I’ve begun to think of money as a “virtual system”. I have not seen anyone discuss it as such. I come from a systems engineering/administration background and I tend to look at everything as system, from human interaction to money to knowledge and psychology.

My friend keeps saying the system will come crumbling down around us, that the US will fail, that we will not be able to recover and that we have not paid for our sins. He may very well be right. Except it feels as if something different is afoot. And my question is, why hasn’t it happened yet? He often points to “market manipulation” as if some invisible hand and a bunch of plutocrats can actually just move the markets however they feel. I think if they were that smart they wouldn’t have let it fail in the first place. I have my doubts that anyone is smart enough to create widescale manipulation. There are too many factors, too many invisible threads. The butterfly starts a typhoon in China as the saying goes? So what is happening.

My theory is still undeveloped, but I am beginning to think of money as virtual and quantum. Our perception changes money. Our view of money changes money. Of course there are concrete underlying factors in economics, like production and supply and demand. But I am beginning to think they are not the whole story. They are like a cluster of commodity hardware that super computers run on. They are not the supercomputer. The software on top of them is the supercomputer. Many, many pieces of the underlying hardware can fail and yet the system keeps running. Of course, all the hardware can not fail, but tons of it can wink out of existence and the computer keeps running, if at a reduced rate. On top of this hardware can be a series of virtual machines that act as if they are real hardware, when in fact, they are not. They only appear that way to a user. I am beginning to think that money acts this way as well.

Why do we look at consumer sentiment? Because how the consumer feels is how he acts. Perception is reality, in many ways. How we see money effects how it works, how it flows, how it changes.

Money can be manipulated changed by our thinking and feelings about it. You can’t wish for more money and get it, but you can decided to spend or hold on to it based on how you feel the world around you is behaving. The markets act this way as well. There is nothing rational about them at all. Bears kept asking, why is the market rising. Simple. People wanted it to. They looked at their money dwindling and said, well stocks were once here, they are now way down here, they must be undervalued. Whether they are or not is totally irrelevant. The perceived them as undervalued and thus they were.

And since we are based on a service economy, 80% or so, how we feel directly effects what happens. If I feel the economy is getting better and my future looks bright, I go to restaurants and have a cleaning lady. If not, I cut back. In older times, where everything was based on food and production, any shortfalls were real, rather than perceived. If I did not have enough steel, I was in trouble. If there was a drought, we were in trouble. Now the food supply is so highly tuned and the production supply so highly tuned that it can switch on and off like a light, at will. It is no longer the thing that drives us down. Our machines tend to our food and make sure they are watered perfectly, etc. But in a service economy perception matters more and hence money becomes quantum. How I feel directly effects how many restaurants close their doors or add more chairs.

Anyway, I am still working this out, but these are my first posts on the subject. More to follow, here or elsewhere.

Thoughts?

Michel

The Ingenesist Project has published a series of articles called the Next Economic Paradigm:

http://www.ingenesist.com/iec-101

In short, human knowledge is formatted as a financial instrument using social media as the operating system. Human knowledge becomes tangible outside the construct of Wall Street and inside communities. Factors of production are social capital, creative capital, and intellectual capital. Information, knowledge, and innovation are mathematical derivatives in an algorithm that defines a business method for generating value. A knowledge inventory samples knowledge assets on a bell curve for diverse communities. A percentile search engine returns the probability that combinations of knowledge assets can execute specific business objectives. Where innovation is predictable, cash flow is predictable. Where cash flows are predictable, they can be combined in diversified packets to investors. In effect, the innovation bond will become an innovation backed currency that replaces the dollar, a debt backed currency. Innovation will reflect social priorities rather than Wall Street priorities.

Please don’t flame me until you’ve read the articles. Again, thanks for asking.