American Re-Evolution and the Value of Currency

The politicized contention that globalization and uncontrolled immigration are the causes of today’s high rates of inflation and dismal economic results, is contested by the history and economics of global trade, as well as the current demographics of the so-called developed world.

The Nobel Prize -winning Economist Joseph Stiglitz corrected some of this misinformation and propaganda-fueled ignorance with this assertion: 

"The United States can only push for advanced manufacturing, which requires higher skill sets and employs fewer people. Rising inequality, meanwhile, will continue ..." In addition, in late 2017, Stiglitz wrote that the drop in wages in the United States was “due to the actions of multinational companies rather than globalization.” He wrote of the trade account imbalances between countries, that they were caused by free trade as an agenda written by and for large multinational companies, at the expense of workers. 

In 2016, Stiglitz said he believes that the economic situation of the United States is critical: "As the economists Anne Case and Angus Deaton showed in their study published in December 2015, life expectancy among middle-age white Americans was declining, as rates of suicides, drug use, and alcoholism increase.” A year later, the National Center for Health Statistics reported that life expectancy for the country (the U.S.)  as a whole had declined for the first time in more than 20 years. "With the incomes of the bottom 90% having stagnated for close to a third of a century (and declining for a significant proportion), the health data simply confirmed that things were not going well for swaths of the country". 

My Comment: It was then President Richard Nixon who renounced the wisdom of Bretton Woods, took the U.S. off of the gold standard and now, it is a Republican named Donald J. Trump who wants to back the USD with Bitcoin, one of the silliest ideas I’ve heard of while working and teaching in the international business field for 49 years. 

A U.S. currency, the USD backed by gold, was used to stabilize the world economy after the Great Depression and now we want to return to one of the original causes of that economic fiasco?

The Great Depression was precipitated when a competitive devaluation of currency drove down the value of currencies in a contentious country-by-country effort to drive exports in a disastrous race to the bottom. 

Today and historically, the value of a nation’s currency is determined in large part by how competently a country’s leadership and management play the Great Game of global trade. 

There is nothing new here, when we consider that the success of many empires including that of Carthage, the Holy Roman Empire and its continuance with the Byzantine Empire was catalyzed by trade and the trust placed in such currency as the shekel - as a medium of exchange in the process of trade. 

The Shekel

Carthaginian coin depicting the face of Tanit - the goddess of civilized life - on the front and her symbols, the horse and the date palm tree, in the back.

The shekel is an ancient Mesopotamian coin, usually of silver. It was first a unit of weight—very roughly 11 grams (0.35 ozt)—and became currency in ancient Tyre, Carthage and Hasmonean Judea.

The coins of ancient Greece, such as those prevalent at the time of Hieron, king of Syracuse and the Archimedean “Eureka” in Syracusa - present day Sicily:

were made of a blank disk of gold, silver, or electrum (a naturally occurring alloy of gold and silver) that was put between the two molds and struck hard with a hammer, stamping the design on both sides of the coin. 

My Comment: The value of currency is determined by the interest rate, and inflation prevalent in one economy compared with those prevalent in other major economies. These factors are strongly influenced by the economic leadership and management of a country and are driven by the competence with which nations engage in global trade. Global trade today is a process of scaling products to retail and international markets by a hybrid of E-Commerce and brick-and-mortar. The global demand for a nation’s products is greatly influenced by product quality (Deming). 

Historically, the developed economies of the world once deployed their representatives to Bretton Woods, New Hampshire - where it was decided that the value of the world’s major currencies would be based on that of the U.S. Dollar (USD). The value of the USD would in turn be based on 128 grains of gold.

In contrast to the historical valuing of our currency with gold, our currency was later and is supported still, and is backed with debt:

and now, some want to support the USD’s value with Bitcoin, evidence of America’s common sense, moral*, cultural and political de-evolution:

Northeast Ohio Media Group

Strategy

The classic writings on war as strategy are those of Carl von Clausewitz:

and Antoine-Henri Jomini:

Von Clausewitz, despite the many misinterpretations of his unfinished dialectic On War, edited by his wife, stressed that war is psychological (he used the term “moral” as psychology had not yet been created as a discipline in the West) and Jomini declared that war involved the entire population of a country. This mirrored William T. Sherman’s lamentation about the U.S. South, when South Carolina seceded from the Union. 

Jomini who served France, Russia and Switzerland during various wars, addressed the issues of logistics and sea power as important, whereas von Clausewitz, the idol of realpolitik did not. Von Clausewitz fought at the battles of Jena-Auerstedt, Borodino and Wavre, the precursors to Waterloo. 

Back to the Future

Situational Awareness and Revisionism

U.S. Marine officers of my generation were taught one of the great lessons of War, the Vietnam War specifically. It was to Stop, Look and Listen - when Patrolling. This of course applies to Leadership, Management, Business, Politics and Economics. 

Back to Jena/Auerstedt

The hero of the Battles of Auerstedt and Austerlitz, the Battle of the Three Emperors, is Louis-Nicolas Davout - the “Iron Marshall," the name my mother used to describe my grandmother.

Davout, according to Napoleon, must have been blind when the former reported that he had encountered the main Prussian army at Auerstedt. Davout saw well enough to recognize where the main concentration of Prussians was, when Napoleon did not, because the Emperor was too preoccupied at Jena. Davout defeated the main concentration of the Prussian Army without the help of either Napoleon or Bernadotte. 

Strategy Continued

Arguably most relevant to today’s world is the strategy of neither von Clausewitz nor Jomini. It is that of Alfred Thayer Mahan:

the “father of American geopolitics." whose ideas are studied at the U.S, Naval Academy today.

Mahan’s concepts of the importance of readiness and deploying naval forces forward, are most relevant to today’s world. This deployment follows in the footsteps of the British East India Company:

The motto of which was: Auspicio Regis et Sénatus Angliae [By Right (authority, auspices) of the King and Senate of England].

that once controlled 70% of global trade. 

Lessons Learned

Thomas “Stonewall” Jackson who commanded what was called his “foot cavalry” because of the speed with which his infantry moved, during the Shenandoah Campaign of the American Civil War, can be considered the American version of Davout. I have explained why in a previous article about Austerlitz.

As a statue of Jackson was being removed from a square in Richmond, Va., an elderly Black woman, a retired teacher, was heard to say that such statues should not be removed lest the current generation forget the lessons of our history. 

Thomas “stonewall” Jackson, arguably among the greatest of American military strategists, taught Optics - poorly - at VMI and famously declared: 

“The rules of strategy are few and simple. They may be learned in a week. They may be taught by familiar illustrations or a dozen diagrams. But such knowledge will no more teach a man to lead an army like Napoleon than a knowledge of grammar will teach him to write like Gibbon.” 

My Additional Comment: Jackson applied Optics brilliantly in battle. 

Today, we neither lead armies like Napoleon or write like Gibbon - as the lessons of strategy and eloquence have been largely forgotten. 

To paraphrase Cordell Hull, the merchant fleet follows the flag. China and Russia have built up their armed forces in recognition of this reality. The forward deployment of the Chinese navy in the South China Sea, is a case in point. Chinese naval and air forces are deployed to win at trade; to protect their merchant vessels and merchants at the world’s blocking points - with the ultimate goal of providing gainful employment to their populaces. 

How is that working out?

The Economist

AI and Jobs

In contrast to the ideas of von Clausewitz, Jomini and Mahan, the U.S. has reverted to a protectionist, populist, isolationist and revisionist “strategy” of geopolitical influence focused on a doubling down on investment in oil and natural gas, lithium-ion powered mobility, AI and tariffs:

with little knowledge of how AI, Strategy and Education apply to the fostering of global trade today. How do you teach machines global trade; what people have only a superficial knowledge of?

Some of the consequences of this idolatry of ignorance are the huge loss of U.S. jobs in IT- where some 250,000 developers have been recently laid off. Boeing is another prominent example of incompetence - global incompetence:

CNN:

Continued with WTO

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