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Money and Prices – a creation of the human MIND!

May 16, 2013

Money does not exist in nature. Money is not a ‘thing’ to discover within our universe. Yet, money and prices are created to serve a role within a marketplace and for human commerce. People (with minds) create money and prices to facilitate trade and exchange. Trade and exchange provides incentives to create more products for the markets. Money and prices then create confidence in the process of trading and exchanging. Historically, people desired an item from nature to serve as a ‘standard’ of value for trading in a marketplace. This item was chosen because the marketplace desired this item and viewed it as having ‘value’ (within itself). This item then took on the ‘name’ of money.

Our Founding Father of money, Thomas Jefferson, observed that people in the marketplace desired particular  items as their standards of ‘value’. He concluded that a silver coin (the Spanish Milled Silver Coin) was the most preferred item for creating ‘prices’ in the marketplace. Once prices were created via the bidding and negotiating processes, these prices became reference points for all traders within a marketplace. This process then created further confidence in the overall exchange process…and also in the item chosen to serve as money. Confidence and success (along with stable prices) in the marketplace produced economic growth and progress for the society or community.

Today, however, our item of value (the money unit) for exchanging and for pricing goods in the marketplace has evolved into a distortion and an illusion. We no longer have a physical item of value for our money unit…and our pricing of goods suffers from this reality. Pricing of products today is subjective and volatile. We witness a good (commodity) like Gold going from $35/ounce in 1971 to $850/ounce in 1980 and then to $288/ounce in 1998 and then to $1900/ounce in 2011 and then to $1385/ounce today. Why is Gold so volatile in price? What we need to understand is that the pricing of a good, commodity, or service is a mental activity. The human MIND creates prices and values of all assets and products that are produced.

Today, the human mind (our Authority figures) have created ‘names’ like Dollar, Pound, Yen, Euro, Ruble, Yuan, Krona, etc. as mental names for our pricing unit. These mental ‘names’ then get expressed via a Number like 1.00 dollar, 1.00 pound, 1.00 yen, etc. These ‘numbers’ then get placed on items in the marketplace that are for sale to the general public. If we go into a Supermarket and observe all the items within this building we witness goods and products (objects of nature) that are being offered for sale. Where do the ‘prices’ come from for all these objects? What happens is that human beings label all these products with a mental price which we observe via a label placed on the item. This shows that prices are mental derivations which human beings create for marketing a product to the public.

When traders in the gold markets desire more gold products, they bid up the price of this item. This bidding creates the various prices we witnessed above. Prices can start at zero and increase to whatever the market will allow. A product like gold can start at a zero price, then get stabilized at $35/ounce and then increase and decrease via daily trading in the gold markets where prices get magnified and suppressed. There is no fixed price for gold today. Traders and the emotions of the trading community can create prices for gold which change by the millisecond today. This is caused by our high-speed computer trading and mathematical algorithms (formula for entering and exiting the market in gold shares and futures contracts).

Currently, most gold investors are witnessing a trend of price suppression in the digital gold markets. Since prices are now set via computer trading and speed of light transactions, digital prices can get suppressed for a time and then get magnified for a time. Prices and money today are units of emotional mental consciousness (expressed in digits within the computer screen). Emotions, deceptions, political rhetoric, fear, greed, and trader machinations (unique trading strategies) all move the price of gold from moment to moment (now mostly in real-time). We now need to think of money and prices differently!

The new technology which we call the computer and the internet has created a new world-wide trading market. This global market is now available to everyone via the internet. Personally, I now trade via a platform that allows me to speculate in virtual products globally. I witness the emotion of prices increasing and decreasing within seconds on my computer screen. Currently my gold share speculations are taking a huge hit downward. The price of digital gold (the ETF’s which are used as the reference point for the gold price) are being suppressed almost daily. This has caused me to experience a loss in my digital accounts of some 40% since the beginning of 2013. Am I concerned?

Not in the bit! I realize that the price of digital gold products will magnify at some later date when the emotions of the traders changes. Emotion does change as we are all human beings with MINDS. Our minds change in perspective from day-to-day. At some point (probably after the stock market bubble has burst) we will witness the magnification of gold prices to historic highs. Then some time later we may witness the prices of gold products being suppressed to near zero prices (as the dollar is replaced as our legal tender unit). Keep in mind that our legal tender unit is a mental unit. If the status of legal tender is removed and our dollar is replaced or eliminated, we could witness prices of a commodity like gold suppressed to near zero (in mental currency units).

To conclude, money today is a mental abstraction and prices are also mental abstractions. The digits that we observe in our computer screens are really just photon images (flows of bits and bytes which we call units of information). Money today is really a unit of information which is flowing through our computer screen and displayed as a numerical image(s). These money flows are mostly created by our global banking systems (fractional reserve lending) and via policy actions as our Central Banks increase digital units via their QE operations. Prices today are not stable nor can they be…given the nature of our money units today. Prices are now derived via the digital computer and emotional subjective trading. We now live in a NEW WORLD of wired markets and digital trading machines for the establishment of prices.

The following images may give you an idea of the NEW WORLD of money, prices, and trading:

The Human Mind creates MONEY and PRICES

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