Cause and Effect – Life’s Tailor

  

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What "is"; is because of what was. What is, has been before.

As a business owner – as an importer, as an exporter, these laws also apply. Major shifts are occurring in local and global markets that will greatly affect everything we do as an importer or exporter, that are not new. Even these shifts have been before, and will be again.  So how will our current US FED monetary policy,  “QE2” or “printing money” affect what we do?

Borrowing has it's price - inflation it's costs: Our Government is set on borrow in a multitude of ways. Perhaps the most corrosive method is to devalue a currency.

Rather than having representatives that spend money in ways that can be seen and tracked, increased or reduced in response to voters – this method operates insidiously. With  “Quantitative Easing II” underway, just the latest move in the US Governments attempt to tank our currency in what many are calling a “race to the bottom” as the FED seeks to  manage the value of our currency so that the dollar has less buying power than most other currencies. Yes – that’s right your own government is actively engaged in destroying your buying power, devaluing your assets, and eroding the commodity by which you receive remuneration and reward for your life’s efforts.  All of this to help with the stated motive of “boosting exports”. A devalued currency allows the borrower to pay its creditors with “soft dollars”, money that means less than the “hard dollars” that were initially borrowed.

However, the only certainty is that this strategy will have real, dramatic and unintended consequences; and a few things that directly relate to we who are in the import/export business.

First: All commodities will become more expensive: gas, food, travel, autos – which will put a great deal of pressure on middle class Americans begets.

Second: Different commodities will be affected more at different times. One month you may see gas jump almost exponentially, a few months later food jumps just as fuel comes down.  Utilities jump in cost just as food starts to correct. 

Third: With a devalued currency, Americans will now learn what it is to be at the bottom of the buying chain.  Farmers that grow food to make a living – will be forced to sell their goods to those who pay the highest prices. Higher prices for us, brought about as a direct result of a currency that plummets in value. A tanked currency is considered the dread of sane governments. Yet Americans are likely to become the losing bidders in the global bidding war for food, due to this weakened, even anemic currency. American families in the lower and middle class will feel the greatest negative impact.

This is important because of the way it impacts purchasing decisions and buying habits.  People who are your customers will have their finances involuntarily re-arranged. So if you are importing goods that are consumed by this segment of the population – and in some way most are – we would do well to consider these new forces that will change our clients' ability to purchase our goods.

It is also good to evaluate what we are selling – optional point of purchase sale, discretionary expenditure or necessary and vital investment in someone’s life.  If not an item or line that qualifies as a “necessary” purchase  – a good question might be:  do I need to import something else, something additional, even something for a different market? 

Be ready.  Things are changing, and fast. So anticipating this shift may have a baring on your import decisions. It would be wise to be fleet of foot, retaining the ability to move from one segment of the market to another, one product line to another by emphasis or percentage or your business, etc.  But most of all is the importance of increasing your value to your customer in as many ways as possible, not least of which is positioning yourself to help your customer keep pace with his/her clients' changing priorities and needs. Then, your client can rely on you as one already poised to take advantage of every swift in a  moving market.

Dave Stover

dave@universalcargo.com