The Medici Effect and Gel’s Future Exchange Rate

Emzar Jgerenaia

This is a story of Shakira’s songs and Shrek’s smile

On this smooth and soft, velvety spring evening I was sitting at the editorial office by myself and was driving my thought away. I was really worried about the fact, that whatever happens in the world, from political, as well as from economic point of view, neither correspond to Keynes-Fisher- Friedman- Lux schemes, nor to Bjezinsky political predictions. We get something new and different. It’s clear that something definitely new is forming. Metamorphose era has began.
Everything is changing in the world, reasons and outcomes are interconnected; everything takes place on the boundary, on cross roads. Nothing is isolated and put separately. Stereotypes, approaches as well as rules are breaking down, borderlines are disappearing and if we do not analyze everything on boundaries and cross roads, we’ll not be able to get the idea of an event. Yes, I have mixed it up too much! DNA structure and my grandson’s locks can’t be so curl. But the night, when I was racking my brain and driving thoughts unmercifully like Alazani Valley breeze to the yards of cognition, I came across a strange book, Harvard Business School Press edition, The Medici Effect by Frans Johansson. It turned out that Frans and I think alike – traditional approaches are breaking down, values are created only at cutting areas. Existence of cross road is caused by the following three major factors: 1. Migration, 2. bringing sciences together, 3. drastic development of computers and technique. According to Frans, it is a miracle when scientists that had separated several years before and specialization took place, now are uniting. For example, famous scientific magazine Smithsonian published article on company Nexia’s biotechnological operations. These technologies made spider silk by splicing genes from arachnids into goats and harvesting the silk protein, or “BioSteel” from their milk. BioSteel was demonstrated to be stronger and lighter than steel or Kevlar. Its used in thousands of spheres. Do you think its fantasy? Well, yes, sir, but it’s a fact. After the project was presented, the company’s shares rates increased several times. The same can be said about Shakira. She is Columbian, although her father comes from Liban and is a very good musician. He has interbred Arabian tunes to those of Latin American, then added nice buttocks to Shakira. As a result we have got a super girl who has traveled around the world in 14 months and earned millions. With her mixed pop-rock she has driven the whole world crazy. This brunette Libanian is thought to be Columbian and generally, American. This hybrid, being the result of a migration, gave a new sound and a new style in singing to the world. There was a time when we liked Vinny Pooh. Later the series of carton was sold across the ocean and turned into Vinny. It seemed quite lovely to me when I was a child. But now children are bored with it. They find the ugliest Shrek to be the loveliest character and Shakira – to be the blond Goddess (sorry Shrek, don’t be mad at me. I talk about you like a politician, because this is what business requires now. You know I secretly like you). Everything has mixed up and changed. The same happens in economics. The thing that was forbidden yesterday is allowed today. Moreover, it is necessary. We don’t want to manipulate with these old doctrines. Let us take an example: according to every old theory, Gel exchange rate is conditioned by economic, political, human, psychological and elemental circumstances. All currency exchange rates share the common formula. Even my laziest student Nozadze is well aware of it. According to these calculations, the prime factors are of economic character. Economic growth indicators are the leading and problematic in this case. The same is true on export volume, employment and inflation. However, Gel is stable. Do you think economists would believe if you have told them some time ago that emigrants keep Georgia’s balance of payments? They wouldn’t! They would start racking brains. Well, nowadays Zezva and Mzia send fixed 866 millions (this is an official data; unofficially it may be even double) working on fruits and vegetables in Vorkuta. Or Ia, cleaning a house in Athens in the morning and working in apple plantations in the evening. Everything is their fault. They send USDs out of there and even do not care. National Bank together with the stock exchange has to work hard on their sterilization and exchange. So, there is no demand on USD. Everyone wants Gel. Zezva’s and Ia’s relatives take control over the money, buy apartments and cause the price increase. This is why inflation is coming up to us in secret. It did not take place before. Aws on economics discussed it as a demographical problem and financial science did not take all the above said into consideration. I repeat, the Medici Effect lies in the following: you should be aware of everything, like Deviancy. You should control and monitor entirely everything…
Appendix:
I wouldn’t like to hide the following: Certain ‘serious’ attempts were made in Georgian printed media to explain Gel stability and balance negative microeconomic indicators’ influence on Gel exchange rate. For example, the article printed in ‘24 Hours’ newspaper (April 2007, #93 edition, business part) explains everything quite simply and blames those poor working migrants for everything. They have used a formula for internal monetary flow in currency circulation and somehow, for unknown reasons made huge mistakes (well, what can be done about it, it happens quite often while making deep economic analysis. 24 Hours make deep economic analysis quite ‘often’!?). Investment of USD 1, 65 billon, export of USD 0,5 billion, Auto export indicator grown with USD 0,25 billion, grants and subsidiaries of USD 0,5 billion, secret investments when agreement formula while purchasing and selling lands of property amounts to USD 1 million in transaction and 2 millions in cash – all the above mentioned missed while drawing up and calculating balance of payments (this is what you were actually doing, darling however, you haven’t used this term).
You see what a big mistake is made? This new researcher took advice of some genius and used a simple and classical formula:
MV= PT
M – Stock of money
V – Velocity of circulation
P – Price level
T – Physical volume of market transaction
The same calculations applied to sugar (however, my darling, 1 Kg of sugar costs 1, 3 Gel and its annual consumption is 180 000 tones) that overcoming trade deficit is possible by means of money circulation. Well, if the money circulates while import as well, it turns out that we don’t have any deficit. Maybe, everything may be. Especially now when all borders have disappeared. I like this courage in researches. Look, how well has the formula been drawn up – V=PT/m – or real and virtual hen. Do you remember that very scientific joke? Our friend’s Tedo Zhorzholiani’s son, Nika told his father in Tskaltubo while sitting at Easter table: Daddy, do you want me to prove you that there are two cooked hens on the table? Tedo did not resist and said: yes, son, maybe. But I’m going to eat this, real one. You can help yourself with the one you prove… and Nika was left hungry. Let’s be more optimistic, not put the entire fault on working migrants and USD 866 millions sent by them. The Medici effect and discovered synthesis are to blame. If you, my young researcher, have discussed this classical formula on the boundary and crossroads of sciences, everything would have been just fine. Maybe you could have even discovered our balance of payment and Gel exchange rate peculiarities (I emphasize Gel exchange rate). If you prefer the easier way of knowing Gel exchange rate, you can go to Nona at remains of Saburtalo market to buy Sulguni (cheese) for 13 Gel and hen for 20 Gel. There you’ll see!
You still don’t believe me??! I’ll provide example of Frans Johansson again. George Cowen, great American scientist, founded private institute in Mexico, Santa Fe where they apply mathematical methods while researching. Biologists together with economists and stock exchange market analytics carried out a research there to understand stock exchange brokers behavior while speculation agreement by means of mathematical methods. They have come to a conclusion that their behavior as well as evolution of financial strategies from mathematical point of view greatly reminded the formula by means of which biologists described ‘beast-sacrifice’ system population. One can get crazy!!! Discussing theoretical postulates makes no sense. Therefore, according to old postulates Gel exchange rate against worn out, exhausted USD that is really tired of diets, should be 1-22. Let’s not talk about Euro rate – 1-3.1. But no! These new crossroads and new scientific approaches Gel is becoming more and more stable. This is the world sensation. Defeating USD is not a new issue is economic theory, although such a great victory over Euro and winning the second score is really too much.
You may ask: what do Shakira and the Medici effects have to do with all these? Well, even we don’t know the answer to your question yet. We just suppose. Since the science, including economic science has completed its job and now everything is done on the boundary of sciences by means of synthesis, we have no idea on what’s going with Gel and therefore we are not able to explain it using traditional currency rate method. Moreover, even though inflation caused us, as well as NBG, troubles, they have increased registration percentage to 10. It happens while the whole world’s central banks decrease rates to save economics from recession and support production growth.
Our National Bank does not worry about production growth. It bravely increases interests, enters the market like a matador and sells Gel 200 000 each week. On the other hand, market volume is 4.5 billions. Well, what really matters is that it sells and percentage as well.
It is not easy to understand all this. Accordingly, we need to form a special institution on the crossroads of sciences and include anatomy in it. Microbiology and country studies would be a nice idea too. It would help us to understand peculiarities of Gel’s such strange behavior. It should be done as soon as possible or in June and in August Gel may go back to its usual clinical situation. 2.2 exchange rates will become a subject of a dream. Since, of course, Euro-obligations do not introduce asymmetrical changes in accordance with fractal geometry and do not leave Gel again on a high pedestal.
The world and especially science has changed a lot. After joining finances and biology with mathematics, the border line has disappeared. I agree with Thomas L. Friedman. Do you?