Message of the Month
Recently in a documentary on world economy, it was said that the total world trade in goods and services is $8 trillion per year, while the total currency trading in the world is $288 trillion. A staggering number, totally out of proportion to what one might anticipate. In other words, for every dollar that we trade in goods and services between nations, we exchange 36 dollars in currency…
We might very well ask why? The documentary went on to explain that this volume of currency exchange is to facilitate international investment, as well as act as a very efficient market mechanism of speculatively maintaining the value of various currencies in relation to each other.
In other words, 36 dollars is exchanged to invest in and facilitate the exchange of one dollar. And of course in the process of exchange of the 36 dollars, much money can be made or lost… definitely much more money than in the exchange of one dollar.
So I began to think about what was really happening.
Presumably the exchange of goods and services represents the exchange of created value – something that is needed and can be put to use by someone else, whereas the exchange of currency has a different nature. When it is used for investment purposes, it creates the means of creating value. And when it is used for facilitating trade, then it maintains the means of distributing the created value. Or put another way, the investment dollars are used to establish the machinery of creation, while the facilitation dollars are used to oil that machinery.
But there was a bigger picture, and that was the size and disproportionate ratio of these numbers. Do we really need a leverage of 36:1 to create value?
This took me to the valuations of the stock market. A typical P/E ratio for a well-established company is between 20-30. In ordinary language what this means is when we invest a dollar in a company, we expect our investment to be returned between 20-30 years.
And the more high-tech as well as the more speculative companies actually have a much larger ratio. Some as much as 100 or 120, which means our investment cannot possibly be returned to us in our own lifetime. What is more interesting is that some companies have a negative ratio. In other words, we buy into a company that is losing money and we will actually need to put more money into it, or never recover our investment.
So why do people do this? In the hope of growth, that one day these companies will become so profitable that they will return their investment and then some. In other words, people speculate.
But speculation has become a dirty word in some circles. So I was looking at it through a more neutral vocabulary. I thought if the one dollar is spent on created "real value", then the 36 dollars will be spent on uncreated "perceived value" – a value that is not actually there, but it is perceived to be potentially there, with a high expectation of actually coming to fruition.
Yet the truly interesting issue is the fact that our lens of perceived value has to magnify the created real value to such an extent that we trade in perception 36 times the amount we trade in reality.
Perhaps this is our escapism, or a sad reflection of our reality that we magnify our perceptions so much that they dwarf our reality. Or perhaps this is the nature of our existence – to live in thought and perception to the level that reality becomes secondary and subservient to it.
I don’t know. Maybe life is a series of speculative ventures revolving around reality. Or maybe reality is created from perception. Maybe we need 36 speculative perceptions to create one reality. I don’t know.
But I sense that as a species we feel out of touch and out of control. I sense a deep level of dissatisfaction. Perhaps our lives would be more balanced and less stressed if we chased our real values a little more, and dropped our magnifying glasses of imposed, acquired, or self-created perceptions from time to time.
Perhaps the real values of our lives, things such as health and joy and compassion and creativity would have a little more prominence. Perhaps we could let go of flag-waving and flaunting, be it nationalistic, materialistic, or even futuristic, and become a little more realistic.
In the meantime, while we drown ourselves in our perceptions, and try to convince ourselves that we are content, real satisfaction that is a bi-product of pursuit of real values remains illusory.
© Shahriar Shahriari
Los Angeles, CA
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