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New Definitions for our New Global Markets!

September 23, 2012

We need to rethink our monetary definitions to understand today’s markets!

Our economic text books are mostly outdated and inappropriate for today’s markets. This has resulted from the major changes in the nature of our money units and the overall global changes which have occurred in recent years. We now live within a wired global economic system which allows consumers, investors, and traders to affect change via their realtime monetary decisions. Let’s think about the following definitions as more relevant for today’s global economy:

 1. Money:   units of consciousness derived from the mind of key policymakers and expressed as digitized ‘numbers’, ‘names’, and ‘symbols’ within the computer screen. Comment:  money is no longer a material thing or a physical unit as in prior periods of history. Today, money is derived mostly from the consciousness of our Central Bankers (and their surrogates) and then actualized within our computer screens for further transmission and distribution.

2. Dollar(s):  a ‘name’ and ‘number’ derived from our consciousness and expressed with mental symbols such as $1.00, $5.00, $10.00, etc. Comment:  our ‘dollar’ is no longer a material or physical item (with the exception of some 4% which still circulates via paper notes and metal coins). Today, some 96% of all money transactions are virtual and/or images within our computer screens. Dollar units are created ‘out of nothing’ (mostly the consciousness/mind of our Central Bankers and their surrogates). Today, our ‘dollar’ is a mental abstraction.

3. Consciousness:  the invisible/inner/psychological part of human beings. Comment:  philosophers have labeled this part of man with names like ‘mind’, ‘spirit’, or ‘ones inner being’. Most of Science describes this part of man with the word ‘consciousness’. All money units (our mathematical numbers and currency names) originate within the ‘consciousness’ and/or ‘mind’ of the creator prior to digitization within the computer screen.

4.  Inflating:  a word which describes the excessive increase in money units within an economy (given a specific price level) which then allows consumers and traders to bid-up prices for existing goods and services (above the current level). Comment:  inflating (of currency units)…may or may not cause price ‘inflation’ depending upon how the market participants spend these new units. Our Fed is the main manipulator of money supply issues within our economy.

5. Inflation:  a word which describes the ‘result’ (expressed in currency units) which occurs when consumers, investors, and traders bid-up prices of goods and services within the overall economy. Comment:  inflation refers to the ‘general overall price levels’ of all goods and services within an economy. Inflation does not refer to an increase in specific prices for specific commodities or goods. An increase in the ‘price’ of one commodity (say oil or gas) does not mean that the overall price level of all goods and services will increase. Inflation refers to the ‘overall’ or ‘general’ price levels from a prior point in time. The application of new money units to the purchase of new goods and services creates the ‘result’ that we call ‘inflation’.

6. Deflating:  a word which describes the process of removing money units from the general markets or decreasing the velocity of money units within an economy. Deflating will eventually create an environment which leads to Deflation or a general decrease in ‘price’ levels for goods and services. Comment:  an environment where consumer and investor DEMAND (for the existing inventory of goods and services) are reduced significantly…can lead to Deflation even though the overall money supply is increasing within the banking system (this situation is prevalent today within the USA and European markets). Money units are being created by the Central Banks but these units are not finding their way into the overall markets (for consumer goods) thus not creating any meaningful price inflation.

 7. Deflation:  a word which describes the ‘result’ (expressed in currency units) which occurs when consumers, investors, and traders lack the ability to bid-up prices (for goods and services) in the overall markets. Comment: price deflation has recently occurred in most real estate sectors as prices have declined from an over-supply situation…and a lack of effective demand from consumers and investors for the existing housing inventory. Inflating the overall money supply (creating new and excessive money units) within the general markets often will reverse the result called Deflation. The QE policies of Bernanke and Company are meant to reverse general Deflation within the markets. So far, however, the QE policies of Central Banks have not stopped the general overall deflation which is occuring within the consumer markets.

 8. Value:  historically the concept of ‘value’ is estimated by measuring another good’s value in terms of some ‘standard’ of value (the officially adopted money unit of a nation). Today, however, ‘value’ is derived subjectively by traders in the marketplace via a money unit with ‘no’ value (our dollar). This means that all ‘values’ today are subjective and/or imaginary and constantly changing. There are no fixed or stable ‘values’ (prices) in today’s marketplace. The implications of this factor creates a ‘short’ term mentality among most traders, investors, and lenders.

 The above economic words have acquired new meanings as a result of the changing monetary system which we now experience. The nature of our money units are now mostly ‘psychological’ and the transmission of these units are within a new ‘virtual’ monetary environment (called the computer screen). Digitization and computerization of our monetary system has created these new definitions within our economic system. Gradually, new words and definitions emerge as new technologies change our monetary environment. This process is relentless and continual.

Watch the markets for new changes in coming days and months. I am:

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