The Optimal Balance is where Supply and Demand intersects and
it's called "Equilibrium", as seen in the Graph. Let me start with
something small to start making my argument.
Companies produce Goods and/or Services to sell on a Free Market.
Let's use an example of you that want to start your Own Coffee
Shop, but there are already a lot of Coffee Shops. Being a bit
savvy, you do some Market Research on Coffee Shops to determine
what people are prepared to pay for a cup of coffee and given
certain expenses you HAVE to cover, how many cups of coffee do you
need to sell? You decide to immediately start with Starbucks and
their range of Products and find out that the Average Price for a
cup of Starbucks Coffee is R35 (keep it simple), Cappuccinos sells
at about R30 and House of Coffees sells at about R28 on average.
The problem is, these are all Franchises, what you pay in one shop
is what you'll pay in another shop. So you start researching local
Coffee Shops and Restaurants and find out that on Average, the
price for a cup of coffee is about R25.
So you quickly draw up a spreadsheet with possible expenses and
start playing around with the numbers to calculate what you can
sell a cup of coffee for. You the realize that you can actually
sell a cup of coffee for R16 on average, by selling 2 000 cups per
month - then you BREAK EVEN (Equilibrium). Then you pause for a
moment and wonder: Why would someone pay R35 for a cup of
Starbucks Coffee when it probably Costs them R12 to MAKE a cup of
coffee? Then you remember this, you don't want to just break
even, you want to MAKE A PROFIT too and so does the other "Brand
name" coffee shops. By just selling a cup of coffee for less than
Starbucks does, will not guarantee more people buying coffee from
you, neither a Profit. And here I have arrived at my
FIRST ASSUMPTION for my argument: If people were NOT GREEDY
and everything and everyone in the World were equal, Profit would
not exist. Unfortunately, if Profit didn't exist there wouldn't
have been an Economy either.
Just keep in mind that all these Brand Name Coffee Shops had to
start somewhere to get to where they are now and have people
willing to pay R35 for a cup of coffee. So you decide to "bite the
bullet" and sell a cup of coffee for R18 per cup, which won't make
you a lot of profit, but it sounds safe and it means that you then
need to sell at least 1 500 cups per month. A few months later you
open your coffee shop and enter the Free Market competing with
Starbucks, House of Coffees etc. and the local coffee shops and
restaurants. Two things can happen:
-
Even though your coffee is cheaper, you just can't seem to sell
coffee and get your "foot in the door" and barely break even.
There isn't a DEMAND for your coffee.
-
You quickly become very popular and you sell a lot more
coffee than you thought you would. You have to increase the
SUPPLY to satisfy the DEMAND for your coffee.
Both these scenario's are guided by Supply and Demand. To use just
one of many examples, if your coffee DOESN'T sell, then you have
to create a DEMAND for your coffee by either dropping your price
or adding Value to your product - MAKE people WANT to buy your
coffee. When you sell more coffee than you thought you would, you
realize that you can make more profit by increasing the price of a
cup of coffee, which is risky, and hope for the best. NO, NO,
NO!!! Look at the Graph again. To increase your Profit you need to
INCREASE your SUPPLY of coffee then you can sell at a higher price
- MORE cups of coffee at a higher price will ensure Profits BUT
ONLY if there is a DEMAND for your coffee.
Let's take it a step further. When Apple entered the market, they
were in direct competition with Microsoft as an alternative. They
needed to create a DEMAND for their Computers, so they focused on
making Computers smaller with a Graphical User Interface. The
Company boomed and became a "Listed Company" trading Shares, but
during the 1990's it started to under-perform and by the mid-90's
they almost went under. After making some changes and introducing
new products to the market that had NO competition (like the iPod,
iPhone, iPad and more) they created a Demand for their products,
which meant people were willing to pay more for an Apple product
and thereby increasing profits. Since they were a listed company
and people are greedy, people wanted to share in these profits,
meaning they paid higher dividends to their Shareholders and when
a company pays out higher dividends, people want to buy shares.
It's a Circle going round-and-round all guided by the Law of
Supply and Demand. First the Company SUPPLIED products at a price
that Consumers would be willing to pay, leading to an increase in
the DEMAND and realizing this increase the Company started
Increasing the Supply at a higher price, making more profit, being
able to pay higher dividends, making the company more desireable
to buy shares in and since there is only a limited number of
shares available, the demand for shares increased, pushing up the
price per share, increasing the Value of the company, making their
products more desireable to the market and people were willing to
pay more for their products. And so it goes...
Then there is GOLD as an example. It can be any COMMODITY that
trades on the International Market, like OIL too. I picked Gold
for a reason, because before the 1929 Stock Market Crash, Gold was
the International Boolean, not the Dollar. Countries Traded with
each other and paid each other with Gold. After both World Wars
this practice basically came to an end and these days almost
everything that's traded Internationally, trades in U.S. Dollars.
Countries do however BUY Gold and keep it as a Reserve as an
indicator that they can back up Foreign Debt, but it also
indicates (to a certain level) the wealth of a Country. Gold
however is a double-edged sword since it's traded in U.S. Dollars
making it Volatile. If (in a perfect world) Gold traded at a
constant value, ONLY the value of the U.S. Dollar would increase
its Value or decrease it. Since there is a Global Economy, it
means there is a Global Supply and Demand "Process". ANY Country
can only MAKE a Certain Amount of its OWN Currency and this
includes the U.S. Since Countries buy things like Gold and Oil at
International Prices, in U.S. Dollars, it means that if something
like the price of Gold Increases, Countries will need more U.S.
Dollars to buy Gold, increasing the Demand for Dollars thereby
Increasing the Value of the Dollar. If a Country like South Africa
produces a lot of Gold and the Gold price Increases, S.A. needs to
Produce More Gold to get more Dollars, but if the Gold price is
relatively constant and the Dollar's Value Increases or Decreases,
it affects the Value of Gold held in Reserves Globally. To guard
against this fluctuation, Countries are also BUYING U.S. Dollars
and keep that in reserve to be able to pay for things like Oil,
from those reserves, when the Oil price rises and the Dollar
becomes more Valuable/Expensive, thereby protecting their own
Economies to a certain extent. But having a lot of Gold and Dollar
reserves, doesn't make a Country wealthier necessarily, but that's
another topic on its own.
So what happened in 1929 and why? To put it simple, the U.S. Stock
Market crashed because of an Economic Bubble (which was only later
defined). An Economic Bubble occurs when Consumers start paying
more and more for goods than what they are worth. There were a few
crashes since 1929 which led to certain "Rules and Laws" for
trading Internationally and on Local Stock Markets to protect a
Country from a Global Crash. Countries have to Constantly ensure
that their own Economy is in balance to the Global Economy and
this is based in turn on a Country's GDP or How much they can
Produce and sell on the International Market. South Africa's GDP
is low even with a High Gold price, because S.A. relies on more
IMPORTS than what it EXPORTS, creating a DEFICIT. South Africa
also has a lot of International Government Debt that is getting
more Expensive because the Dollars gets more Valuable, Gold is
stagnant and the GDP is low and sometimes even negative, leading
to Recessions. Why does S.A. import so much? To satisfy the local
demand for international goods. The ONLY way a Country like South
Africa can impact this demand is to make it more expensive for
local consumers to buy International products by putting levies
and tariffs on certain products. People also buy "things" by
borrowing money from Banks and paying back the loans at a certain
Interest Rate. Banks borrow money from the Reserve Bank to satisfy
the demand from consumers for loans. The more money people have,
the more they spend, which sounds good. It's not! If it is cheap
to borrow money, people are willing to pay more for products
(according to The Graph) and this can cause an Economic Bubble! To
stop people from doing this, Governments have a REPO rate that
they can control, making it more expensive for people to borrow
money, thereby decreasing the spending power of consumers,
preventing an Economic Bubble.
The there is INFLATION and DEFLATION and why INFLATION is good. We
all know (or think we know) what Inflation is, basically it's the
rate at which products' prices increase over time. Products become
more expensive because there's an Increase in the Demand for a
product but consumers have limited resources - money. Deflation is
when prices of products DECREASE, which sounds good. The price
decreases because the demand decreases or the supply increases but
consumers still have limited resources. When Deflation happens and
prices start going down, people will STOP spending because they
are expecting prices to decrease even further. To get people to
spend money, Supply increases, Companies are willing to produce
more and sell their products cheaper because they need to make
Profits. When a Country has Deflation for very long periods, like
Japan has had, it can affect their Economy very Negatively. Japan
is currently facing one of its worst Economic Crisis's because of
Deflation. So just as High Inflation is bad for the Economy, long
periods of Deflation is just as bad. And underneath all of this is
the LAW OF SUPPLY AND DEMAND!
For a few years now, I've had this "thing" about people just
Hearing and not Listening. How often have you heard someone say "I
hear you" and not just as part of a conversation, but when someone
else is telling them something that's actually worth Listening
too? How often have you phoned a Call Centre and felt like you had
to explain yourself over and over to the Agent? I've had a very
recent experience I want to share.
I had to eventually focus on the Problem Statement and not
everything else that's going wrong in my life and the rest of the
World, because trust me - I CAN go on. Have you ever heard the
expression "I'm only HUMAN"? There's actually a
Song
and it's a bad excuse for not Listening to each other (Google the
Lyrics). The really sad thing about Humans is that our Scientific
Name is Homo Sapiens Sapiens. Sapiens means "resembling modern
humans" and by using it twice in our Scientific Name means we have
elevated our species to being more evolved than other Human
species before us, with more empathy and higher intellectual
abilities. This might be true and I'm sure the Name was given with
only good intentions. The fact is however, because we have more
empathy and are more intellectual, we also have the ability to
inflict harm and cause more pain to other Humans, like us.
HEARING AND LISTENING
I've been having Internet Connection problems for MONTHS. When
it started, I was promised that my problem will be escalated and
sorted out immediately. Three months later, the problem got
worse and no matter how many times it was "escalated", the
Company didn't keep one promise. They would send out a
Technician to come and investigate, which just didn't happen.
Eventually, after three months, a Technician arrived and as
Murphy's Law would have it, I had no connection issues when he
tested. The frustrating part of the experience was, when the
Technician arrived and I started to explain, I kept on telling
him to just drop everything and LISTEN. Instead he kept on
fiddling and responding with "I hear what you're saying", but I
LISTENED to him and everything he told me I did wrong or was not
suppose to do. He left but gave me his Mobile number and told me
to phone him when my Internet doesn't want to reconnect and that
he'll come back as soon as possible. A few hours after he left
my Internet disconnected and couldn't connect. I phoned the
Technician, no answer. I sent messages, no response. At around
10 p.m. that evening I decided to take matters into my own hands
and did everything he said I SHOULDN'T do, because what can be
worse than not having Internet connection? After doing
everything I wasn't suppose to do, my Internet connected and
stayed connected. I gave it a few days and informed the Company
that my connection problem has been sorted out by MYSELF and I
insisted on a refund. I complained about the Technician and was
promised that I would get a call from a Supervisor - I'm still
waiting for that call.
This might seem insignificant, but let your mind wonder for a
moment and think about everything going on in the World today.
Wars, Armed Conflicts, Economic Crisis's and more. NOW,
put down EVERYTHING ELSE you've been fiddling with since you
started reading and REALLY think about the Global State and how
you can pull a thin virtual string back to your own life and
circumstances. This is where I now make
SECOND ASSUMPTION for my argument: If people would only
take a few moments when someone else is trying to tell them
something, and they LISTEN, they would be able to actually make
a difference! People forgot how to Listen to each other, BUT
people have also forgotten how to TALK to each other. Listening
takes effort! It's not just about the words coming from someone
else, it's about HOW the other person sounds, their body
language and what the message is hat you're getting. When you
ask someone "How are you?", do you actually mean it? Do you want
an honest answer? Do you really care or were you just being
polite?
Someone once said: "When you ASK - LISTEN"
I honestly think that people have stopped Listening. They
stopped Listening to each other, they stopped Listening to
what's going on around them and they stopped Listening to what's
going on in the World. WAKE UP PEOPLE!!! According to the
Doomsday Clock
it is 90 SECONDS before Midnight, the CLOSEST it's EVER been set
since its inception. If this doesn't make you wonder at least,
then stop reading.
THE RELATIONSHIP
"The world is very different now. For man holds in his mortal
hands the power to abolish all forms of human poverty and all
forms of human life." These words were spoken in 1963 by
John F. Kennedy, but I think they are more apt today than ever
before - WHY?
It comes down to Supply and Demand. The Law might have been
applicable to Economics in 1776, but it can be stretched to
cover almost everything in the World and your life. People have
limited resources, other than money, like TIME, Energy, Love...
Every now and again we are reminded that we need each other,
like the Tsunami of Boxing Day 2004. Covid. Chernobyl. Why does
it take a Global Catastrophe to remind us that we are People and
can not navigate life without other People? Percentage wise, the
number of People in need, poverty or involved in armed conflicts
have not increased - Percentage wise. The Human Species however
is thriving, with NOW a Global Population of 8.1 Billion People
and predictions putting the count at 9.7 Billion by 2050 -
that's just 26 years from now. By the end of TODAY the Human
Population would've increased by an extra 200,000 People (that's
Births LESS Deaths).
It is not far fetched to argue that due to our evolution as a
species and the power we hold in our hands, the Demand to be
Listened to has increased even though there hasn't been a change
Percentage wise. We have created the means to let the World know
about our lives by using Social Media for instance. If Facebook
was a Country, it would've been the Third Most Populated Country
in the World! We post photos of ourselves on the World Wide Web,
but complain about things like "Invasion of Privacy".
Governments changed Laws to "Protect the Rights" of People. The
People want to be Heard, but they don't want to Listen. I'm
probably preaching to the choir. There's a quote from a famous
movie that sums up exactly what I feel about People right now:
"I feel I'm standing In the Middle of a Crowded Room,
screaming at the Top of My Lungs, and No one even Looks Up" - Titanic 1997.
Then I realized that there is no point in just Screaming at the
Top of my Lungs, I have to Scream something more specific that
would make People Listen, I just don't know what. There is no
equilibrium because the Demand has Increased so rapidly that the
Supply will never catch up. It "Costs" too much for People to
Listen to each other, so there is an "Inflation" that is
completely out of control and it would take a
MAJOR EVENT to force us to Listen to each other. That
scares me and rattles me to the bone, because what can be worse
than a Tsunami or Covid? With all our abilities, People are ill
prepared for a Major Event, which is going to happen, it's just
a question of When, the What is insignificant. I just can't help
feeling that People are going to wake up one day and realize
that "something" happened and because we are ONLY HUMAN we will
waste our resources on shifting the Blame from one entity to
another.
I can't remember which Politician answered a question about why
People Vote for Government, but the answer was more or less that
People Vote to Elect People to make decisions they are too
afraid to make themselves, only to be able to have someone to
blame when everything (pardon) "Goes to Hell". It is so much
easier to complain or blame than to actually Listen to the
Problem and be part of the Solution.
WE WILL ONLY BE JUDGED BY HISTORY AFTER ALL!
FIN
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