‘Virtual’ Exchanges (Let’s Understand this Concept)!
Today, our traders ‘exchange’ virtual symbols and ‘assume’ that these symbols represent some underlying ‘thing’ (collateral). Is this ‘assumption’ justified? Are ‘virtual’ symbols within our computer screen actually ‘representing’ some commodity or good that lives within observable reality? Could these symbols be representing ‘nothing’ but ‘imagination’? My prior missive entitled “What is PAPER Gold” outlines a scenario where traders confuse what is ‘virtual’ from what is ‘physical’. This happens mostly within our electronic cyber markets (which are now global and operating within cyberspace). Paper Gold is traded (as if it were real physical gold)! This distorts and rigs our markets! Price discovery is phony when trades do not represent the real good!
Symbols in cyberspace do not always represent an underlying commodity or share of stock!
The confusion over what is ‘real’ and what is ‘imaginary’ is often difficult to discern. Today, our stock symbols are virtual digits, our bond symbols are virtual digits, our commodity symbols are virtual digits. What we trade today are virtual symbols/digits…located within this Netherworld called Cyberspace. Cyberspace is really nothing more that an ‘extension’ of our consciousness. We witness this reality within our consciousness. So deception is everywhere today as many pundits and traders are unable to discern the difference between that which is ‘virtual’ (within cyberspace) and that which is ‘material/physical’ (within observable reality). Let’s set up a new virtual symbol for a good which I personally own (my car). We can then ‘trade’ this symbol as if it represented by personal auto. The virtual symbol is CAR! Let’s follow the logic!
My personal car or trading product. This is what can be traded with a virtual ‘symbol’ (CAR)!
I will also show you an ‘image’ of my car (see above) so when you trade this object/thing you can visualize the underlying collateral for a trade. Let’s set up an electronic exchange for my good (car) so everyone who has a computer and a trading platform can trade this symbol, called CAR. As you trade this ‘symbol’ you can bid the ‘price’ (my auto) UP and/or DOWN with your electronic trading. I will allow you to trade this symbol (CAR) as if it represented my personal auto and you can assume that delivery of this good would occur when a trade is completed. It reality, however, all your trading of this symbol, CAR, could be an ‘illusion’ as I have possession of this good and you are merely trading the ‘image’ and ‘symbol’ within your MIND (via your computer)!
Trading is now at the speed of light and algorithms execute most trades! Price discovery changes from millisecond to millisecond! Notice the above ‘tick’ chart and the price changes!
Who will actually get delivery of my auto/good? Could we trade this symbol (CAR) at the speed of light via an ‘algorithm’? Could we also set up another ‘algorithm’ as the counterparty (temporarily) to represent my auto (good)? Since trading is now at the speed of light how could I know WHO is actually taking ownership of my auto/good? Trading the symbol (CAR) may result in trades which never actually represent any underlying collateral (as trades are entered and cancelled at the speed of light). Is this similar to what is now happening within our global cyber markets? Who actually will get possession of my auto/good? Trades could continue and my auto/good may never leave my possession. What determines ‘price discovery’ today? All the trading activity may end up being mostly an ILLUSION (within one’s mind)!
Algorithms execute trades and traders watch the computer screen (why is this corrupt)!
Virtual trades are being executed today (electronically) at the speed of light, 24/7, within our global cyber markets. Most of these trades are exchanges of ‘virtual’ symbols (within the computer screen) and the ‘assumption’ is made that these trades are real…with delivery of the underlying commodity or share of stock/derivative taking place. Trades are made at the speed of light and executed with the ‘assumption’ that real goods and objects (physical wealth) are being exchanged. In reality, however, this is often an ‘illusion’ or ‘deception’. The virtual symbol being traded is executed by an ‘algorithm’ which represents the counterparty. This algorithm does not care about the real physical item underlying the trade. All that the ‘algorithm’ cares about is executing the trade (now a ‘virtual’ symbol) located within cyberspace. This creates a false mechanism for ‘price discovery’!
Traders watch the screen as trades are executed globally within cyberspace! All is now electronic! Symbols and digits are traded and prices get manipulated!
In today’s cyber markets we trade ‘virtual’ currencies (dollar/yen/pound/euro/etc.). We trade ‘virtual’ commodities which never actually exist within our space/time reality. We trade ‘virtual’ stocks (symbols) which may not represent the underlying (existing) ‘shares’ of a company. We trade ‘virtual’ bonds and ‘virtual’ derivative contracts (which may or may not represent anything real…say the real collateral underlying the ‘symbol’ being traded). In reality, traders are now trading ‘symbols’ as if these ‘symbols’ were actually representing real wealth and production. This is often NOT the situation since it is impossible to trade in milliseconds and then obtain delivery of the good. What happens is a ‘false’ price discovery which does not represent a real traders thinking!
Silver is traded via a symbol like SLV. Is there any underlying silver representing this ‘symbol’ (when a trade is executed)? Gold is traded via a symbol like GLD. Is there any underlying gold representing this ‘symbol’ (when a trade is executed)? What about oil or platinum or palladium? Do the symbols which I trade within the computer screen (now within cyberspace) actually represent real goods within space/time reality? How can a trade be executed within milliseconds represent ANYTHING real? How can an ‘algorithm’ which executes a trade and where the counterparty is another ‘algorithm’ actually represent any real WEALTH? All I am trading today are ‘symbols’ and ‘numbers’ (virtual units of nothing) and all this is executed within milliseconds. Computers operating at the speed of light execute nearly all trades today. Math and algorithms do the execution and symbols represent nothing real (as we all witness within the gold/silver markets today).
Trading of symbols may not represent anything real! Price manipulations are now ubiquitous! Can this system work for international trade (long-term)?
We live in a world called Cyberspace today as all our markets have become electronic and computer driven. Traders appear not to understand what they are trading as they trade mere ‘symbols’ and ‘numbers’ which often have no relation to any real physical WEALTH. Wealth are the goods and items which can be exchanged (physically) between various trading partners/nations. Oil is wealth. Silver is wealth. Gold is wealth. Farm products are wealth. Textile products are wealth. Most technology items are wealth. Buildings, homes, factories, autos, etc. are wealth. But are ‘symbols’ and ‘numbers’ (within the computer screen) WEALTH? Are virtual objects and images within the computer screen WEALTH? If we go back to Economics 101, we will discover that real wealth consists of material/physical products derived from planet EARTH. Give this some consideration when you think of today’s virtual markets!
An example of real wealth are all the container ships with goods to load and unload!
Wealth is what our economics profession and our monetary system is supposed to promote and monitor. Today, however, this is often not the situation. Virtual objects within our computer screens are traded as if they are real wealth…when, in reality, they are metaphysical units of nothing. Virtual objects are not within our observable space/time universe. Are you aware of this? Think on this word ‘virtual’. Think on this word ‘cyberspace’. Think on this word ‘symbol’. Think on this word ‘digit’. Think on this word ‘consciousness’. And think on this word ‘mind’. What is wealth? Wealth is what we eat, wear, drive, live in, and what we use to enhance our material well-being. Wealth is NOT virtual symbols within Cyberspace. Think on this for a few minutes! Enjoy! I am: https://kingdomecon.wordpress.com.