Human beings are not freely portable, as we are bound to community, family, friends and where our traditions lie. While we can move, it generally takes a fairly healthy dose of incentive to do so.

Capital, on the other hand, flows quite freely. Just as a liquid like water, capital tends to “find its own level”. We are witnessing capital leave the US dollar denominated assets in order to seek either other markets or better stores of value (hard and soft commodities like metals, oil, grains, or precious metals). One great measure is that oil is priced over $60/barrel in an economy where GDP growth has been crushed over the past year. So while Congress was so quick to assert that speculators drove oil prices so high last summer, what would be their explanation for oil remaining so high despite a severe global recession? It certainly appears that capital, particularly that from Asia, is looking for a better store of value.

Changing the rules does have unintended and destructive consequences. I take a look at my own “One Hundred Trillion Dollar” note from Zimbabwe every day in order to not forget that.