Limiting Demand

In my article “Mr. Putin’s Economic Theatre of Operation, I cited “limiting demand” to explain a Russian Iranian Oil Deal.

For most people, supply and demand is the simple concept of economics:

If more sellers (supply) show up than buyers (demand), the sellers must drop their prices to sell their goods.  They are competing with other sellers.  The more perishable the product, the faster they must sell it, the more willing they are to drop their prices.

If more buyers show up than sellers, the price goes up because buyers to not want to go home empty handing. Specially if the product is in great demand.  That is the premise.

Now on to limiting demand.

Slim’s Paradigm

“Limit supply and drive up prices. Limit demand, bypass the market, stablise the economy.”  ~ Slim Fairview

Look at what is happening from the standpoint of the two articles I wrote on the subject:

Putin’s Overture in Eurasia Minor

Mr. Putin’s Economic Theatre of Operation

In addition:

China: Not the What the Where.

What is happening? 

Russia and China: Nat Gas Deal

Russia and Iran:  Oil Deal

Russia and Germany: Nat Gas Deal

China and Germany:  Have we forgotten that China and Germany are trading partners?

If Slim’s Paradigm becomes the new normal, all the forecast numbers will have to be recast

.

A few years ago I wrote an article “Energy Independence” (Then What?)  In that article I said that the Middle East must find new customers to protect oil revenue.  China was the obvious choice.

I also wrote, “It is a universal condition. We refuse to accept that all alliances and enmities are transitory.” The Quotations of Slim Fairview © 2014.

The Global Economic Landscape is shifting. Please allow me to present a soupçon of evidence:

NAFTA

OPEC

APEC

EEU

Eurasian Economic Union

And, soon…

A Union of Emerging Nations Economic Unions. 

And, an 

E-20

The world is fragmenting into economic (not military) power zones.  Asia, Middle East, Africa, Europe, Eurasia, Latin America, North America.

One important factor of the new paradigm and the recalculating of the numbers:  it will replace the following, specially regarding China.

“When the numbers are bad, the Wall Street experts gloat.  When the numbers are good, the Wall Street Experts doubt the numbers.” ~ Slim Fairview.

The concept of limiting demand will enable long term economic planning with a reasonable degree of stability by rendering market forces irrelevant.

In addition, we seldom see ourselves as others see us.  Look at us from the perspective of emerging nations.

• ·       Chinese People have suffered poverty and hunger.

• ·       Russian People have suffered poverty and hunger.

• ·       Americans are rolling in dough.

Remember! The perspective of people starving to death in emerging nations.

I will explain what I mean by limiting demand using golf as a metaphor.  

This is a lesson about Economics.  Golf is a metaphor.  The takeaway is: Economics!

Golf Course # 1.

Public (municipal)

Fees: $50, per round in groups of four.

Anyone can play.

The demand exceeds supply.

Many are turned away.

Golf Course # 2.

For Profit.

Anyone can play.

Demand often exceeds supply.

Fees: $50, per round base rate plus extra fees with high demand.

If few people want to play, the fee is $50. As the demand rises, the fees may rise to $100 or $150 per round.  Many can’t afford the higher fees.  Many are turned away.

Golf Course # 3.

Private

Fees: $50, per round.

Demand limited to 500 members.

Not exclusive, not for the rich, not restricted.  Simply Private.

Demand is limited, the fees are always $50, and everyone gets to play.

It should be obvious to all that price increases are more sever among those who can least afford it.  As this applies to food, in many industrialised nations there is a fixed or limited demand and a stable supply, and a marketplace that can blunt the negative impact on the less fortunate.

For our purposes and to understand the metaphor, replace Golf Course with Farm and replace Golf with Food.

In the US and other industrialised nations there is certainly poverty and hunger. 

In Emerging Nations:

·       A Flood

·       A Drought

·       A Crop Failure

·       A Migration of Starving Refugees

·       Widespread Famine

·       Global Food Aid (Marginally helpful)

·       Population Displacement

·       Starvation and Death

People lying on stretchers, skin and bones, unable to stand or even sit up because their bones are too fragile to support their weight, mothers clutching to the bodies of their dead babies, do not care if we've had 5 servings of vegetables, the unfairness of golf, and never want to hear, “Childhood obesity in America is caused by poverty.”

As the world moves into Economic Power Zones, survival will come from “limiting demand”.  This is to insure that economic stability will prevail.

Regards,

Slim

slimfairview@yahoo.com

Copyright © 2014 Robert Asken Slim Fairview

All rights reserved.

A Primer in Economics by Metaphor

This is how economics evolved. This is a metaphor.

Bill is a caveman back in primitive days. He lives in a cave. He lives in a community among other cave dwellers. Some hunt, some gather, some cook, but not Bill. Bill crawls in the dirt, using his hands to make holes in the dirt. He drops seeds into the holes. When he is finished planting, he goes out to gather. He is not good at hunting so he only gathers. The seeds grow. Bill eats.  Bill barely survives.

Bill has a neighbour, Tom. Tom is a hunter. He works hard. Hunting is dangerous. Some of his friends have been killed hunting. Still, he does it.

Now, Bill and Tom have a neighbour Jack. Jack thinks. He thinks what Tom does is dangerous and only marginally profitable. He thinks what Bill does is not the most effective way of doing what he does. Jack comes up with an idea.

Jack takes a stick; he walks across the field poking holes in the ground. Then, using a hollow reed, he drops a seed through the reed into the hole. He plants many seeds.

When Jack is through, he gathers. Because he has more time to gather than Bill does, Jack gathers more food than Bill does. Jack has more food to share, so he trades food with Tom who hunts. This causes Bill a problem. He does not have enough food to buy meat from Tom, so he eats less.

Jack’s farm prospers. He not only gathers and trades he now reaps and trades. He trades food with Bill for labour. Bill now works on Jack’s farm in exchange for food.

Jack now has twice as much food so he stops gathering. He cultivates more land. He grows more food. Now he can trade more food for more labour. The gatherers find Jack’s steady supply of food to be a better alternative to gathering.

Tom, seeing how the investment system works, and with meat scarce and vegetables in plentiful supply, he charges Jack more for the meat. Jack pays happily. In addition, with the lessons he’s learned, Tom teaches others how to hunt, where to hunt, and supplies them with the tools to hunt. They pay for their lessons with some of their meat. He pays them for hunting with some of the vegetables.

Tom’s hunters increase the quantity of meat. Jack’s farmers increase the quantity of vegetables.

However, there is another problem. It takes time to make tools to farm the land, weapons to hunt for meat, and it takes time to make clothes from the skins.

Enter, James. James also thinks. He sees an opportunity. He agrees to supply the hunters and the farmers with tools and weapons and clothes.

He gets together with some of the less successful hunters and gatherers and promises to pay them in meat and vegetables in exchange for their labours making tools and weapons and clothes. They don’t have to hunt. They don’t have to gather, and they can eat. That works for them.

James begins his business. Soon, more people are making tools, weapons, and clothes. More people are farming. More people are hunting. However, things are a bit dull despite the prosperity. Enter the arts. (It will be centuries until things become dull because of the prosperity.)

Tom, Jack, and James can afford to take time to pursue the arts. However, they are not very good at it. Enter, Dave.

Dave tells stories. He is paid with food.

Susan can paint. Susan is paid with food.

Peter, Paul, and Mary can sing. They are paid with food.

Mark and Lorraine get an idea. They seek out people who can tell stories. They arrange for storytelling. They charge people to come to listen to the stories and pay the storytellers with a part of the profits.

Susan, who can paint, teaches promising students to paint and helps them sell their paintings taking a commission on the sales.

Things are moving along reasonably well with the exception of dragging around sacks full of food and dead carcases. Moreover, there is quibbling. They agree to seek a solution from the elders. There, they listen to the elders suggest the formation of a council.

With time on their hands, and the evidence of intelligence, Jack, Tom, and Dave become leaders appointed by the elders. For whom everyone has respect.

Together they create a medium of exchange. Then, they issue an RFP and subsequently someone creates a food storage system. The people start schools where the experienced hunters and farmers can teach hunting and farming. Singing, storytelling and painting are also taught. However, there will always be troublemakers. At first, they are handled by a few of the leaders. Then the leaders appoint a shire reeve who calls a posse comitatus to handle problems when they arise.

Some people are smarter than others are. However, they are not creative; but they are inventive. They invent ways to make tools using metals. Some invent more expansive tools and machinery. They learn to grind wheat and make bread. Others figure out how to harness the water to turn gristmills. Others are natural born salesmen. They go out to sell the products of the industrious people of the community.

The community grows. Soon, other communities follow suit. People take what they have learned, their stock-in-trade, to other communities to help them plan their communities.

Some communities with more of something to sell sell it to those communities with more of something else to sell in exchange. Foreign trade is born. Treaties are signed. Thus, civilisation arises from the very dirt that Bill used to crawl in digging holes with his hands to plant seeds.

This is the entry to understanding economics.

Regards,

Slim Fairview

 

Mail  slimviews@gmail.com

Copyright (c) 2011 Slim Fairview