How countries operate

At times, we can all become frustrated by political agendas, misfortunes and perceived lack of planning by various governments around the world. As a result not quite often seeing the bigger picture – or the economics of how countries work.

Naturally, the political fracases provide fuel for media companies who in turn bombard us with their 24-hour news cycles. But we need to understand that politicians are only temporary custodians of the country and its economy.

Each economic model is built on the same premise that started many hundreds of years ago – that of bartering.

Two pillars of government

There are two main mandates or rather tasks that a ruling party is assigned by the electorate when it comes to governing. These are: controlling the country’s fiscal and monetary policy.

Fiscal policy is the internal running of the country and basically deals with tax and how it is allocated. The fiscal budget is then awarded to the various sectors of any economy.

These include education, transport, healthcare, finance, trade and industry, defence, agriculture and many other building blocks of your country.

How the government prioritizes the spending on each of these sectors will determine its policy priorities. It will also be a signal of its wider political intentions. And this not only to voters but also to its neighbouring countries in regard to international trade and security.

A nation concerned with information and its human capital will prioritize education in its budget. There are however other approaches to budgetary allocation such as funding trade and industrial activities.

This leads to job creation that will, in turn, drive a need for tradesmen and women to diversify and obtain the new skills required.

This also provides an incentive for state-run schools, privately funded schools, and institutions to develop new skill sets.

Doing both is ideal – as governments must foster innovation by promoting and funding higher learning institutions where top talent can be nurtured and developed.

Fiscal policy forms the larger mandate as this budget is derived from the collective taxation of income, capital gains, trading and customs, sin taxes, corporate, and simple public services.

That way allocation of the fiscal budget to finance will pave the way for monetary policy to function.

International trade is the key to generating further income as a government cannot rely on an internally driven economy to sustain wealth. The same applies to business so an agreed trade policy would need to accommodate all aspects of the country’s economy.

National specialization

Every thriving nation has been built on either skilfully utilizing internal resources or have created global demand for a service or industry.

The UK has strong financial and corporate offerings plus its geo-positioning (GMT) allows it to be a central commercial trading point for the world.

Germany has always had a rich source of steel enabling the production of cars, rail brands, and manufacturing.

In addition, it continues to be a market leader in developing technologies to compliment those industries thus allowing the country to thrive as a major European power.

The Nordic countries are rich in mineral resources of which they have converted the revenues into national trust funds. These are used to aid its citizens; many of whom develop skills in trade, innovation, and finance (and now Fintech).

Though Japan is a geographically smaller and is made up of two islands it continues to prosper by becoming a global leader in the exporting of innovation, artificial intelligence (robotics), fishing stocks.

It even ‘exports’ financial aid (loans) to other countries due to strong and disciplined monetary policy.

The US has invested heavily in services, human capital, and innovation – to a large extent immigration has played a major role in these areas of growth.

The emerging economies

Russia is mineral-rich and has outsourced its intelligence gathering skills, military technology, and training for years.

China continues to grow and subsidizes its agriculture and manufacturing industries fully utilizing the abundance of manual labour at its disposal.

China even exports this labour thus gaining influence and soft power enabling Chinese goods and services to be exported more freely to other economies.

The ability to offer the global economy a form of expertise or goods/service can attribute hugely to each country’s economic wealth.  Israel – military and intelligence; Brazil agriculture and tourism not to mention countries in the Far East – oil and fossil fuels.

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Most African countries obtain their sources of income (though not as much as they should) from natural minerals, agriculture, and tourism.

Ghana has gold and cocoa; Nigeria – oil; South Africa – gold and many mineral resources; Kenya and Tanzania – tourism. Even a poor country like Zambia has survived because of its coal and coffee reserves.

Any country without resources or the ability to offer goods and services would have to be more subsistence-like. This usually means having to rely on aid or import goods and services.

That, however, comes at a price and leads to the country functioning with an unsustainable debt burden.

Application of policies
Interesting food for thought by Dr. Jagdish Bhagwati, a famous Indian-born economist in the US:
Americans spend, save little. Also US imports more than it exports.
Has an annual trade deficit of over $400 billion. Yet, the American economy is considered strong and trusted to get stronger.
The Japanese on a contrary, save a lot. They do not spend much. Also, Japan exports far more than it imports, has an annual trade surplus of over 100 billion. Yet Japanese economy is considered weak, even collapsing.
Modern economists complain that Japanese do not spend, so they do not grow. To force the Japanese to spend, the Japanese government exerted itself, reduced the savings rates, even charged the savers. Even then the Japanese did not spend (habits don’t change, even with taxes, do they?). Their traditional postal savings alone is over $1.2 trillion.
Thus, savings, far from being the strength of Japan, has become its pain.
International trade

This then gives way to various trading blocs, which over time have been built, broken or renegotiated when it was not suiting either of the participants.

The strength of a country’s currency is primarily determined by supply and demand for its sovereign currency – but demand can only be fostered by trade.

The more the demand for a countries commodity the greater the demand for its currency – which is the medium we use to compensate for transactions.

In terms of a country’s monetary policy, it is more of a singular relationship between a government and its banks.

The banking system

Banking is the system to which people can place their disposable income (gross income after tax). The central (reserve) bank regulates the money supply into the economy ensuring that locally, inflation does not corrode the value of its currency.

The central bank controls how much it lends to local banks and at which payable interest rate.

The central bank is independent of government. They have their policies shaped by fiscal influences and is under obligation to impact the strength of the economy through its interest rates and exchange rates.

So, the central bank sets the mandate by which banks offer security interest, loans and building deposits to help you benefit from their hard-earned cash.

Banks, however, have a wide range of consumer charges so transacting doesn’t offer much protection against inflation. In some cases, banks offer you zero interest on savings deposited!

You can therefore understand the frustration of citizens who would like to see increased corporate taxes especially for banks.

This especially as they reward executives with excessive remuneration packages even in a failing economy.

Financial governance and regulations

The new wave of Cryptocurrency aims to shake-up these long-standing benefits banks have enjoyed.

Benefits such as the bailouts from taxpayers’ money from risk-taking behaviour that nearly brought the global economy to its knees.

Like a petulant child knowing well that its parents will only mildly reprimand but ultimately still allow the continuation of behaviour with a slap on the wrist.

Governments continue to tolerate excessive wage packets and risk-taking due to the fact banks play a strategic role in the stability and growth of an economy.

This is just a tip of the iceberg and paints a big picture of how a country is managed – or indeed can be mismanaged.

Life hacks using tech

We often do things out of routine without considering if there is an easier way to achieve the same result quicker and even more effectively. In a larger company or organization, this is the job of the business analyst.
What if we applied this to other daily activities and tasks that shape the way we live?

This would give us more time to partake in of the things we love.

It’s hard enough for most working-class adults to spend most of their days in the week behind a PC. This is usually followed by hours behind the wheel in traffic or commuting via public transportation.

This makes the task of going shopping or even attending a doctor’s check-up after an 8-hour work stint more of a burden or chore. Worse over if you must queue further to get the service.

This very example came to mind when a relative complained about having to go from one doctor to another. When referred to a specialist they had to then book another appointment by calling that specialist’s practice.

Now granted, this is basically a ´first world problem’. Because having a specialist attend to a back problem after your doctor recommends it during an initial check-up is a luxury. One that third world citizens could only dream of having in the first place!

Problem solving scenario

So, in the case of the referral to a specialist, a simple unified medical system can resolve this. A CRM database linking all the medical practitioners including their schedules can save you the time taken to arrange the new appointment.

This system would also have a secure high-tech scanning and attachment add-on so that X-rays, scans, diagnoses and the attending doctor’s notes can be attached. All for the attention of the specialist.

The times for the new appointment can be chosen quickly while the patient is at the doctor’s practice.  When convenient, you could then go to the specialist directly.

The concept explained

This is one very basic and rudimentary example of how an automated, centralized software solution can help schedule appointments.

To achieve maximum optimization the system would clearly require several tests before implementation.

Too often systems analysts and developers do not consider the end users. The user experience (UX) is the most crucial aspect of software development and should be the first step in building an automated system or it will never achieve its purpose.

It doesn’t have to be used as a national health solution. This is because centrally planned systems, as mentioned in a previous blog, can lead to inefficiencies.

It would need to be localized in order to make the system easier to maintain and be updated with contact details.  This especially when information can change on a weekly or monthly basis.

Naturally, and for decades, health insurance companies have utilized card systems to document patient visits to practitioners. This also helps you and practice to easily claim back medical costs.

But this only serves a singular function and is laborious to run. What is being proposed in this blog post is something to resolve this in a more secure and decentralised manner.

Application and security

Cloud security has become a huge requirement and will be a necessity for all businesses and services in the very near future. Europe, for instance, is implementing compliance laws for storage of data under its new GDPR regulation.

Countries like Sweden also have similar compliance laws to handle financial (with a lot of  banking going mobile) and medical data stored in the cloud.

So, security would become less of a concern for businesses when it comes to data storage and automated CRM systems in the future.

Shopping and housing convenience

The burden of shopping can also be alleviated with initiatives such as cashless processes. We first saw this introduced in Asia (China) and now adopted in the West through Amazon’s new cashless´ and cashier-less grocery stores.

While shoplifters might not see the innovation in this ‘new method’ of shopping; it saves you time spent queueing to pay and will invariably help resolve the scourge of shoplifting.

It will, however, require more reliance on technology for surveillance, to monitor and track the scanning of the goods and keep a database of records on a server.

This helps you with the inventory management and other back-office processes and is managed by an automated ERP solution (and not a person).

smart-home-3096219_640We are still waiting for massive roll-outs of the so-called smart houses equipped with smart chips that help regulate temperature, turn off energy-consuming devices when not in use.

Some are even equipped with fridges that remind you when food is expiring or simply needs to be replaced.

Designing such systems would naturally require careful observation into the various steps needed to reach the desired result. Details in every step from how you go from point A (selecting a product); to point Z.

Point Z being you walking out of the shop with a fully paid item. All without using cash or the need for a cashier.

Tweaking the solution

The system analyst’s job would be to engage or even simulate the processes using different test subjects and not just the best practice.

There is the possibility that you might forget to pay for the milk after checking out of a security area. That could result in an embarrassing scenario for all.

These are just two examples of countless scenarios that can help us benefit from the use of automation and AI.

There are many other subtle examples such as in the motor industry. This includes the use of computers to diagnose a ‘sick car’.

There can be a solution for every bottlenecking problem. Addressing this is now has become a new field of study. Computerisation and the use of robotics to handle manual labour and repetitive blue-collar jobs will be new highly lucrative career paths.

Many new start-ups already exist purely to develop system automation.

Welcome to the future!


Conjecture buying

Before throwing our coins out of the pot or making second guesses about a big crash one must understand how the price of altcoins work.

The price of some altcoins on the trading market, has a lot less to do with its intrinsic value. It is actually what individuals, and most traders (who seek profit only), believe it to be worth.

So, what is the reason behind the recent downward price spiral? Not much of conspiracy to “ruin the cryptocurrency” other than an expected price correction coupled with some external factors.

Punters including ‘corner shop’ setups inflated the price with rampant price speculation. Speculation based on nothing more than historic (and a short history) rise of the price of the coin from only a few cents to almost $20 000 each.

The idea of creating an invention that performs a certain function quite soundly and then limiting its supply displays the financial clout of its creator/s.

That way, the natural laws of supply and demand would drive up the price of Bitcoin, as it became rarer though needed. It is already becoming harder to attain (through mining) and as it encroaches its supposed 21-million-unit limit.

“The fact that people keep talking today that bitcoin is below 10,000, it’s a disaster, or bitcoin is above 10,000 and that’s crazy. I think the fact that bitcoin is still alive, and attracting so much attention, is the fact that we’re talking about bitcoin in Davos with a Nobel Prize winner, a central bank governor and a seasoned investor. I think that’s a powerful tool.” – Jennifer Zhu Scott (Radian Partners principal).

External influencers of price

But there are external factors that come into play that affected its speculative price. Factors such as the rise of other altcoins after the split in its technology.

Bear in mind that the blockchain code is open to anyone smart enough to develop and run a product on it.

So, there is also some kind of a substitution effect as newer altcoins become more specific in purpose and faster in executing transactions.

This results in people switching from Bitcoin to the likes of Ethereum-run newcomers like DigixDAO.

These new coins are doing well (if rising price is an indicator) and climbing while others lose both intrinsic a speculative value.

External factors including market sentiments do in fact play a huge role in determining the demand for the product or service. In the case of Bitcoin, the closing down of some Exchanges in Asia as well as talks of heavier regulation. Such was mentioned at the World Economic Forum in Davos 2018.

Global leaders pledging to take tougher measures to regulate cryptocurrencies raises cause for concern for people who have a significant amount invested in it.

So, the usage by criminals for instance, has created a much-expected reluctance by governments and financial institutions to accept its legitimacy.

There is also a constant and sometimes subliminal shift in thinking, as trading involves a lot of psychological and emotional play on buying behaviour.

Buyer behaviour

One such example is the impulse people have when purchasing items that are supposedly on ‘special’ or at a low price.

A 75% discount on a pair of shoes only tells you that the seller has marked it up so high that they could still make a profit when they knock it down by that much!

You only notices the price (before and after) the discount. This is without realising that it cost the buyer a fraction of both to produce, package it and get it shipped to the store.

The true value of ‘the shoe’ lies in the materials (quality) used to produce it for it to last long or give it its level of comfort (its true purpose). That and its appearance of course.

The “brand name and image” in this case can thus be comparable to the speculative aspect of a commodity.

So, a pair of pumps would sell (at a higher than normal price) if the likes of Beyoncé or Gal Gadot are seen wearing them.

The same goes for sportspeople and the whole multi-million dollar/euro endorsement deals they carry. Their endorsement of a product thus ‘legitimizes’ it.

When global leaders, banks, and financial institutions raise concerns about cryptocurrency – it does the very opposite. This sets off market panic and the selling off we are currently observing.

The future of Crypto

So, what will happen from here on? Provided it is not outright outlawed – which is proving to be difficult as even the South Korean government have now softened their tough stance on the Crypto Exchanges.

This is after they discovered what a tax ‘gold mine’ Crypto exchanges can be. This is then when the speculative buying will begin again.

120x600Investors who couldn’t purchase Bitcoins at levels above $10 000 will now be seeking an opportunity to enter the market.

Especially if it dips below the $5000 mark (it is currently $3800). This with the hope to make some decent profit even if it just pushes back to $7000.

Some will hold on and speculate on a return to previous highs – and so the bullish and bearish cycle continues.

Authorities including the delegates at the Davos talks were in agreement, however, that they will want it at affordable prices. At a level that stays relatively stable they may even start to consider it as ‘global legal tender’.

But that will be a long time especially if traders continue to buy it speculatively to make profits.

Those awaiting a total crash of Bitcoin, altcoins or the blockchain, however, would have to hold their breaths under the water.

The technology is indeed a game changer and has already been widely adopted.

It will only change form to be partially or fully regulated.

The core functions of blockchain-based currency will remain its main contribution to the evolution of banking and ‘money’ transfers.