Interbank Market News Scan: The real free market is the one between commodities owners, merchants, and traders.

I rarely use the term “free market.” There is no such thing. When I hear an elected official or money manager use the term I gather they are discounting the realities of markets; that there is always a cost to entry, that the risks the other party does not pay or deliver has to be covered, that government will demand its taxes. There is no free.

For the above reasons I advise my clients not to use the phrase. Its use signals to me that a candidate for office rather stay in lock step with low-hanging fruit and definitely will not stand out from among the hundreds or thousands of candidates who avoid critical thought.

Whether a candidate or an incumbent elected or appointed official, your narrative will stand out where you merge depth of knowledge with elegance in delivery. That kind of reconciliation requires work. In the case of the economy, it requires sitting down and learning the economy’s true basics and discarding the cardboard, bullet point rhetoric that is out of touch with the realities voter/taxpayers are facing.

For example, in about forty minutes the U.S. Bureau of Labor Statistics will release its jobs situation report for the month of April 2023. The economy is in full employment mode, a metric that says that everyone looking for a job has one or is looking for one. Currently, that metric is an unemployment rate of 3.5%.

The central bank would, as a part of its inflation fighting strategy, like to see that number increase to five percent as the greater the number of unemployed means the few people that can go out, shop, and drive up the prices of goods and services.

U.S. Senator Elizabeth Warren, Democrat of Massachusetts, and U.S. Senator John Kennedy, Republican of Louisiana, represent how philosophically opposed and geographically divergent elected officials come together albeit briefly in concern about the impact the Fed’s monetary policy stance could have on labor.

Unemployed workers could show their anger and hunger at the polls.

You would swear that America has a labor centric economic policy especially when jobs day comes around. The labor centric sentiment is fleeting. The inordinate amount of attention that is given to the Federal Reserve and monetary policy tells me its more about the financial markets and a lot less about the labor markets.

Then again, has policy ever really been labor centric? At the country’s inception, the United States was in the last years of mercantilism where the focus was on the merchant class and their role in facilitating the government’s accumulation of gold and silver as indicia of wealth.

But as Adam Smith called for unleashing animal spirits guided by the invisible hand, the capital class and capitalism took center stage in American economic policy. Money and power moved from the merchants and traders to those who could pool together their financial and natural capital to build enterprises and produce and deliver product, goods, and services.

The irony, in my opinion, is that today’s politicians take for granted how difficult it is to enter the stream of commerce that flows between those who control land and commodities. A cursory look at those new founders and owners of unicorns are not starting shipping companies or trucking companies or food processing or manufacturing plants. They are shelling out a few thousand dollars to get a coding engineer to write an algorithm for dropping off meal kits. Otherwise, they are writing code for non-fiat money.

Meanwhile, employees across the colored collar spectrum are wondering whether artificial intelligence will put human-embodied analog intelligence out of business. I say across the board because up until last November, degree-holding labor were chugging right along thinking that data mining, robotics, and machine learning were concepts the factory worker had to worry about; that she would continue going to Starbucks to sit with a latte while writing senseless emails. ChatGPT and Bing now has Lisa Laptop wondering when she is next as companies like Amazon, Google, and Facebook swing the battle ax at labor.

I see the gutting out of labor causing Government to take another look at the policies it uses to manage the political economy. Capital is getting costlier. Competing against traditional manufacturing and processing platforms as well as against large digital platforms is less than fruitful.

Seeing these changes, I would advise Government that maintaining a yield generating political economy means putting in place policy that moves from credit-capital-centric to merchant-centric. Government’s concern about competing with China is going to pull the United States back into a mercantilist stance.

The talking heads on YouTube would have you believe that a commodity-backed China-Russia currency is right around the corner ready to displace the United States dollar as the world’s reserve currency. It is still too early to say this will happen. However, part of the Government’s hedging policy should employ preparing American labor for such as event.

To prepare taxpayer/voters for this new world order means encouraging merchant/broker/trader behavior among labor. We have been in this era for a while starting with the expansion of a gig economy that started soon after the great financial crisis of 2007/2008. More of us are learning to live more “on the spread” versus relying on wages. As the affluent continue to cut out middle management and reduce the need for the current quantity of frontline labor, labor will have to further adjust to different ways for making money.

It is not about free markets. It is about recognizing that transactions markets are changing and how we encourage and tax new markets will change as well.

Alton Drew

5 May 2023

Alton Drew

On this Jobs Situation Report Day, thanks for reading my insights on the changes in the markets. Your donations are truly appreciated. Thank you!