drucker in his 1966 book, “The Age of Discontinuity”.  It includes this:

In a knowledge economy where skill is based on knowledge, and where technology and economy are likely to change fast . . . the only meaningful job security is the capacity to learn fast.

True enough, since a lot of knowledge applied as an art went to revolutionizing economics itself since that time.  But as many of us have learned, the ability to think fast means nothing without the right connections.

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Be Careful What You … Measure?

Why should the stock market move in tandem with the price of oil? If you’ve never before heard that it has been you may think that the world really has gone crazy. Of course, you might be right.

But the phenom has been so strong and so enduring, lasting nearly two months now, that it’s more than a bizarre intellectual exercise – there’s a lot of money at stake. So what’s so important about oil going up that it drives the market? And how long will this keep up?

There are a few good theories out there for the first question, none of which make a strong case for when this relationship will break and we’ll go back to “cheap oil is good”. But there may be an even simpler way to look at it which tells us that the current situation can’t hold for very long at all.

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Rising Again?

The best bet for economic growth in the US comes from simply looking around the world. Japan is in a recession, Europe appears hopeless, and China is struggling. Where else can you put your money?

The answer appears to be the developing world, or emerging markets. Granted, whenever someone talks about “emerging markets” they usually wind up focusing on China – which definitely carries a lot of risk in terms of both currency value (fixed by the still communist government) and slowing growth. But throughout the rest of the planet there is opportunity. Lots of it, in fact.

While the US still looks great as a “safe haven” there is plenty of reason for cash to start flowing back to the developing world. But that investment is almost certainly going to be led by US investors given the strength of the US dollar.

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Resiliency

Long ago, most Americans lived as Laura Ingalls Wilder chronicled in the “Little House” series.  Pa Ingalls and family were out in the wilderness, surviving with the rhythm of the land and putting away what they could to survive long winters and perhaps beyond.  The family’s net worth was what they had around them – nearly all put toward surviving on their own.

That life has been replaced with interdependence based on a dollar value assigned to absolutely everything.  We all get by with any extra scratch, should there be some, not stored up to get through the winter but properly invested in convertible assets.  This means that everyone is subject to the values of the Free Market™, which determines the value of all assets including experience, talent, and work.

The real lessons from successful financial companies like Bain Capital are the demonstration of what these values of interdependence are – and how our world far beyond Pa Ingalls has become as hostile as any winter on the Great Plains.

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