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12 March 2009

Idea: A preliminary sketch of the new world

1. My worldview has been totally shattered of late. I read 2 books by Gavin MENZIES entitled 1421 and 1434 [] and came to the conclusion that most of history is totally wrong. Magellen did not discover the Magellen Straits, nor Columbus America nor Gama the Cape of Good Hope -- the Chinese did, although not a word about this Chinese feat is even mentioned in the English history books. The Chinese also sparked off the European Renaissance with the gift of a series of books and encyclopaedias to the Pope teaching astronomy, printing, machines and other civil and military Chinese inventions and again, not a word of this is mentioned in English history books. A History Channel programme I watched yesterday, Inside Islam, also transformed my worldview and made me realise how recent and short European domination of the world is and how the previous empire in the Europe region, the Arab empire, contributed so much to math, science and learning. Our numeral system of 1, 2, 3, etc, is Arabic. As is algebra, an Arabic word itself.

2. So I began researching. The various European countries' domination and colonisation of many parts of the world began only in the 15th Century, that is, about 600 years. Against this ~600 years are China's ~3,900 years of civilisation, most of which as the most advanced in the world, and India's ~4,200 years or so, if I remember MENZIES' book correctly. American domination began only after WW2, or about 64 years, although it seemed forever. Its rise coincided with, and is probably the direct result of, the Bretton Woods agreement which made the US$ the world reserve currency, originally backed by gold, now backed by nothing, so the Americans simply print as much as they want, to buy up the world's assets and resources and to enslave other countries.

3. We are captives of our senses. We can only live in the moment, and have memories of events no longer than the time we have lived. The rest of what we know of history is what we read or learned. And history is written by the victors. After reading 1421 and 1434, I concluded that history is mostly lies and inaccuracies and historians and history books cannot be trusted. I have also learned the hard way, that the media, even the supposed free media of the West and America, also cannot be trusted to print or describe the Truth. I now don't believe anything I read or hear in English. I have, like most Singaporeans, learned to read between the lines and distrust any Singapore media; now I apply this to all Western media as well. They are sama-sama. Thus, currently, since we must live in the moment, and our memories extend to no more than the date of our birth, we may believe that America is the most powerful empire in the world, just like the various Europeans' variously before it, but we only have to think a bit and realise that this may not be so or can continue for long. Indeed, the economic crises of the US and, to a lesser extent, the EU, may mean that the European domination of ~600 years and the American domination of ~64 years, may come to an end.

4. But isn't America the world's biggest economy and therefore military? Like everything else, what result you get depends on what you measure it with. Economics is measured in dollars, usually US$, and by this measure, the US economy is indeed the biggest. But if you measure economies in non-dollar terms, other economies are far bigger. Here, I introduce the concept of Unit Economics.

5. Currently, all economic production is measured in dollars, ultimately the US$. Like rice, dvd players, pc software and services like a haircut or a massage. What if you measure these in their Units? For example, the rice produced by the US could be measured in tonnes, the dvd player as a unit of dvd player, similarly, a piece of software, a haircut or a massage, etc. Then, you will discover that the true US economic production is far smaller than that of China or India. Because China produces far more tonnes of rice, dvd players, haircuts, etc.

6. Economics is a form of accounting and like all accounting, far from the reality it describes. For example, the balance sheet of a company is far from the reality of the company itself. You can no more understand a company's size, operations, and impact on the world from its balance sheet than you can understand an economy from the usual economics measurements, especially the US$ measure.

7. Proof of this is in the comparison of military might. When you compare the military might of Russia vs US, you don't say that Russia has $4 trillion of nuclear warheads while the US has $10 trillion, etc. You actually say how many warheads, that is, using each warhead as a Unit measure. You don't even measure by the megatonnage of the explosives although that works well like the US$ in economics. Thus, when clear thinking and accurate comparisons are needed, comparisons are made in Units, not US$. Apply this Unit Economics to compare the economies of countries and you will paint a totally and vastly different picture of the globe. Generally, the bigger the population, the bigger the Unit economic production, so China and India would be far ahead of the rest of the world. If a billion people in India and China are NOT starving or homeless, then their economic production must be enough to keep them roofed, clothed and fed, even with some of life's other necessities, thus totalling a far greater production than the 300 million in the US despite its much higher productivity due to higher mechanisation and computerisation, etc.

8. The European domination of the last ~600 years and the American domination of the last ~64 years worked to better their economies and people's lives by taking by force the raw materials and the colonised people's work and shipping these back to Europe. The subject colonies also served as captive markets for the Europeans' productions. But these methods are no longer possible, meaning that world domination is no longer profitable, so American domination means little. Indeed, quite the opposite, as vast sums are needed to subjugate a subject country, like in Iraq and Afghanistan since modern insurgencies are efficient and effective against even superpowers. Are American oil companies making much money from Iraq? Or is the cost of this robbery not quite worth it? Thus, world domination is unprofitable nowadays. Meaning that America cannot profit from it like the Europeans did, thus its continuing quest can only result in over-reach and over-extension leading possibly to swift decline.

9. Another horrific inaccuracy lies in the different EXCHANGE values of currencies. The currencies of most of the developed world is much higher than those of undeveloped countries. Thus, economic production of the developed countries, ultimately measured in US$, are far higher than those of undeveloped countries. But a US$10 haircut or dvd disc in a developed country is much the same as a US$1 haircut or dvd disc in an undeveloped country. Generally, WITHIN a country, that is, domestically, the exchange rate is unimportant but when buying and selling overseas, a low exchange rate means a great disadvantage because you have to pay so much more in products or services worth to get something that may be of much lesser intrinsic value. Just because of the low exchange rate. Thus, it is possible that for future international trade, across borders, undeveloped countries may want to barter instead of paying in US$. In the old days of cross-border trade, merchants bartered, sometimes using gold as a barter instrument. Today, with internet websites, email, fax and phone, barter is even easier. The first few times would be hard but quickly, norms and quantities would be quickly established, for example, 10 tonnes of rice for 1,000 dvd players. It would be easy to also devise a Barrel of Oil Equivalent. Thus, 10 tonnes of rice for 100 BOE, at which point, the BOE would become the international trading 'currency'. Russia, with its huge oil and gas reserves, could begin instituting this. The BOE could be backed by a real barrel of oil, like the US$ was previously backed by gold. This would make the BOE superior as a reserve currency. The BOE would be issued primarily by the oil producers, since they produce oil and can back each BOE with a real barrel of oil, but others who also can acquire oil would also be able to issue BOE probably. As long as each BOE paper is backed by a barrel of oil if redeemed. Since every country needs oil, it is a universal store of value, which is why currently, oil is traded in US$. Countries may also want to consider having 2 currencies, 1 for internal, domestic use and the other, for international exchange for trading use. For example, a domestic Renminbi and a foreign Renminbi. The China govt would probably set the exchange level between this D-renminbi and F-renminbi so as to control trade and monetary policy. Every country can do this.

10. High exchange rates usually go with high costs. Generally, costs of everything are high in developed countries and much lower in undeveloped countries. This means that it costs many times more to build a condo or mall in the West than in the East. Together with the higher densities and bigger pops of the East, thereby making everything more efficient [see my blog for my explanation of "high density = high efficiency = high quality of life"
Iconoclassing Pt 1:
Iconoclassing Pt 2:
Iconoclassing Pt 3:
], this means that buildings and infrastructure are much cheaper in the East meaning they get built, renovated and maintained, which is usually not the case in the West. Soon, the East will be far more modern and efficient than the West. Already, tourists are discovering that a holiday in the East is far more value because of better, newer hotels and tourist facilities at a lower cost than in the West, like 5-star hotels in Asia for the price of 3-stars in the West. For the local people, too, all this gives a more efficient and better quality of life. With the internet, satellite tv and mass travel, the West will become more widely known as being inferior. Soon, the West will be widely regarded as the backward regions and the East as far more modern. You only have to look at the inner city slums in the West and their old creaking metro train systems and compare these with the brand new ones in the East. High density and bigger pops create ever-increasing demand for new homes, which are then built. With these come the malls and metro systems. At major metro hubs soon rise office towers of steel and glass. This story is repeated all over Asia but not in the West where new developments and projects are agonisingly slow and expensive.

11. However, because of the higher exchange rates, the West can buy up real estate, companies, etc, in the East at what, to them, are small prices. This means that the East should have laws regulating what and how many 'cheap' assets can be sold to the West, otherwise the exchange inequalities will put the Eastern assets at a disadvantage, at risk of being bought for cheap.

12. But people are the hardest to change. Until the economic crises happened, nobody dared even broach the idea of a change in the US$ Hegemony fiat currency or trading practices and US financial dominance. Now, as the US and the world roils further into depression, things will begin to change. Gone forever is the US model. It is a model of moral decay and collapse. I very much doubt the Americans can dominate the world for longer. Its ~64 year reign is ending even though we, living by the moment, cannot see it so clearly. What were the last days of the Roman or British Empires like? We may be seeing its equivalent with the dawn of each day.