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Our ‘Dollar’ is a mental Abstraction!

April 16, 2012

 Why is our ‘dollar’ an abstraction with no substance or value!

The above picture is a great representation of our ‘money’ today. Money today is a digital image within our computer screens. Some 96% of monetary transactions are now done electronically and the electrical charges which send digits from computer to computer represent our global monetary system today. We all visualize the above symbols as we think about money. Each symbol ($, etc.) represents a unit of money. Our dollar is now a mental abstraction ($1) which is distributed electronically via our credit cards and via on-line cyberspace storage. Most of us now have our IRA or 401k accounts on-line. Our investment and savings accounts are now stored in cyberspace. Money is rapidly becoming a total mental visualization with no physical substance. Many call this our global cashless society. Is this a sound and viable monetary system going forward?
I would suggest that this type of monetary system is totally subjective, imaginary, and psychological. The units we use for ‘money’ are abstractions (derived from the MIND or CONSCIOUSNESS) with no material substance involved. This type of money is similar to mathematics. Plato defined math and numbers as units of consciousness. Math is great for calculations…but is it great for our MONEY? The key concept to understand is that ‘money’ needs to represent VALUE…and ‘value’ can not be measured (objectively) with a subjective number and symbol.
History and human nature demonstrates that people need to VALUE goods in the marketplace (say a loaf of bread) with some thing that has objective existence. Silver coins can serve as a ‘tool’ for valuation of other things. A paper note (if defined and backed by some thing of value) can serve as a ‘tool’ for objective valuation. Actually, any thing which people agree upon can serve as a ‘tool’ for the valuation of other goods or things. Money, historically, has emerged as a proxy for the valuation of goods in the marketplace. And ‘money’ has always been some THING which people view as having substance or materiality. This materiality allows us to measure the VALUE of other things (goods)…somewhat objectively.
Our current digital money units, however, are no thing units and also are created subjectively. This means that ‘prices’ and ‘values’ are given a NUMBER (say in dollar units) but this number is really meaningless as a measure of VALUE. This situation creates DISTORTIONS in all ‘prices’ in the marketplace and this leads to continuing volatility and uncertainty in the valuations of all goods and services (as we witness in the marketplace today) . Money, in reality, is not real economic WEALTH (the real goal of economics). Rather, ‘money’ is merely a proxy used (a tool) for deriving an objective VALUE of the good.
Capitalism is based on ownership of property and then the exchange and valuation of goods…and in-ground natural resources. Capitalism demands that goods be produced and valued. Also, if Capitalism is to work over the longer term, it also demands that ‘values’ of goods (say houses) have some stability over time. How can long-term mortgages be made if ‘values’ have no objective reality or no objective stability over longer time periods? Digital money units promote short-term investments and short-term thinking. This type of thinking can not lead to sustainable Capitalism.
In conclusion, money today has evolved into imaginary digital units (electrical charges within our computer screens) with no objective stability over time. What is a ‘dollar’ today? Does it exist in space and time? If not, how can it serve as a proxy for value? How can a mental abstraction (our current digital dollar) which is derived from the consciousness of Central Bankers (and then ‘typed’ into a computer screen) serve as a viable longterm monetary unit? Think about the nature of our money unit today! It’s totally subjective, psychological, and meaningless for longer term valuations.
This type of money can not work for any type of real Capitalism, viable investments, or longer term valuation of assets. That’s my missive for today. Think about the goals of Capitalism and the purpose and role of money within this type of system. We need to either have NEW money (which we all agree has value) or live with NONE (no money). I see no other alternative! The End!
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