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Understanding REAL ‘wealth’ vs. IMAGINARY ‘wealth’!

September 4, 2013

Today’s markets are really absurd and unreal in that all trading involves mostly ‘imaginary’ transactions. What do I mean? Visualize our trading system today. We now have high-speed computers (and smartphones) as our medium for trading nationally and globally. Then we have ‘virtual’ (imaginary) currencies for trading units. This means that traders (all around our planet) are trading within their ‘imagination’ (their inner consciousness) from moment to moment in real-time. There is no physical reality to what is occurring today within the trading venues (now mostly all electronic venues). Our currencies are virtual and imaginary and almost every item traded is now a virtual (within the computer screen) item. Stocks are now virtual, bonds are virtual, currencies are virtual, derivative contracts are virtual, options and futures contracts are virtual, and even much of the trading within the gold/silver markets (other than via coin dealers) involves the trading of virtual gold and virtual silver (ETF’s). Doesn’t  this seem absurd or unreal? Who understands today’s markets?

Today, I trade via my Smartphone. I send ‘money’ and pay bills via my laptop or Smartphone. The numbers in my account are virtual and imaginary. Most of us spend virtual money and create NO real wealth? Is this sound economics?

The whole purpose of economics was supposed to be a process of creating physical wealth for our planet. WEALTH creation was the primary goal and purpose of Capitalism. So what does the concept of ‘wealth’ mean today? How has this concept changed over the years? Traditionally, ‘wealth’ was the creation of material items from our planet and from our natural resources. Farm products were wealth (oats, barley, wheat, corn, etc.); food products were wealth (vegetables, fruit, bread, meat, etc.); industrial products were wealth (machinery, cars, lumber, steel, etc.); technological products were wealth (phones, ipads, computers, smartphones, etc.); textiles and similar were wealth (clothing, cotton, wool, leather, etc.); and finally natural resources were wealth (copper, iron ore, nickel, silver, gold, platinum, etc.). But what is NOT ‘wealth’ and what do most financial accountants record as our WEALTH today?

Economics started out as a profession which promoted and evaluated the creation of REAL wealth! Real wealth derives from our natural resources and consists of food, clothing, shelter, transportation, etc. 

What we need to understand is that ‘money’ was not viewed as wealth by our historical economists (Smith, Marx, Mises, et al). Money was viewed as a ‘tool’ for valuing material wealth produced and created for our markets. Money was a ‘tool’ invented by people within the marketplace to serve as a measuring rod when exchanging wealth. Money allows wealth to be exchanged, transferred, and recorded…but ‘money’ itself was not viewed as wealth. Today, however, we trade currencies, stocks, and most financial assets via a virtual currency unit. Some traders spend all day trading ‘imaginary’ currencies via their computer strategies. Is any production (real wealth) created via all these computer trades and manipulations? I would suggest that nothing physical which could be viewed as real wealth is created by all these real-time trades within our currency markets. All that is traded are units of ‘imagination’. What an absurd financial system we witness today!

Our cities consist of buildings and personal property which is real wealth. Money was used as a ‘tool’ to help with this production of real wealth. Money, however, is not real wealth. Money serves to measure the real wealth which we create. Think of ‘money’ as a tool for the valuation of real wealth. Real wealth creates our prosperity!

Today I receive a social security deposit directly from our Treasury each month. This deposit is generated by an algorithm and the ‘funds’ deposited are derived mostly from Bernanke’s QE creations and other borrowed ‘funds’ from foreigners. No real physical wealth is created from all these virtual computer machinations/transactions which circulate from computer to computer. Today, my IRA account increases and decreases by thousands of virtual units (called dollars) in milliseconds with no real wealth generated for our economy. Today, money emerges from all the ‘imaginary’ trading being done in real-time via computer platforms/strategies and algorithmic generations (with no real wealth emerging). Currency traders are trading some $4 trillion of ‘imaginary’ exchanges daily with NO real wealth generated from all this creative computer activity. And then we have our accounting profession recording all this ‘imaginary’ wealth as part of Gross National Product. What absurdity and deception!

Our Social Security Trust Fund has no real reserves today. 10,000 new recipients qualify for S.S. every day…yet there are no reserves for payment to recipients. Money must be created ‘out of nothing’ to fund this entitlement. Is this an operation which contributes to the real wealth of our economy?

Economists call all this ‘imaginary’ wealth the ‘Wealth Effect’. When my house (property) value increases we call this appreciation in value. We assume that this ‘imaginary’ increase in virtual dollars means a growing and prospering economy (real estate values have increased some 15% in my area). When I look at the stock market fluctuations and the increase in the Dow Index for 2013 (15%), we are supposed to assume that our economy is growing and the American people are prospering. Yet most of this increase in the Dow and the other stock indices is a result of mere QE creations by our Central Bank. QE, in reality, is ‘imaginary’ money created ‘out of nothing’. No real physical wealth is generated from this QE creation process…yet we are supposed to assume that our economy is growing and real wealth is being created as a result of these ‘imaginary’ operations (processes). What absurdity and deception!

The Wealth Effect derives from mathematical calculations…often with no real physical wealth being generated. Appreciating values of real estate create a ‘wealth effect’ but with no increase in production of real wealth!

Real wealth creation is the purpose of economics…yet our measures of wealth deceive us. Our measuring rod is a virtual currency unit ($) with no substance and no existence within spacetime. How can ‘imaginary’ money work to bring us jobs, production, and a growing stock of real wealth? How can prosperity develop with all the ‘imaginary’ money which is traded and circulated with no tie to physical/material reality? Personally, I have not created one item of real physical wealth this past year. All my income and revenue has emerged from non wealth producing activities. How many Americans today live on food stamps, welfare, social security, and government programs where NO real wealth is generated? The number is huge (some 150 + million). Imaginary money allows us to purchase real wealth at Wal-Mart and other retail outlets, yet most who purchase create NO real wealth for our economy. What absurdity and deception!

Some 48 million Americans on Food Stamps (debit cards) do not contribute to the creation of real wealth! This also goes for some 62 million Americans drawing Social Security. Can everyone live on debit cards with only robots creating our real wealth?

Our economic system has evolved into a casino which resides within our metaphysical consciousness. Few, today, seem to be AWARE that our money is ‘imaginary’. Virtual reality tends to ‘fool’ the many into thinking that images within the computer screen are reality. Today, only some 4% of all money units in circulation (within the U.S. and the Western World) consists of paper units and metal coins. The remainder of 96% is virtual/imaginary and resides strictly within our metaphysical consciousness. We witness the ‘images’ of money within our computer screen. These virtual images deceive us into thinking that our money is real and tangible. In reality, however, most money, trading, lending, investing, speculating, and accounting numbers are circulating within the billions of computer screens around our planet. None of these numbers EXIST as physical items. All is imaginary and resides within our consciousness! What absurdity and deception!

Money emerges from our Consciousness and then we witness images within our computer screen to represent our imaginary wealth. Pull the plug on the computer and all our money disappears. We can not ‘eat’ the images within our computer screen. Imaginary (virtual) money derives solely from Consciousness. This is NOT real wealth!

The first item of real wealth was probably BREAD. I can live on ‘bread’ and bread products! Real wealth is OUTSIDE our consciousness. We need to differentiate between ‘imaginary’ wealth and ‘real’ wealth!

In conclusion, we can say that we live (today) within our metaphysical consciousness and most people are unaware of this reality. Real wealth, however, is OUTSIDE our consciousness. Farm products are the original items of real wealth. Human Civilization started within a farming environment. Money was created to serve as a tool for the measurement of ‘value’ and real physical ‘wealth’ was VALUE. Today, we create mostly ‘imaginary’ money and ‘imaginary’ wealth and call this operation Capitalism. All our DEBT is also within the computer screens around our planet. All this DEBT is ‘imaginary’ and resides solely within our consciousness. We live with ‘imaginary’ debt and imaginary money. What absurdity and deception! Enjoy! I am:

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