Economic uncertainty in the world

Tuesday, August 02, 2011 | En Español

I try to post thoughts only occasionally, in-between technical articles, but since I am working on some major modifications to my publishing system, and the incoming technical posts require further testing, I relax by just writing, so...

I have to say that I am very concerned about the economy today, seeing that all the markets in the world fell today while the prediction was that the opposite would happen after a debt ceiling deal was reached in the United States. I didn't even have to visit Paul Krugman's blog, which I occasionally read, to get worried today. Of course, visiting his blog and seeing that he embedded a youtube video of the song "How can it feel this wrong?" didn't help. But I will try to keep the optimism, and I will continue working.

Economics is really complex, specially macroeconomics. I try to understand the concepts, with a fairly good rate of success, but it is still a very complex subject. I can't say to people "save every penny, live a frugal lifestyle and be happy" because if everyone actually did this, the economy would collapse as nobody would be buying anything. But it is difficult to resist the urge of save whatever can be saved seeing the volatility of the markets and the often misguided decisions by the policy makers in just about every country. On top of that, there is the issue of where to allocate the money so it doesn't lose its value, or more a where to invest it.

I wouldn't invest in gold at this point tho, the price is very high. Gold fluctuates in value but occasionally it reaches peaks and then falls. Buying gold during these peaks is very risky, because when the value of the gold falls, it may take many years for that gold to recover its value.

In 1980, on January 21 according to the charts (check the references at the end of this post), the gold reached a value of about USD$850 per ounce, after that falling, and it took almost 27 years to reach the same price in USD that it had in 1980, of course by this time the purchasing power of the USD was much lower than it was in 1980. I don't intend to inundate this post with charts (they are in the reference links), but the point is that we are clearly on a peak now, and if the value falls, it may take years before we regain the purchasing power that we had at the time where we bought the gold. The current price of the gold doesn't not appear to be given by the supply of gold, but merely by speculation.

This are very uncertain economic times, with a crisis looming in Europe, and the US economy slowing down. I don't like to write about countries other than my own, however, this is a global economy, the actions and the policies of the world's strongest economies do affect me and those around me to a great degree.

We all know the expression "You reap what you sow", but unfortunately our "representatives" everywhere are very short sighted (not to say corrupt, greedy) and they have their own version of this phrase: "whomever comes after you reaps what you sow". We are experiencing the results of the decisions of past governments, my hope is that the current governments can think more about the future than about their pockets in the present.

As for me, I'll just try to create something of value while I figure out the math to bring to life some projects. I can't wait for my second attempt at a company, as I learned a lot from the (now defunct) first one. One that truly cares about the needs of the customers, the well-being of the employees and the dominance of the market based on quality and service; more than it cares about very short-term earnings and customer lock-in. It won't be easy, but I believe it's doable, specially since a good job saves a lot in costs and headaches in the long term.

In case anyone is curious, I follow Paul Krugman because his economic predictions almost always become true. He won the Nobel price in economics in 2008 (although the Nobel peace prize have no value for me, but I don't wanna criticize that). His blog is at http://krugman.blogs.nytimes.com/ 

References

Categories: Thoughts