Gold Ounce Price vs. DXY Index

 

There has always been an inverse relationship between gold price and the dollar. One of the measurement scales of the demand for the dollar is the DXY index, which is the average index of the dollar equivalent of 5 countries’ currencies. If the DXY index is increasing, it means that the demand for dollars in the world is increasing. As can be seen in the graph, the reverse relationship between the dollar DXY index and the gold ounce price in the last year is quite clear. With the DXY rising, the gold price is falling and vice versa. The DXY index has started to decline accordingly, as the reserve currency of the dollar has weakened more and more, and gold has started to attack. This was an expected development.

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Central Bank Digital Currency

 

The monetary system is changing as a natural target of technological development. The time to say goodbye to fiat papers and coins is near. In this new financial system, when the economy starts to shift to digital environments, money cannot be expected to remain in its old form. In addition, we know that in the old system, the intermediary financial structures that created the money, namely the commercial banks. With the digitalization of money in the new system, it seems that commercial banks are coming to an end, thanks to the digital money issued by central banks.

It seems that most of the seigniorage revenues of these structures will be included in the state budget, thanks to the state’s control of the money in digital form to a large extent. Thus, we will open our accounts directly in the central bank. According to some, it seems that the state’s control in the financial world will expand thanks to the change in the form, printing and control of money. In this way, it is inevitable that all commercial and economic activities are reshaped and the control of capital and the way it is created will change.

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FED Balance Sheet in the Monetary Crisis Process

 

We see the balance sheet of the US central bank Fed in the chart. After the 2008 crisis, the Fed printed approximately 4 times the amount of money it printed in 200 years. The balance sheet, which was around 800 billion dollars until 2008, increased to 3 trillion dollars after the 2008 crisis. As of March 2020, when the first wave of the great financial crisis we were in came, it increased its balance sheet, which was around 4 trillion dollars until then, to 7 trillion dollars. At the beginning of the crisis, Covid gave money directly to the unemployed households in the economy that was closed due to the 19 epidemic, using a method called “helicopter drop”. Here we understand once again that every money printed since 1971, when money was cut off from gold, is a debt, a debt of interest. This debt was borne by the state in Japan and to the public in Switzerland.

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Global Debt

 

Information showing the ratio of total government debt to global production (GDP) globally is given in the graph. When we look at the chart, we see that the total global government debt was 2.28 times the total production in 1999, 3 times in 2009 and 3.19 times in 2019. This globally increasing debt gives an idea about how fragile countries are in the financial crisis we are in.

I suggest you also read my “global debt” article on this subject. Global Government Debts-to-GDP Ratio

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Indebtedness of Countries

 

State indebtedness rates are given in the table. According to the table, the top five most indebted states are Japan, Greece, Lebanon, Italy and Singapore. Japan, the most indebted country, owes its annual output approximately 2.37 times its GDP. Then Greece follows with 1.77 times, Lebanon 1.51 times, Italy 1.35 times and Singapore 1.26 times. The USA ranks eleventh with 1.07 times. This ratio is 0.33 in Turkey (www.tradingeconomics.com/country-list/). We may wonder how developed countries such as Japan and the USA survive with these indebtedness rates.

One of the important pillars of the smooth running of things in the economy is the continuing trust in the country’s currency and the acceptance of the country’s currency in the international arena. Another reason why the indebtedness is so big is not a problem is undoubtedly the strong industrial production of these countries. In Japan, interest rates are “0”, if it is 1, there will be difficulty in paying the government debt and the risk of the economy collapsing.

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Gold and Silver

 

We entered the first phase of the period that the world will call the “worst financial crisis” last March 2020. The main cause of this crisis is the system itself. We are approaching the end of the global unlimited money experiment we have experienced since 1971, when the dollar as a reserve currency was completely disconnected from gold. In order to better understand the fiat money system (fiat paper money, currency) we are in, we must first understand the system known as the gold standard, in which money is printed based on valuable commodities such as gold and silver. One of the reasons for the global financial crisis we are in and is at the beginning is that we do not know the difference between the exchange tool called fiat money (originally called currency) and money (commodity, money, which is limited and has its own intrinsic value), which we use as cash and is printed unlimitedly. Fiat money has features such as being a medium of exchange, being a unit of value calculation, being portable, divisible, and being the same as its counterparts. In fact, money also has an intrinsic value like gold and silver, apart from the above. Throughout history, whoever owns more gold has made the rules.

About 5,000 years ago, Egyptians began using gold and silver as cash. The gold and silver coins paid to the workers when the Egyptian pyramids were built are still in circulation today. Therefore, gold is the only item that has not been thrown away in history. One of the reasons why it is gold and not another mine is that it can be processed easily. Why gold when there are other easy-to-work metals? Historical documents also mention a side of gold associated with God. Therefore, the answer to this is a subject of long and detailed research that cannot fit here. Around 700 gold coins were converted into coins for the first time before Christ, increasing their availability as currency. Prior to this, gold had to be weighed and checked for purity while processing. B.C. In the 6th and 7th centuries, a lot of gold and silver called “electrum” was used and trace amounts of money produced from a mixture of platinum and copper were used. The earliest known electrum coins, Lydian and East Greek coins were found under the Temple of Artemis in Ephesus and are dated to the last quarter of the 7th century BC (625-600 BC) (Kurke, L. (1999). Gold: The Politics of Meaning in Archaic Greece, Princeton University Press.).

Today, gold and silver continue to be real money. Although the value of real gold is suppressed by marketing paper gold and paper silver issued in derivatives markets, this cannot be continued for a long time. It is inevitable that these precious metals will attain the values ​​they deserve in the near future.

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Cashless Society

 

In the information economy, the digitalization of money as in production systems leads to a gradual decrease in the use of cash in economic transactions. In fact, it is costly in cash production, transportation and storage. In the Figure, the increase rates in non-cash transactions in major countries between 2015 and 2016 are given. The country with the largest decrease in cash usage is Russia with an increase of 36.5%, followed by China with 25.8%. In the USA, this rate increased by 5.7%. In short, although the transition from cashing out varies significantly between countries, it is actually almost global.

In the new economic system where money has entered the digitalization process, the concept of “Cashless Society” has become a frequently discussed concept. The cashless society, in short, is a situation where all kinds of financial transactions are made electronically in the digital environment, not with the usual physical banks and coins (Chakravorti and Mazzotta 2013). For example, the bill submitted to the US Senate in June 2020, the bill, code S3571, briefly passes the following topic: “The bill includes Federal Reserve Banking’s digital transition accounts for residents and citizens and businesses residing in the United States (i.e. Among other things, these accounts are required to provide certain banking services to eligible individuals who choose to deposit funds into these accounts, including access to covid-19 (i.e. 2019 coronavirus disease) and payments. These accounts may not charge fees or it may not have balance requirements and must provide a specific interest rate.

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Virtual Industry

 

With the developing technologies, production forms are also changing. In the current period, this change has gained momentum. The Internet plays a big role in this. With the development of the internet, it started to be used by wider masses, and it started to bring people closer to each other. It is no longer necessary to have large amounts of capital to be able to trade. There is no need for a physical location because everyone can easily establish their own market on the internet. You do not have to employ employees here either. All you need is a little bit of computer use and access to the internet. The rest is up to your creativity. Moreover, you can instantly market your products to the other side of the world. The concept called the internet of things is one of today’s innovations. Now not only people, but also things can be connected to the Internet, and even machines.

We have entered an era in which artificial intelligence has begun to dominate everything from machines to mobile phones, from white goods to the brains of cars. This necessarily requires production systems to evolve. The era of machines that investigate the problem by connecting to the internet on their own when there is a malfunction or find technical support for their own repair begins. Artificial intelligence has begun to infiltrate the financial system. Thus, you will not have to sleep in front of the screen while making instant price follow-up of your investments. An artificial intelligence that you download to your mobile phone will instantly track your investments for you and will be able to buy or sell when necessary. We will be able to produce our own glass using nano-technological inputs with three-dimensional printers the size of a refrigerator that we buy in our homes. Also in the color and pattern we want. Imagine that you are marketing them in the virtual market we have established. The virtual industry is a new industrial revolution in our lives in every aspect.

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Blockchain

 

Technology is always created to serve the mind of its manufacturer. At this point, it is necessary to be careful and use it to our real benefit. While doing this, it should not be overlooked that technology can serve different ideologies and plans in the hands of different minds. For example, splitting the atom into its nuclei is a technological breakthrough, and while there are many useful things that can be done from it, some minds make bombs from it and threaten humanity. Blockchain is also one of the most important inventions of our day. It seems that it will also play an important role in building the future. At this point, what role it will play depends on which minds will be used. Blockchain is an invention that will bring innovation to our lives in many economic and technological aspects. It is necessary to look at its effects not only in economic and technological aspects but also in sociological aspects as an integral part of them.

Blockchain is a common registry. Its lack of central structure makes it think that it is reliable. Blockchain is like a structure that can even change the management style. One of the most important factors that make the bond between the state and the citizen strong is the official money printed by the state. Crypto currencies driven using blockchain will be able to break this link. This, too, is something to be desired. I think that as this technology matures over time, nation states will try to make this technology more controllable by intervening. I have a lot to write about blockchain, wait for the next issues …

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Centralized Money Economy

 

All kinds of centralization slowed down the fast pace of things while reducing productivity over time and made bureaucracy chronic. To give an example of the centralization of the money economy, as stated in the Swiss Federal Institute of Technology 2011 report, approximately eighty percent (80%) of approximately 40 million companies operating in the world are in control of 737 companies. We understand here that these 737 companies actually drive 80% of the world economy (MacKenzie and Coghlan 2011). Another important problem arising from the central structure of the system is the income distribution unfairness. For example, the income of 85 people in the world is equal to the total income of 3 and a half billion poor people (www.oxfam.org).

The other two most important sectors in which centralization has become stronger are the media and banking sectors. For example, while approximately 50 companies were active in the media sector in the USA alone in the 1990s, this number has recently decreased to 6. Likewise, this number decreased to 4 in the banking sector where approximately 40 banks operate. (www.statista.com). It seems that centralization is not an exercise in socialist regimes alone. As can be seen from the examples given above, centralization in the money economy is in the nature of the system. In the socialist system where the central authority is usually the state, economic decisions are naturally taken by the state, since the capital belongs to the state. One of the important indicators of this is the ratio of public expenditures to GDP, which is measured as a yearly total production value. This ratio gives an idea of ​​how much the state controls the economy, and in the world’s developed monetary economies, for example, 49% in Europe (www.ec.europa.eu/Eurostat), 42% in Japan, 40% in the USA, while communist. It is 36% in Russia, one of the pioneers of the system, and 24% in China(Miller, Kim, and Holmes 2014).

Source: https://arzualvan.com/centralized-money-economy/

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Digitalized Knowledge Economy

 

It is possible to see the advanced production systems of that period at every stage of the economic history. To understand the functioning of the economy, it is necessary to examine the most advanced manufacturing practices. Because it is the production systems that fully reveal the forces of humanity. During the industrial revolution, the most advanced production system was mechanized production, which turned into industrial mass production. In our time, it is information economy. Before we produce a definition of the knowledge economy, we can tell what it is not, knowledge economy does not necessarily mean that everything is technology-based. That is, the knowledge economy is not just a structure with a very high-tech private working class.

The first of the most important features of the knowledge economy is that it combines large-scale production with the epic standardization of products and services. Another feature is that it seems to loosen or even reverse the law of diminishing yields, which is one of the cornerstones of the economic system we are in. Thus, in the knowledge economy, there is a potential for continuous innovation. Continuous innovation has the potential to loosen or reverse this most universal constraint in the economic system. Another feature of the knowledge economy is that it brings together the activity of producing and the activity of imagination or discovery.

The best firms become like the best schools and have the potential to radically change the relationship between person and machine. In the current system, economy is the system of allocating scarce resources. In the money-based free market system, production is now largely driven by people’s brains. Whether you are producing something or providing a service, the quality of what is achieved now more than ever depends on the quality of the mental input entering the production stages. Many factories, which are part of the knowledge economy, make us realize that production cannot be sustained with the old methods, it must become smarter and leaner.

Intelligent mindset and technology-oriented solutions are used in the knowledge economy. The deepening and dissemination of the knowledge economy depends primarily on a new kind of education, an analytical and dialectical form of education offered to the whole population. Secondly, it depends on the accumulation of social capital, intensive network of partnerships, and increased ability to cooperate. Another way of spreading and deepening the knowledge economy is the legal and institutional reorganization of the market economy. One of the ways to make every segment of the economy able to produce in technologies that pioneered the knowledge economy in production forms stuck in the old technology is by providing more people with access to productive resources and opportunities. The new system, which emerged as the knowledge economy, should be deepened and widespread in the ways suggested above to increase the productivity of each unit in the economy.

On the other hand, the increasing dependence of production systems on information and technology has started the process of moving the economic system to digital platforms. Digital platforms are, of course, meaningless markets without electricity and internet. Nowadays, we see that many things, from social relations that cover most of our lives to production and sales relations, are now happening on virtual platforms. Part of the economic activity has now begun to move to virtual environments. These are thousands of such as advertisements, customer-oriented production, clothing, grocery, health and cosmetics, technological devices, travel and of course vacation opportunities offered in virtual reality. We will no longer see the developed country, developing country concepts that we are used to in the digital world. Thus, according to the report of the United Nations in 2019, approximately 90% of the digital economy in the world is formed by companies from the USA and China. The remaining 3.6 percent is the share of Europe and 1.3 percent is the share of Africa.

In the same report, we see that these two countries have half of the spending on the internet of things. The digital economy is basically a data-driven economy. The process of creating value in the digital economy includes the stages of data collection, storage, analysis and information transformation. Global internet protocol traffic is a good tool for measuring data flows. This was 100 cigabytes per day in 1992, but more than 45000 cigabytes per second in 2017. In the 2020s, while more and more people are connecting to the internet, we also see that things are starting to connect to the internet with an increasing density. This causes the concept of the internet of things to spread rapidly. In countries that invest in the digital world such as the USA and China, investment in the internet of things is increasing day by day. I will continue to write on the internet of things and digital economy.

Source: https://arzualvan.com/digitalized-knowledge-economy/

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Money Turbulence, Covid-19’s Shocking Financial Impacts and Ways of Exit

 

In this article, we will seek an answer to the question of how we can be more resilient individually in the current economic and financial process. Is it possible to get out of the currency turbulence that started with the sudden halt of economies all over the world and trade between countries coming to a halt? It is possible, of course, if you have been able to save your money before with careful financial management. Otherwise, unemployment has reached enormous proportions in the economies that are closed. This leads to the proliferation of segments that have difficulty in finding food and bread, let alone save money. For example, the unemployment figures reached 15 million in mid-2020 in America. Approximately 40 million people feed on food aid provided by the state, and approximately one million people live on the streets.

In this process, we see that the figures in the debt households of the states, which apply aid packages to those who are unemployed and to units that cannot operate, also increase. This seems to result in more fiat money being printed and increased taxes and inflation in the future. In this case, it is appropriate to consume every penny earned with care and, if possible, to save.

Large cost home, car, etc. Postponing such purchases to more stable states where the water is settled is one of the ways to get the least damage from money turbulence.

I would like to emphasize that the bond markets and stock exchange were not safe investment instruments in this period. In times of crisis, the approach to cryptocurrencies such as bitcoin, physical commodities such as gold and coin increaes. Because these assets are limited and sound money. Investors who want to preserve the purchasing power of their money, and even states and central banks, such as large-budget organizations, also shift towards solid money when confidence in the system begins to decline. In individual investments, sudden and high gains should be avoided in the short and medium term, and commodities such as physical gold and silver should be turned to.

Source: https://arzualvan.com/money-turbulence-covid-19s-shocking-financial-impacts-and-ways-of-exit/

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Is The Money Economy Ending ?

Is The Money Economy Ending ? The world economy is in a great economic and financial transformation. This transformation is from money economy to knowledge economy. Besides, this transformation has been accelerated by the great financial and economic crisis we are about to enter. Examining the cyclical processes that the economy has gone through is the first step to understanding and interpreting the current situation. With this crisis we are in, the redefinition of money and its original definition is one of the possible consequences. As a result, the crisis is expected to cause countries to issue their own digital currencies and rapidly move away from the reserve currency dollar. Thus, with the renewed form of money, it is predicted that the knowledge economy will change the economic order. It is possible for the world to evolve from a world where money is unipolar to a multi-polar, independent and national currency world. This can result in a change and restructuring of everything from economy to trade, politics, social life, and even the geographical borders of many countries.

The foundation of the money economy is capital. In this economic model, the central element is industrialization, that is, massively centralized production in factories. This centralization often brought about monopolization. As the capital grows over time (capital accumulation), mass and large-scale production, large-scale consumption, mass transportation, mass communication, collective armament and so on. It also gave birth to such elements within its body. It is understood that the money economy causes centralization in production, from the establishment of large factories to the industrial revolution, from the mass production of distributed and small-scale production in these large factories. This structure of the money economy has caused the social structure and social life to be shaped in the same direction.

 

All kinds of centralization slowed down the speed of work, while reducing productivity over time, made bureaucracy chronic. To give an example of the centralization of the money economy, as stated in the Swiss Federal Institute of Technology 2011 report, approximately eighty percent (80%) of approximately 40 million companies operating in the world are in control of 737 companies. We understand here that these 737 companies actually drive 80% of the world economy (MacKenzie and Coghlan 2011). Another important problem arising from the central structure of the system is the income distribution unfairness. For example, the income of 85 people in the world is equal to the total income of 3 and a half billion poor people (www.oxfam.org). The other two most important sectors in which centralization has become stronger are the media and banking sectors. For example, while approximately 50 companies were active in the media sector in the 1990s in the USA alone, this number has decreased to 6 in the last case. Likewise, this number decreased to 4 in the banking sector where approximately 40 banks operate. (www.statista.com). It seems that centralization is not an exercise in the monopoly of socialist regimes alone. As can be seen from the examples given above, centralization is inherent in the system of money economy. In the socialist system where the central authority is usually the state, economic decisions are naturally taken by the state, since the capital belongs to the state. One of the important indicators of this is the ratio of public expenditures to GDP, which is measured as a yearly total production value. This ratio gives an idea of ​​how much the state controls the economy, and in the world’s developed monetary economies, for example, 49% in Europe (www.ec.europa.eu/Eurostat), 42% in Japan, 40% in the USA, while communist 36% in Russia, which is one of the pioneers of the system, and 24% in China (Miller, Kim, and Holmes 2014).

Source: https://arzualvan.com/is-the-money-economy-ending/

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