As the Dollar becomes less valuable, where will you put your hard-earned assets to work?
A lesson in macro economics hardly seems congruous with a website development and domain development blog, but bear with me; the information herein is quite important.
CNBC, which is my favorite business news channel, landed a protracted interview with Warren Buffet this morning, and the information gleaned from that interview will have me thinking for weeks and years to come, much like watching Steve Forbes at TRAFFIC in 2007 is still teaching me economic lessons I didn’t know required learning, at least at the time.
The importance of what the “Oracle of Omaha” said this morning, about the value of the dollar, about the Federal Reserve’s monetary policy, about wanting to own farm land instead of all the world’s gold, is critical to teaching us the fundamentals of long-term, strategic and enduring investments. His commentary about the U.S. Dollar is not for the faint of heart, because it is an inconvenient truth about the status of the U.S. economy in this emerging-market world that many wish to ignore. American “exceptionalism” is not gone, but it will be distributed to economies where workers and business are learning to unleash their potential. Nonetheless, Buffet does say we will remain the dominant economic force for decades.
When we see dramatic economic growth rates in places like India and China, the numbers are somewhat of a misnomer. Rick Schwartz loves to talk about how numbers do not lie, but they can be made to lie, if other numbers are not properly factored. Poor math can include things like forgetting the second or third part of a formula. Our economy is not an island feeding the world, as it may once, dubiously, have been.
An economic growth rate of 3-percent, in the United States, means our economy is expanding at an annual rate of $428-billion, based upon 2009 GDP. The numbers are staggering, for any one person, but on a national level, with an economy the size of the United States, that figure is about what you would expect in a developed country. That same $428-billion number would constitute nearly 100% annual growth in a country with a GDP of only $450-billion worth of production.
Remember what production is: It is the total value of all goods and services produced from land and labor, making capital products. The dollar is declining in value because it is just paper. With little to back its value, it will continue to be less an instrument of currency and emerge as more a means to port wealth from one investment to another. Even Mr. Buffet warned that the U.S. Dollar is a poor investment, and it has been, apparently, for many years. Navigating the seas of high finance, it is no wonder gold has finally found its berth, among many hedge seekers!
Historically, gold has always been worth the price of a good suit of men’s clothing, and this has been the case dating to antiquity. When, therefore, the U.S. Dollar went off the gold standard, because President Nixon needed a way to pay U.S. war debt as a consequence of Vietnam, the value of the U.S. Dollar, at the time and through the following few decades, artificially clamped the price of gold, because of our potent economic engine. The long term, however, is that it did not keep it down forever, not with the emergence of new economic powerhouses, from the European Union to China to India, and even to South America. No genie has been let out of the bottle; it has actually be put back into it.
That brings us, in a loose way, to domain investments, which are, as the analogy has been for nearly 20 years, virtual realty. Mr. Buffet said he would prefer to own all the farm land in the United States, rather than have all the world’s gold. Understanding macro economics, one can see why that would be the case. You can continually make the land more productive, growing from the land more valuable commodities that will always generate renewable revenue streams. Gold is a fixed asset, and it always will be.
Domains are the means by which we now purvey the products produced by the land, and people will always need to find their way to the products. As more countries flex their economic muscle, more people in these emerging markets will be using technology to find the goods and services they want, rather than visiting more terrestrial establishments.
What’s more, the growth in mobility will continue to permit the proliferation of online land and equity investments for years and decades to come, both in “traditional” TLD investments and the now avante garde ccTLDs. So many people in these emerging markets, like India and China, are going online with mobile devices that the old PC has become a dinosaur. This is also holding true in the former territories of a long-dead Ottoman Empire, where the populations are only now, after nearly 100 years, rediscovering their political voice, which will lead, too, to economic freedoms heretofore unimagined!
As laptops are replaced with tablets, like the iPad and the Galaxy and the RIM PlayBook, an emerging generation of web users will be more comfortable with the tablet than a tethered device, like our lovely iMacs and render farms. In fact, the latter will increasingly be relegated to servant devices, primarily utilized for making the use of tablets more exciting.
Domains will always be necessary because as people access all of this information, in the cloud, the domain will be the gateway. Applications will have their place, but you have to find the application, first. Doing that does not always mean going to an App Store, either. It will often mean going to a domain name that makes sense and fits with the product or service being sought.
Nowadays, having the domain is only the first step, and how one handles the domain, after the acquisition, is critical to determining long-term success as a domain investor. That, however, is the subject of another blog post, which is likely to be just as long as this one, and no less important. Now, at least, you have a foundation for understanding why domain investors are doing what they do.