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The Value Of Money

There was a time you knew the value of your money.

 

That time may come again.

Commodity and currency markets bob and weave on the futures exchanges in a mixture of prize fighting and dance.

Currencies no longer have any backing, except for a politicians promise.

Perception now determines an individual currency's value as it floats or sinks on the foreign exchange (forex, or FX) markets against other measures of value.

If you have been watching this forex futures dance for a while, you have realized there is no continuing, rational valuation of FX.

What information everyone values this week may be totally different than the topics they discussed last week. In truth this weeks data may be opposite of last weeks, and still effect the markets the same direction. Excuses developed after the fact are used to explain futures market action, not reasons.

The Kitchen is 70 degrees Fahrenheit, the stove above 200 degrees, the kettle of water boiling furiously between those temperatures. If the stove is turned off, all will eventually reach thermal equilibrium.

There is no equilibrium in markets. If it was just normal rise and fall of economic activity there would be shallow booms and busts, but the trend would continue on a steady upward march.

Governments try to control small booms and busts, making them larger and highly unpredictable. Dozens of governments, each with their own agenda, play with relationships of commodities and currencies. It is like turning the stove to HIGH; the water will boil furiously, and much will vanish as steam.

The prices of cash and things will move quickly. It becomes difficult to determine real relationships - if they exist at all. We all are speculators in forex, the money we use for exchange varies in value daily.

Right now governments around the world are creating inflation, they are printing money. More money means cash has less value, prices of things therefore increase. Along with overworked printing presses lending constraints have loosened, putting ever more money into the system.

Inflation is a hidden tax - governments spend money they don't have - and pay the debts incurred with freshly minted cash. All existing money is devalued by the dilution. Forex is in essence an exchange of politicians promises. Inflating money exchanged for other inflating money - true water vapor, steam from the kettle.

There is a finite amount of water in the kettle. At some point the water will have evaporated, the pot will melt or start a fire. To those of us in the real world of money - government interventions will have created deflation or hyperinflation.

Perception becomes the key to future forex values.

If you want to find a way to judge future perceptions, technical financial analysis claims to have the insight needed. The claim is that past action reflects past psychology and perceptions, and hence is a clue to the future. In practice it is easier to look at the past and explain it than to look at the future and decipher it.

If you are interested in technical analysis, check out Robert Prechter's books, especially Socionomics. If nothing else you will learn a new way of considering both past and future - and you will have enjoyed the read. You may also enjoy History's Hidden Engine, a documentary by an award winning director on socionomic concepts.

In the meantime do not pay too much attention to trader talk or news reports. Analysts tend to view events, and then imagine a cause for these events - a cause that will require you to change investments - creating commissions.

Forex markets offer a short term snapshot of currency values - but one that has been manipulated by government players.

A better image of currency and commodity markets is a lot of folks at a social dance with a free buffet and open bar, waiting for the last minute to rush the exits. - Did I mention the forex building is on fire?

A Futures Market Speculation Rule:

 

Fill your own pockets and leave early.

It's ok to watch from a safe distance.

 

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