I have read two "interesting" topics over the last couple of days from the Australian economy, where the first one was critical of the board of the Reserve Bank of Australia, noting that 5 of the 9 members are business people and have zero experience with developing and setting economic policy. With one of the critical points noting that the board make technical decisions on how to move the economy and aren't meant to be representative positions.
However, I think that the criticisms might be misaligned, because the decisions made seem to be doing exactly what they were intended to do.
So, the other story looked at what has gone into the increasing inflation costs, where businesses are saying that they have no option but to increase prices due to rising wages and their own costs. The only problem with their argument is of course, that 60% of the inflation can be attributed to profits, not rising costs, with wages accountable for only 15% of the total inflation. This makes sense though, because across the board, businesses are profiteering, which mean supply chain costs increase, each taking their pound of flesh from the body - the consumer body that is.
See - business is booming!
Well, some business.
Not all businesses are going to benefit the same along the supply chain, because the further down the chain you are, the more compounded profit-taking has to be absorbed and the more that has to be passed onto the next link. At some point, the next link starts to demand less, but in order to have the possibility to stay in business, it still needs to be bought. It is like a restaurant that has to have a full fridge, just in case they have patrons, but because the cost to fill the fridge is so high and will be passed on to the patrons, customers stop coming.
But at some point, an equilibrium is reached, where based on the supply chain bloat due to profits, enough businesses fail to lower supply demand, that prices have to come down again. However, all that really happens in this scenario is that the suppliers lower their prices to near where they were prior in a bid to generate demand again, however, because they have already profiteered, they have a nice little cushion to fallback on during the process.
In Finland for example, there is a 76% tax on motor fuels. This means that for every euro spent, 76 cents goes to the government and the "real cost" of the fuel is 24 cents. If a liter of fuel is 1.50€ like it was two years ago, 1.14€ of it is tax and 36 cents is real cost. Now, the price is around 2.50€ per liter, so 1.90€ is tax, 60 cents real cost.
If this was a business (it is), it is not a bad deal for the seller, as there is no risk exposure whatsoever, they are able to take the same percentage of profit, regardless of what happens in the supply chain.
It is like a business that has a product for a 1000 dollars where production costs are 200, and labor costs are 200, so the profit is 600. But then, they increase the salaries of all employees so labor costs are 400. What is the cost of the product? You might be tempted to say 1200 to maintain the same 600 in profit, but that doesn't maintain the same percentage of profit, because prior it was a ratio of 1:1.5 cost:profit. so to maintain the same ratio of profit, the product cost is now 1500, a 50% increase to the consumer, but also a 50% increase in profits. So, they increases wages by 200 and are still making more money than they did earlier.
Of course, business doesn't work like this, because there is a supply and demand element, meaning that if prices of a product went from 1000 to 1500, demand for that product should drop, unless it is a necessary item, right? Like, milk, bread, fresh foods, fuel, heating.... The trapped consumer audience.
Make no mistake, at the end of the day, no government or business cares about you in the economy and the only "us" they care about maintaining is the one that consumes to maximize profits for business. The governments aren't there to improve our lives, they are there to support business to increase the gains, while finding an equilibrium point where we as a group are content enough not to revolt and overthrow the government. But, because greed knows no bounds, inevitably, the revolution will arrive, because the system they use leads down the path to centralization and increasing control that looks to maximize the extraction of value.
History is a pretty good teacher in this and there is a simple question to ask yourself about the future of centralization.
Which empires have survived?
The answer is of course, none. All empires have fallen and all countries will too. They might survive 100 or 1000 years, but the more they hold onto their traditions, the more likely they will be too fail, because time erodes all things and culture shifts, whether the ruling class like it or not. Society is in a constant game of tug of war, where those in power, hold control and want more, will be pulling against those who ware looking for increased freedom and autonomy. At some points, the pull on the freedom-seekers is low, because they feel they are "okay" in their wellbeing, but as the controlling forces keep pulling to maximize, at some point, that wellbeing drops to the point that resistance is met and there is "pullback".
In the past, the option for the majority of us looking for wellbeing was to overthrow the central ruling force and replace it with something that would hopefully treat us better. But, expecting limitless benevolence from a centralized authority is a fool's game, because ultimately, power does corrupt and once it gets to a point where that power is "ultimate" in the sense that there is no competition, it will become more confident and ramp up its activities, turning back the wellbeing of others.
For a simple example and not getting into the right and wrong of it, once the US Supreme Court was able to overturn the abortion laws in the US and push them back to the state instead, the call is for them to do the same for same-sex marriage. This essentially is a "turning back" of the clock in the same way all centralized authorities will look to protect their position and happens across the board to lesser and greater degrees. After all, the law is the law and if stoning women to death for adultery is legal in a country, we have to accept it as such. Who are we to judge?
You see the problem with the "code is law" mentality some people have?
Laws change.
And unlike the past of overthrowing the centralized dictators of our world and replacing it with a future dictator, there are new options available - namely, decentralized dictatorships. Yeah, where we dictate the course of our lives and as you can see, the financial systems is where to start, because it is through the economy that we are able to affect our wellbeing. However, that economy doesn't have to be a centralized economy anymore, it can be a more direct trade in a free system between us, the people, where the "laws" are created by the group.
Just like two people can love each other and commit to each other without a piece of paper sanctioned by the state, an economy can operate similarly. And, we can see that while all empires have fallen due to their policies, very few cities have fallen because of it. The cities exist because of the people willing to use them and we all need a place to live. Economically, we do not have to be part of an empire to live, we can be part of economic cities that through usage, create dynamic laws that will operate for a time, until a better system through usage again is found.
Centralized systems have to take the position that they are "perfect" at the time, because to continually change is to erode their power and they are not benevolent enough to do that, even if it is better for the people they govern. But, decentralized systems will continually adapt to the changing usage and usecases developed, as well as the shifting sands of culture and society, to always be a work in progress, never perfect, always improving. It takes out the protection mechanisms for the traditions and if something isn't working, it will be removed - not by force, but through disuse.
And, for the first time in our history, the entire economy has a competitor through blockchain and tokenization solutions. This means that there is going to be a tug of war with the outcome of control versus quality of life being fought between centralized and decentralized economics. This battle however needn't be as bloody as the revolutions of the past, because they will be determined by usage, not violence. However, like all centralized systems have done and will do, they will look to protect themselves in order to hold control, so peaceful competition is unlikely.
We as a global society are in unchartered territories in so many regards due to how we have advanced technologies to be able to do what we can do today and expand even further tomorrow. This has given us a completely new toolset that not only lets us transfer information near instantly anywhere on earth, but also bypass a lot of the physical limitations that have been used to control us in the past, like mobility of wealth and national borders, as we become digital versions of ourselves in many senses.
These tools are just starting to be trialed and there are going to be many errors along the way, but they are the tools of decentralization, meaning that the errors needn't be catastrophic to the global outcomes. However, these same tools also have the potential to increase control over us if we let them be used against us, rather than use them for us.
However, the challenge we face is that most of us concern ourselves with the "layer two" of the economy, the governments and corporations that are essentially applications that manipulate the laws of layer one for their own gain. However, the economy at the layer one is actually owned by us through enduser usage, so if we change our behaviors, the layer one is affected, as are the applications that reside on it. However, now we have the potential to remove the middleman management services by recalibrating the layer one and converting it into a layer we actually own in a distributed manor, making it impossible for any single entity to control it and therefore, control us.
This all sounds impossible.
Right?
Well, we just have to get uncomfortable enough to revolt and remember, we don't need violence to win, we need to change our behaviors.
Taraz
[ Gen1: Hive ]