Perspectiva económica: Martínez-Solanas

Basically, Money is a medium for the exchange of property and a tangible instrument for the payment of services. Therefore, Money means "property"; it is a measurement of "value"; and is used as a tool for two parties to benefit by fair exchange in a transaction. The sole purpose of Money is to facilitate the exchange of property and services in a fair manner. But Money is in practice a much more complicated thing: in all its forms, bullion, standard coin, token coin, convertible and inconvertible notes, legal tender and not legal tender, checks, stock, etc., it functions as an instrument of exchange. In brief, economists use to define the "functions" of Money as a medium of exchange, a measure and a store of value and a standard of deferred payment.

For many centuries since antiquity Money has been pegged in one form or another to the value of Gold and Gold was used as a standard measure of exchange. In fact, contrary to some modern perceptions and uses, Gold is neither a commodity nor an investment.

It is not a commodity because Gold has very few practical uses. Commodities are undifferentiated goods produced to satisfy various needs or wants, such as oil, wheat, corn, aluminum, copper, etc., and they are consumed as food or energy or they serve as inputs to other goods demanded for “consumption”. Gold is not “consumed”; it is not an industrial necessity. Practically all gold that has been mined throughout history is being hoarded as a “reserve” in government vaults or is being used as an ornament with no practical value. There is no other real demand for gold. However it is the only metal that does not decay. It is the most stable metal in nature. And it shines beautifully. Therefore, it is a useful and reliable item as a measurement of “value” and it has supported the value of paper money (legal tender) as part of government reserves up to the last century. In modern days it was fixed as the “gold standard” and meant that you may claim a fixed amount of gold in exchange for the legal tender in your hands.

On the other hand, it is not an investment because it is not an instrument that may expand or contract in value in tandem with normal laws of supply and demand and it does not offer a rate of return. 

Mucho se comenta en estos días del fenomenal aumento que experimenta Estados Unidos en la producción de crudo, pero este hecho no es el que lo convierte en gigante sino su abrumadora base industrial y tecnológica que lo mantiene muy al frente de otras potencias económicas. En otras palabras, Estados Unidos tiene la capacidad de hacer y lograr lo que otros no pueden.

Esta formidable capacidad industrial y tecnológica es en gran parte responsable de que Estados Unidos en 2014 haya producido 88% más crudo que en 2008 y que la producción siga aumentando, pese a que la notable baja de los precios del petróleo debida a una producción en exceso de la demanda, ha forzado y está forzando a las empresas petroleras, sobre todo a las medianas y más chicas, a reducir las inversiones de capital destinadas a abrir nuevos pozos y nuevas exploraciones, sobre todo mediante el proceso de "fracking". 

Esta es una controversial técnica de fracturación hidráulica destinada principalmente a la extracción de gas de los estratos que no son accesibles por perforación directa, pero también a la extracción de crudo. Es una técnica costosa que no es viable a precios tan bajos como los que predominan en las últimas semanas y meses. Además, es controversial por las consecuencias nocivas para el medio ambiente, las que todavía no se han evaluado debidamente y se sospecha que son mucho peores que lo que esas empresas reconocen. La oposición a la fracturación hidráulica provoca notables costos adicionales, por lo que últimamente se han paralizado muchas nuevas iniciativas de prospección.

Either US government officials do not know anything about economics
or they do not care to hire Economists to show them the facts
and their foreseable consequences.

It was reported today that the US budget deficit this March was higher than expected, up to 53 billion from the projected 44 billion and 16 billion higher than the deficit reported in March 2014.

When we talk about budget deficit, it means that the total National Debt increased proportionally that month. The higher the deficit, the faster the National Debt grows. And the National Debt is an accumulation of deficits.

It is important to note that while the National Debt increased from around 6 trillion to about 10 trillion during the period 2002-2008 due to the high cost of wars in Iraq and Afghanistan, it has increased 8 trillion more since 2009 in spite of US withdrawal from those wars.

This splurge of budget dollars emulate irresponsible policies at countries like Greece or Argentina, giving a false appearance of growth and well being promoted by elected politicians being "generous" toward their own generation, with wealth that has been immorally looted from the labor of future generations. It is very simple, just like any household budget, people cannot keep charging their credit cards forever if they do not count with real means or prospects to pay back their debt obligations.

It is also important to note that the National Debt obviously cannot be serviced by income taxes from people that are no longer employed. And the doctoring of the unemployment figures is another sign of irresponsible government. It is astounding that so few people, even Economists, pay attention to the real figures. However, they are not secret or hidden; in fact they are available to all of us.

Budget discussions in the United States and many other countries are publicly aired masking them with many different promises to attract voters, calculated to promote social causes that would benefit large sectors of the voting population. Voters are prompted to vote for those candidates offering more "free" government services and welfare.

The problem is that voters are seldom informed about the cost those promises would impose to the whole of society; government expenditures are not "free" and must be paid sooner or later. Ambitious and irresponsible candidates rely on credit schemes and loans that will eventually be payable long after their terms in office have expired or they have been able to escalate to higher political positions, leaving behind their mistakes. They also rely in hidden taxation, such as the effect that inflation and monetary devaluation has in the purchasing power of every citizen and resident.

When this kind of policies are applied at the national level the end result is always a national disaster. Such is the case now facing Greece, preceded by several other European countries in recent years. And it is an endemic ailment of Latin American economies.

However, when a country such as the United States follows the same path, the national disaster becomes a world-wide crisis. United States and its citizens and residents have enjoyed the good life on credit for too many years. And they are at the brink of a financial abyss. Public debt has doubled from more than 9 trillion in 2008 to more than 18 trillion now. That represents an unprecedented increase in the public debt per taxpayer from $92,159 in 2008 to $154,109 now!!! And that means the Federal government must pay about $8,000 annually per citizen solely in interests. Although the debt is still sustainable in the US huge economy, the rate of increase of the public debt is not. The US is at the brink of economic meltdown.