The Daily Dollar Auction and Persistent Inflation

The Daily Dollar Auction and Persistent Inflation

They couldn’t call it The Daily Paradox because Terrific Mentors International has already established the name – but they might have done so to better effect, at least for most of us. It is indeed a mysterious financial world in which something that happens weekly is too disruptive for the markets but something that happens daily calms them. I hope the central banks won’t aim for further calming with The Hourly Dollar Auction.

You could be forgiven for thinking that, among all the highfalutin jargon, what is happening to money is an elaborate printing exercise to keep in place the ice-creams that have not yet melted. If that is true, the exercise will also keep in poverty those who have never had an ice-cream. Our world’s existing imbalance of wealth is exacerbated by inflation. We are also trying to work on our commitment to a fairer world, on our faltering determination to handle the climate problem, on acceptance of basic health as a right of life, on a ‘starvation’ need to stop the Russia-Ukraine war and on a mission to improve diversity.  

You might think that a better system of money is long overdue.

Money is being reinvented daily, of course. Crypto, Cashless, Bonds, Notes of every description are creatively launched on a public with heavier pockets after Covid. But inflation is little better understood than it was fifty years ago. Stress testing is still archaic. In a world of arbitrageurs movement is essential and greater movement, profitable. But regulators, not just of finance but of everything, are being put in the unsustainable position of attempting to ‘discipline freedom’, a contradiction in terms. Personal responsibility is defined by a taxi company. Creativity is up the Chat. Is ‘crisis’ now our working model? 

If Davos ever had a purpose I don’t think it is yet defined, let alone realised.

Money is fundamentally a symbol of goods and services. It has done a moderately good job for us, allowing us to earn, think and spend. We rather relied on it retaining its value and it hasn’t done that. Savings in the 1970s got clipped by inflation, just as they are being today. We borrowed to buy our houses in the hope that we would be able to help our children and grandchildren buy theirs. Taxation ate much of what we might have done. In business we borrowed to finance risk and invested to provide continued employment for colleagues and as good a return as we could for shareholders. But business is hamstrung at every turn.

Proliferating prosperity and reactive recessions have come and gone, often precipitated by stupid or immoral financial decisions. The path hasn’t been predictable but it was mostly handleable. Debt became the basis of smart management. When it was cheap and stable it was a good idea. As often, ‘more’ has turned out to be ‘worse’. Debt levels are now too high for repayment and so are forgiven in a way incompatible with efficient capitalism. Risk is moved arbitrarily – but no doubt with good intent – from investor to government. Capitalism has become cheapened as those governing finance what is vote-buying rather than what is needed.

The day-to-day management of money is largely a business of tactics. The strategy of money is still the business of government. Increasingly governments feel obliged to handle the tactics and in the process ignore the need for a developing strategy. Everyone would rather drive the car than design it.

Time for those with power, all of which is invested in them by the people they rule –  whether autocratically or democratically – to pay attention to strategy, which means the future. That won’t happen unless all educators – parents, teachers, mentors, coaches – instil a sense of responsibility for others as strong as the need for self preservation. Whether a society votes for its government or not, those in power only stay there as long as they are tolerated. That tolerance has to be informed and rational. In a world where life expectancy increases every year, riots against retiring later are evidence that such education has a long way to go.

Education was always at the root of civilization.

It needs root and branch attention urgently.

Good morning

John Bittleston 

Thank you for all your comments and suggestions. We really appreciate them. I answer as many as I can and as quickly as I can – often rather slowly. If you have any views about today’s somewhat convoluted Daily Paradox please let us have them –

24 March 2023