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The ‘Foundational’ Concept of Economics, Money, Banking, Finance!

January 14, 2014

Few students of economics and/or finance professionals understand the core (foundational) concept of Capitalism. There is a reason for this lack of understanding. This concept (at the core) is invisible, non physical, mental, metaphysical, and spiritual. When I teach about this concept few (attendee’s) can define the concept in objective language. There is often disagreement about the meaning and reality of this concept. So what is this foundational concept that few discern or understand? Let’s ask a few questions?

1. If there is no money or currency and we desire to exchange goods (products), what concept emerges in our metaphysical MIND?

2. Is this concept a ‘thing’ which EXISTS within observable reality?

3. Can this concept be objectified in some manner?

When I exchange my eggs for your loaf of bread, what is the issue that we need to resolve? The core (foundational) issue is the concept of VALUE. So what is ‘value’? Where is ‘value’? Does ‘value’ exist within observable space/time? Give some thought (right now) to this issue of VALUE. Can you describe it, define it, and/or locate it? If not, why? Every transaction within Capitalism is based on this important concept. We deal with this concept daily, yet FEW understand this concept and FEW can define it objectively. After some 45 years in the Valuation Profession, I have discovered that less than 1% of my clients and less than 2% of all educators (within the profession of valuation) understand this ‘tricky’ concept.

The reason for this lack of understanding is that this concept we call VALUE (does not exist). It is really an illusionary concept of the MIND which is much like the ‘Tooth Fairy’ or ‘Santa Claus’. There is no such ‘thing’ as VALUE within observable reality. There is no ‘thing’ to find, locate, or discover. VALUE is similar to the QE dollars ($$$) which Ben Bernanke derives from his CONSCIOUSNESS. It’s a delusion, illusion, fantasy, phantom of our thinking which we accept ‘on FAITH’ (as having meaning). So how do we deal with this concept so that exchange, trading, buying, selling, lending, investing, speculating can occur? Think about some item that we could INVENT to serve as a PROXY for this phantom/illusionary CONCEPT?

What has happened historically is that people in the marketplace (it all starts with Barter) play with various alternative items which are traded until ONE unique item is discovered that most people (in the marketplace) DESIRE as a PROXY (or substitute) for VALUE (our phantom of the Mind). If we review all of history we can discern that people have CHOSEN such items as tulip bulbs, wampum, cowry shells, beads, nails, deerskins, beaver skins, copper, iron, silver, and gold (to name just a few items) as this PROXY for VALUE. Anything physical can work within a Barter environment for this PROXY. I just read where Russia and Iran have agreed to Barter oil for farm products (this negotiation will require serious thinking about this phantom concept that we call VALUE in Exchange).

What we need to understand is that the CONCEPT of VALUE is foundational to all trading and exchanging within our marketplaces.  What we choose for our PROXY (substitute) is also foundational. History demonstrates that most people within the marketplace have mostly preferred the precious metals as their PROXY for the phantom concept that we call VALUE. Americans chose SILVER as their foundational PROXY way back in 1776 – 1792. Thomas Jefferson observed traders in the Colonial marketplace and noticed that these traders mostly preferred SILVER coins as their proxy. T.J. then decided to choose SILVER as MONEY for Americans (gold was chosen secondarily). This choice (of silver) created our Money item and then our Currency item (the dollar) came next.

Chosing Silver, however, is only one step in the process of objectifying the phantom concept that we call VALUE. We must also specify ‘how much’ silver should be traded or exchanged for goods within the marketplace. This process of ‘how much’ can be objectified if we choose a CURRENCY unit to imprint (engrave) on each quantity of SILVER (our money). If we DEFINE a currency unit (say ‘dollar’) as 371.25 grains of silver, then we have the foundation for our PROXY (value in exchange). We now have a minted COIN (with 371.25 grains of pure Ag) and also a NAME for this specification. The ‘name’ is our currency unit (for Americans this is the Dollar). Notice the details of this process which resulted in our PROXY for Value. These details are very important to understand!

The foundational CONCEPT of trading is the phantom concept that we call VALUE. Since this concept is a phantom (illusion of the mind) we need to OBJECTIFY this phantom by choosing some physical good/commodity/item which people DESIRE as a substitute. For Americans this was SILVER (a minted coin) which became our MONEY (and proxy for value). We then chose a CURRENCY unit (called it Dollar) and defined this ‘name’ in terms of the Money item (silver). The result was a definition of 371.25 grains of pure Ag…equal to ONE DOLLAR. We could now mint coins from the metal called SILVER and assay the silver so that a specific coin would contain precisely 371.25 grains. We would then officially call this PROXY (for value) by the name DOLLAR. Notice these details!

What a ‘tricky’ process this all became so that we could trade, exchange, buy, sell, invest, lend, and speculate with this creation…so that phantom ‘values’ could emerge’! The foundational concept of all economics, finance, and investing is this phantom that we call VALUE. Value does not EXIST in reality and Value can not be located or discovered within our observable UNIVERSE. Nonetheless, we humans create substitutes called MONEY and CURRENCY so that we can pursue Capitalism as a system and philosophy for our lives. We might say that we have a RELIGION called Capitalism derived from phantom concepts of our Consciousness (mind). The core (foundational) concept is the phantom that we call VALUE. Who understands the religion we call Capitalism?

If we fast forward to 2014, we can witness not only the phantom of VALUE (which does not exist) but we can also witness the phantom of our Dollar (now derived from banksters consciousness) as another phantom of our Consciousness. We can witness digital (virtual) currencies which do not exist (as they are merely ‘typed’ into the computer screen as units of information). We also witness phantom gold trading, phantom silver trading, phantom futures trading, and phantom derivative agreements. Our entire marketplace has evolved into mostly a PHANTOM experience that we view within our INNER consciousness (mind). What a mystery all this becomes as we all live ‘on FAITH’ and within our metaphysical consciousness for most of our survial needs. The Spiritual realm has emerged within economics and few are aware!

What a world which we live in! Who discerns what is really happening! Who wants to understand all this fantasy and illusion? It’s all necessary for our survial as this is what we humans have created! Are new alternatives emerging for our future? Take some time to review this missive for your own philosophical contemplation. Enjoy!

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One Comment leave one →
  1. January 15, 2014 9:43 am

    Hi Don

    I have an idea for a Christian alternative to the ReverseMortgage . Please call me.

    Your friend Ray Morse Jr 207-323-4207 leave a voicemail

    Sent from my Verizon Wireless 4G LTE Smartphone


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