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Hyperwage Theory Part 11

Hyperwage Theory Part 11

Chapter 11: Prelude to Inflation Analysis

The Hyperwage Theory is probably the most revolutionary economic thought in recent history. But the revolution may not be in its conclusions but in how it changes the way we apply economics to our economic and non-economic problems.

Hitherto, in our exposition of the Hyperwage Theory all the ideas we have discussed did not require a PhD in economics, yet, at the same time, these ideas are ones that PhD economists couldn’t have thought of. Seeing what everybody else has seen and thinking what nobody else has thought.

Why? The economists have the fortune of a lifetime of academic education while the Street Strategist has the misfortune of a lifetime of miseducation. In other words, it is a war between the brainwashed and the iconoclast.

Yet somehow, as I have argued in Certiorari Conundrum, contrapuntal vectors of wisdom are additive. The weak ideas are annihilated by the strong ideas. And the strong ideas become stronger after such annihilation.

Even if you are an economist who doesn’t believe in Hyperwage Theory, maybe you have watched how

some of your economic ideas acquire a new meaning when I reformulated the same economic principles and ideas from a completely different vision.

For example, have you ever heard of an economist declare that our country is more expensive than Germany, France, Canada and the USA?

Yet, having reached this far, it seems that the Hyperwage Theory has established that the general rule is that Third World countries are actually more expensive than First Word countries especially on economic commodities that really matter. Could you have thought of our economic condition in this way?

As for the non-economists, I hope you have seen how my discussion of Hyperwage Theory annihilated the mandatory popular economics you learned in school. I don’t really mean annihilate but I guess you know what I mean. You are beginning to appreciate economics and how it affects the entire population on issues of poverty, wealth distribution, and respect for human labor. Now, you know what questions to ask, and what answers to expect.

Hyperinflation

I will be discussing about Asymptotic Hyperinflation. Inflation, you understand. But I doubt if you know what an asymptote is, much less understand it.

But don’t worry, as usual, I’ll enhance your vocabulary and refine your vision of things.

But first, allow me a little digression.

One of the most exciting things about conjuring up theories is the fun of drawing analogies from different disciplines of human thought and using these analogies to explain or arrive at a conclusion with the theory you are building up.

With the Hyperwage Theory I have gathered the basic paradigms I used in my original analysis of the Third World poverty problem, and discussed them in Part 3. I also added a few more paradigms in later chapters. Now, allow me to add more paradigms.

Rejections

The most common knee-jerk reactions to Hyperwage are:

1.Hyperinflation

2.Unemployment

3.Unaffordability

In tackling the first issue of hyperinflation, allow me to share the genesis of my thought on this issue.

Like most intelligent college educated chaps such as yourself, I immediately rejected the idea of a high minimum wage because even without thinking, my economics education taught me that higher wages leads to higher prices and that every dollar increase in wages will be wolfed down by a two-dollar increase in prices.

That’s it, right? That’s the intelligent way to approach any proposal to increase wages.

Intelligent vs. genius

Yet, no matter how I forced myself to find direct, workable and logical solutions to Third World poverty while I was wallowing in the luxury of a First World city, I couldn’t refuse the one simple fact that kept leaping at me: All these gweilos from the far corners of the world are here in this city, drinking Singapore slings and rocking to the beat of a Filipino band, because of the high wages and at the same time they are not afraid of the high prices.

The more I thought about it, the more I thought about inflation. Hyperinflation will annihilate the increase in wages. That’s the intelligent analysis.

But then I remembered what I usually tell a colleague of mine whenever he calls in his reports and analysis from his hotel in Taipei or Jakarta or Auckland. When facing some problems, I would always encourage him to offer a solution, no matter how crazy. I always encourage people to think freely.

After his analysis, I would comment: “That’s a very intelligent analysis and solution. Very good. That’s good. You are intelligent. Indeed, you are intelligent. But there’s a big difference between the intelligent and the genius. Now, here’s what a genius solution looks like…”

Boy, it was fun doing that, and it became a positive thing for us because we were then forced to outthink each other.

Anyway, let’s go back to the issue of hyperinflation. The intelligent analysis was to reject it outright, after all, why rock the boat, and risk a two-dollar increase in prices with a single-dollar increase in wages?

Then again, I remembered the games I played. “Now that I have the intelligent solution, is there a genius solution? After, I’m not intelligent. I’m a genius.”

And so it came to pass, that I focused my genius on what happens in the twilight zone of hyperinflation.

Relativity

When I started looking for genius solution, I remembered Einstein.

When he was still a student, he was fascinated with the speed of light. When a BMW in uniform motion is traveling at a constant speed of 120 kph, and a Benz is running at 100 kph beside it, the BMW has a relative speed of only 20 kph with respect to the Benz. That’s obvious, right?

Consider a different scenario. What if the Benz is running at 120 kph as well? Then, the speed of the BMW is zero with respect to the Benz, and they will be running side by side. That’s obvious, right? This is called Newtonian mechanics.

Now, listen closely to this different scenario. Light travels at 300,00 kilometer per second! If the Benz is running at the same speed of light, respect to the Benz, light will stop (zero speed). That’s obvious, right?

Yes, it’s obvious, but no, it does not happen that way. Why? The speed of light is constant in the absence of acceleration from any frame of reference. This was the startling conclusion of the Michelson-Morley experiment. The speed of light is constant.

The second scenario involves light and speed of light, in which case Newtonian physics no longer applies.

Even if you are running at 90% of the speed of light, with respect to you light will still be running at 300,000 km per second. This was what triggered Einstein’s research into relativity.

There is no more relative speeds. And, confusingly, this is called relativistic mechanics or Einsteinian mechanics.

Lesson: The cars are normal speeds are analyzed using intelligent solutions. The cars running at speeds of light are analyzed using genius solutions.

Limit

Einstein’s curiosity on what happens if he travels at the speed of light has exemplified for us that things don’t quite happen at hyperspeed levels the way they happen at ordinary speeds. Now, let me digress to another mathematical concept called the limit.

Unfortunately, not many of us have the fortune of studying limits. The concept of the limit is the single most important concept in calculus. No limit, no calculus.

When we studied limits in college, we did it in passing because we were interested in the application of calculus. The importance of the concept of limits is lost on most students.

In fact, although I was very fluent in the calculation of limits it was only much later that I realized the conceptual importance of limits in the entire discipline of mathematics. The concept of the limit is so pervasive that science and engineering would have been still in its infancy if the concept of the limit was not introduced.

Let me give you a few examples of the limit. For example, you have a square, that’s a polygon with four equal sides. Try to imagine if the polygon have five equal sizes (pentagon), or imagine a hexagon, a decagon, and so on and so forth.

Question: What happens when the number of sides is 100? Or 500 or 1000 or 10, 000? What will you have?

You will eventually have a circle. You can then say that a circle is a polygon with an infinite number of sides. The limit of the polygon as the number of sides approaches infinity is the circle. While this is not a good mathematical example of the limit, at least you will have an idea of how it is used.

Another example: What is the limit of 1/x as x approaches zero but never quite reaches zero? The limit is of course, infinity. However, take note that if x is actually zero, then the ratio 1/x is not infinite but rather “undefined.” That is why division by zero is not possible. However, the limit is infinity.

Another example, if 1/0 tends toward infinity, hence its limit is infinity, what is 0/0?

Hmmm, 0/0? Anything divided by zero tends toward infinity. Good answer.

But don’t forget, anything divided by itself is 1. So, is 0/0 approaching infinity or approaching 1?

Good problem huh? The answer of course is not undefined, not infinity, not unity, not one.

The answer to 0/0 is “indeterminate.” Yes, indeterminate. You have no way of knowing. It could either approach zero or approach infinity. Why? Because the answer depends on from where the zero is approaching fast. If the numerator or denominator approaching zero faster? If the numerator is very near zero, the ratio could be zero. If it is the denominator, the answer could be infinity.

Try it on your calculators choose a number close to zero (0.000 000 1 and 0.000 000 000 000 1) and divide them and then reverse the numerator and denominator. Both close numbers are practically zero but their ratio is either approaching zero or infinity. In other words, zero divided by zero is indeterminate.

Why are we discussing this?

Things do not behave the way you expect them to at regions or zones that may have a different set of rules. Whether its the speed of light or the ratio of 0/0, some things are not necessarily what normal intelligence expects them to be. More of limits and asymptotes in the next part.

(Thads Bentulan, July 14, 2005)

* * * * * ∯ * * * * *

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To join the mailing list send an email to streetstrategist-subscribe@googlegroups.com

A PDF copy of the entire book on Hyperwage Theory is available currently for free.

Send an email to streetstrategist@gmail.com for the latest edition.

Want to order other books by Thads Bentulan?

The Misadventures of the Street Strategist Vol 1 to 13

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