“How much?” is an unanswerable question without clarifying the object being exchanged and determining the point and time of delivery.
When one compares the cost for a same amount of X, the amount should be relative to the prior economic period. The fact that X had a price of Y amount of X must be understood as being relative to the value of Y in the prior period.
The value of a similar amount of X must be comparable to the cost of other things at the same time.
The proposed minimum cost of unskilled labor being currently $15 an hour must be compared to the cost of other things in the prior period when comparing the amounts. The difference in amounts is a result of product quality in some cases and increased wages in all cases. Inflation is reflected in the competitive value of the currency of the nation producing that which is being sourced.
Think of the amount of land owned, the measure of value in many countries, which could have been acquired if US$100,000 was available to a buyer at the time when labor was available to a buyer 20, 50, 100 or 200 years ago.
Due to the financial needs of the people in the lowest and fastest growing segment of the socio-economic population pyramid, governments will be forced to acquire ever-increasing amounts of funds. These funds will have to be tax-based or borrowed. If borrowed, the natural resources of the country will ultimately be used as collateral for the debt and printing currency continuing to be the usual practice.
In the case of non-collateralized government debt, investors and lenders are likely to be adversely impacted.
Owning and being paid a percentage of defined revenues is a better approach for investors in countries, as well as in companies.
Arthur Lipper, Chairman
British Far East Holdings Ltd.
+1 858 793 7100
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