I had a conversation several years ago where a friend of mine put dollars in a very different perspective for me. He asked me, “What is a dollar and what is it worth?” I told him that what we consider a dollar today is not what The Constitution defines the dollar as. He said, “No, you are missing the point” and the conversation took a turn that I never expected but made total sense and way before its time because this was maybe more than 10 years ago.
My friend asked what is $100 worth? I answered with “whatever it’ll buy or trade for” …and here is where unexpected turn came up. $100 means very different things to different people. To an average American $100 still (for now) means a very nice dinner out for 2 unless you are in a metropolitan area. To some, it may mean a full week’s worth (or maybe even two) of groceries. To some foreigners, $100 may represent a month’s wage for labor under some very harsh conditions. At the other end of the spectrum are movie stars, CEOs and even professional athletes.
I read a story (I can’t remember who the player was) about a pro baseball player who made $69,000 per at bat. What is $100 “worth” to this guy? Is it worth just one step on his way to the plate? 1/2 of a step? Or what is $100 worth to the owner of Kentucky Derby winner California Chrome? This guy was handing out $100 bills to the crowd after his win; these notes for him would be like us handing out pennies!
This is income “inequality” right? Well yes but this is not really what I am getting at. Let’s take professional sports but this argument holds true no matter what profession …it cannot last. Teams have inked multimillion deals after deal after deal. They have signed media deals, logo deals, stadium deals you name it but… they all have one thing in common (actually 2). Debt! Debt is used to build the stadiums and to purchase or trade the teams. The scheme is unsustainable (just as it is on a systemic basis) because players cannot get paid what they are being paid, stadiums cannot be built for what they are being built for and teams cannot trade at the numbers they are trading at …when the income of the fans can no longer support the revenue needs of the league.
Do you see the connection here? The inequality of income is exactly what will eventually bring the disparity to an end. This year’s Super Bowl barely sold out and this was only because ticket prices were discounted by more than 50% in the last week. Attendance at baseball and basketball games are way down …yet “signing deals” keep going higher and higher. This cannot last and will not last. By the way, as I wrote over the last couple of days regarding the coming “re set,” this situation is a perfect example of “why” it’s going to happen…because it should …and because mathematically it will have to. This is an example of a question that has an ugly answer.
In case you had not made the leap yet, debt, and the ability to service this debt is exactly what stands as the foundation for dollars themselves. If the debt (the foundation) becomes impaired, so does the entire structure. Pro sports are a perfect example and one that “us fans” can relate to. Was Mickey Mantle’s or Joe DiMaggio’s $100,000 salary equivalent to today’s routine $5 and $10 million contracts? No, not in buying power or in any other way with exception that it was “the biggest” to that point in time. In 10 or 20 years will an average salary of $100,000 for the fans be able to support routine $10-$20 million salaries? The answer is no because there are just not enough “fans” to support the “stars.” It works this same way in all of business, debt must be serviced but there is too much debt when compared to the amount of “blood donors” available. This is just another way of looking at how and why fiat systems (Ponzi schemes) always must come to an end.
On a separate topic, I have written about China being the ones who will “force” a re set upon the United States and would like to bring China up again. Their president spent a week in Africa back in March and their premier just returned yesterday from a one week, four nation tour. No, they were not on some safari adventure or enjoying $100 million vacations at their people’s expense, they were both there to do business. Africa has been largely ignored by the U.S. and it is a good thing …for them. If you get a chance, read a book entitled “The Confessions of an Economic Hit Man.” This recounts many deals done in the 70’s-90’s between the U.S. and Central/South American countries. Most of the deals were for infrastructure such as electricity, water and telephone. These “deals” typically involved the U.S. lending more money than these countries could ever pay back to build systems …where the U.S. would then foreclose (restructure) the loans and take control of natural resources.
I believe that China has and is looking “very forward” in terms of time, probably a minimum of 100 years. They are looking to supply themselves with the raw natural resources necessary for their economy. They have also watched, in my opinion very closely as to how the U.S. has done their deals over the years …with disdain. You see, you can do a deal, or several deals that are “one sided” and make some short term gain…for only so long. This can work on a larger scale if you do deals with different “customers” in different “neighborhoods.” This falls under the category of “fool me once…”
This leads me to what I think the Chinese are really doing. We know that they are buying gold, lots and lots of it. We have done the math and know for a fact that they are importing so much gold beyond global production that it must be coming from somewhere…and that “somewhere” can only be from western vaults. We also know that the Chinese are doing business deals that will build out infrastructure and ensure their supply of raw materials for many years to come… and these deals are structured in Yuan rather than dollars. They are in effect lining themselves up to become “a” if not “the” reserve currency of the world. They have watched as the U.S. abused their privilege of issuing the reserve currency and they also have seen the global sentiment sour as we “imposed” one sided deals on weak and needy business partners. I believe that since the Chinese do have such a long term “vision” of the future, their actions now will stand as the foundation for the next 50, maybe even 100 years or more.
I will finish with this statement, “They don’t need us, we will need them.” I won’t finish this or elaborate on it until tomorrow but I truly believe this to be the case, the Chinese know this and sadly the American people do not.