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Attn: Members of Congress…Money is no longer a Commodity!

July 21, 2012

The confusion over ‘what is money’ seems to be an issue within our Congress!

During a dialogue between a House Member and Chairman Bernanke at the recent Federal Reserve report to Congress, this member referred to money as a commodity which is administered by the Fed. How many additional members of Congress are confused on this issue? Is money still a ‘commodity’? I don’t think so! Today, our money units should be viewed and labeled a non-commodity. This confusion also permeates many textbooks that discuss money and finance. We now need to re-think our definitions and ideas about ‘money’ to reflect current realtime reality.

If we go back to the start of our ‘dollar’ and all our original money concepts, the language that emerged was that our ‘money’ was a ‘commodity’. This language was valid up until 1973. With the emergence of the ‘floating dollar’ in 1973, however, money became merely a mathematical ‘number’ (the weighted average of some six fiat currencies). The dollar index emerged and today our ‘dollar’ has become mostly a ‘name’ and ‘number’ within our consciousness (what I call a ‘no thing’ unit). The picture below reveals what our money was conceptualized as when it was labeled a ‘commodity’.

Additional items which were called ‘commodity’ money historically were items like: silver coins, tobacco, rice, cotton, wampum, deer skins, etc. All these items were viewed as things of ‘value’ in select markets. Any ‘thing’ can emerge as a money commodity if people accept the ‘thing’ as an item of ‘value’. This makes all ‘money’ a proxy for the concept we call ‘value’. Paper money emerged as a ‘commodity money’ in the minds of most people as governments created these units (where some of these units could be redeemed for a thing of ‘value’). After President Nixon closed the gold window in 1971, paper notes were viewed as a ‘commodity money’ by most economists and most financial traders (even though these units did not represent any ‘thing’ of real ‘value’.

After the closing of the gold window on August 15, 1971, the new regime which emerged was called the Floating Currency System. This name does not fully explain what happened, however. In reality, our money units (dollars) became ‘no thing’ units. No thing units should not be viewed as ‘commodity money’. With the emergence of our computer technology most paper notes (printed by the Bureau of Engraving and Printing) were no longer necessary. What emerged is our ‘digital dollar’. This dollar is a virtual unit which appears strictly within the computer screen. Cyberspace now stores some 96% of our money units with 4% being printed notes and metal coins. We now live with a non-commodity money unit for the majority of all transactions. This image reveals our new non-commodity money units.

 What has evolved within the past 40 years is the devolution of money from silver/gold to paper notes to numerical numbers and symbols. The idea of ‘commodity money’…which many still think of in their minds…is no longer a reality today (nationally or globally). How many House and Senate members are currently deceived or unaware of this change in our money unit operations? What our Chairman of the Fed and his FOMC committee are now doing is what Ron Paul calls ‘creating money out of thin air’. And the definition of  ‘thin air’ is really the same as creating money ‘out of nothing’. And ‘nothing’ or ‘no thing’ is really creating money from the ‘consciousness’ of Bernanke and Company via the digital computer. Who is aware of these changes in our money units and the operations of our policymakers at the Federal Reserve Bank? We now need to THINK of our money (our dollar) as a ‘no thing’ unit (96% of our money units are now imaginary units). New credit money lent by our commercial Banks now represent units created from the ‘consciousness’ of the lender (imaginary money). Can this last? History says NO!

 Get the message out to our Congress members that our real problem is our MONEY and its meaningless nature! History shows that ONLY commodity money has any significance or perceived ‘value’. Digital, virtual, imaginary money units can not work as meaningful proxies for VALUE. Stable ‘prices’ can not be maintained given this type of money units. This means that volatility and flash crashes and price distortions will continue until the entire SYSTEM breaks down. We witness the start of this breakdown now. Prepare for more breakdown in the coming months and years. Capitalism can not survive with ‘no thing’ or ‘non-commodity’ money! THIN AIR MONEY IS IMAGINARY!

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