There are two dangerous delusions held by most employees …
- Today will be much the same as yesterday and tomorrow will be much the same as today.
- Companies can control their own future without regard to externalities like global interest rates, trade pacts, and international politics.
The first one denies the existence of “black swans,” unpredictable and unexpected events that occur randomly in life or as a consequence of simultaneous complexities in our environment. And the second one occurs because most people are self-centered and want to believe that they can control their own destinies; however, the assumption does not extend to the macro world where chaotic and collective mechanisms are at work.
A tectonic shift in world politics …
It appears that the shifting plates of our economic and political world are realigning themselves. Few people have noticed that China, Russia, Iran, and India have combined with some lesser nations to ignore the U.S. Dollar as the settlement medium for commodities like oil and to use the Chinese Yuan or Indian Rupee instead. The impact of this decision cannot be overstated as it has enormous consequential effects. One, foreign nations no longer have to accumulate and store U.S. dollars for their energy purchases – a blow to the parking and stabilization of the U.S. Dollar in world trade. Two, foreign nations no longer need fear the influence of America when it comes to foreign banking, including the settlement and tracking of trade dollars; insulating these nations from potential U.S. financial sanctions. And three, the power of the Federal Reserve, acting as America’s Central Bank is greatly diminished in strength and ability to ‘regulate” international financial imbalances or to prevent currency manipulations by foreign sovereign states, many of whom want to cripple America’s economy and the political control it exerts on the world.
What you pay tomorrow is regulated by the Federal Reserve …
Although the Federal Reserve is a private, not government, organization, it nevertheless holds the power to determine what individuals and corporations will pay for borrowed funds as well as the strength of the dollar (including inflation). The FOMC (Federal Open Market Committee at their last yearly meeting on December 13, 2017, voted to raise the target range for the fed funds rate, from 1.00% - 1.25% to 1.25% - 1.50%. As a consequence, the United States Prime Rate is now 4.50%, effective tomorrow December 14, 2017. Overnight, all loans that are indexed to the prime rate have just reset and debt service of obligations will increase by 25-basis points (one-quarter of one-percent). Perhaps reaching the tipping point where it is no longer feasible to build that new plant or continue to manufacture goods in the United States.
Read the news and consider the impacts on the world, our economy, your industry, and your employer.