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Financial ‘ideas’ that few understand!

February 5, 2013

Question #1: Does ‘money’ exist in our space/time universe?

Answer: No! Money is ‘invented’. Many items from nature have been invented and used as money, including: tulip bulbs, cowrie shells, wampum, tobacco, iron, copper, silver, and gold.

Question #2: What is the purpose of ‘money’?

Answer: Since barter is difficult when items differ in ‘value’, money serves the role of measuring ‘value’. Also, ‘value’ is subjective and a money item like a silver coin is objective. The silver coin serves to objectify ‘value’ for buyer and seller.

Question #3: Does a money unit need to be defined to serve as a measure of ‘value’?

Answer: Yes! If silver is chosen by the marketplace to serve as a measure of ‘value’, then a clear and precise definition allows the mint to create a coin that everyone views as valid and trustworthy. The American silver dollar was originally defined precisely as 371.25 grains of pure silver. This precise definition was derived from an assay of the Spanish silver coin which Colonial Americans viewed as the best measure of ‘value’ in the marketplace. The Coinage Act of 1792 created the American dollar as our basic unit of money and our money unit had some legal definition until 1971.

Question #4: What is a virtual dollar as compared to a paper dollar or a metal coin?

Answer: All money units have been physical items since the dawn of monetary history. With the invention of the electronic computer, however, our money units have transitioned from physical items (paper or metal mostly) to virtual units. Virtual dollars are what we observe within our computer screen. These units are non-physical (derived from information theory called bits and bytes) and are then originated by typing numbers into the computer screen. The bits/bytes create the virtual numbers as photons of light and frequency waves transfer signals from computer to computer. Virtual units appear to be physical as we observe an ‘image’ in the computer screen and observe numbers in our computer accounts (IRA, Checking, Investment, Forex, etc.). In reality, however, virtual money units are illusionary abstractions that have no physical existence. A good word for a virtual money unit is the word ‘imaginary’.

Question #5: What percentage of our money units today are virtual?

Answer: Some 96% of all money transactions are now done electronically. Credit and Debit cards are electronic transactions. Practically all Social Security payments are now direct deposits from the Treasury’s computer to the recipient’s bank computer. All on-line money transactions are virtual money transactions (bill pay, pay pal, Fed wire, stock speculations, bond investments, forex trading, and all Central Bank clearing transactions). Virtual money creates a ‘centralized’ administration operation. Central Banks now operate as ‘centralized’ institutions which are outside of political real-time control.

Question #6: What do the words ‘created out of thin air’ mean?

Answer: Today, our Central Bank called the FED creates our money units (our dollars). Since our money unit today is a mental abstraction (a symbol $ within the mind), new money units originate within the mind of FED policymakers (initially) and then new units are created by a decision of the Federal Open Market Committee. This means that all new money units today derive from the ‘consciousness’ of these policymakers. This makes our ‘dollar’ a unit of consciousness. Money does not exist in space/time…as in all prior periods of monetary history. The words ‘created out of thin air’ means that our money is created from the ‘consciousness’ of key policymakers at the FED. QE or quantitative easing is an example of this process.

Question: Does our Central Bank actually ‘print’ money today?

Answer: No! We still have a Bureau of Engraving and Printing in Washington D.C. which prints paper notes. This printing is mostly (some 90%) for the replacement of existing notes which wear out. All the paper notes now in circulation (worldwide) represent only some 4% of the money that circulates (flows). The remainder (96%) are our virtual units within the computer screen. Credit and Debit cards are instantly converted into virtual money units with the swipe of a plastic card when a purchase is made. You and I do create money ‘out of nothing’ when we use our credit cards for a purchase.

Question #7: Philosophically, are numbers (1, 2, 3, etc.) things that exist (physically) or are numbers (math) units of consciousness (no thing units)?

Answer: In reality, numbers (also called math) are ideas of the mind. Keynesian economics uses math as a form of logic for all monetary transactions. This philosophy of Keynesianism (modeled from math formulae) is not real science. Math and numbers are units of the mind and therefore they are ‘imaginary’ units. The philosophy that we now practice for all our monetary transactions should be viewed as pure ‘imagination’ (a product of the human mind). Our money units are ‘imaginary’. Derivative calculations (Swaps, etc.) are ‘imaginary’. Forex transactions are ‘imaginary’. Virtual transactions of all types are ‘imaginary’. To understand the difference between imaginary money and real physical money purchase a silver and/or gold coin. Hold this coin in your hand and feel its physical nature. Now look within your computer screen and attempt to hold a virtual dollar. Is there a difference? This difference reveals the illusionary philosophy of Keynesianism and our math based economics of today.

Conclusion:

Watch the markets as the illusionary nature of the Keynesian philosophy will likely play out and become noticed by many astute observers in 2013. At some point down the road, the vast majority of people will recognize the ‘imaginary’ and ‘illusionary’ nature of our current monetary system. Illusion can only last as long as monetary conditions are viewed as positive. When (if) the stock markets crash, a new awareness will likely emerge. This new awareness seems to be growing slowly but continually. Watch and then think as an individual. That is my missive for today. I am: https://kingdomecon.wordpress.com. Enjoy!

3 Comments leave one →
  1. Laura Stein permalink
    February 6, 2013 3:29 am

    Thank you

    Like

    • February 7, 2013 7:08 pm

      Lewis: I am pleased that your are gaining some wisdom from my site. Thanks for your comments. D

      Like

  2. February 7, 2013 1:15 pm

    Dear Sir:
    I certainly want to thank you for your wonderful site Kingdom Economics. I ran across your old post Value is subjective. So true, I made my living for 40 years buying and selling real estate. I retired in 2005 because I could no longer determine what was going on with values.

    But most of all I want to thank you for introduction to Closer to Truth and your videos.

    Sincerely,

    Lewis Dozier

    Like

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