Civilisational Wealth, Economics, Economy 2.0, Money, Thinking Money

Economics for a civilised world – Part 3

Steve Kelsey

Money = Imaginary Wealth

Money is potential or imaginary wealth (iW). Money is variously described as a credit or an IOU for resources or the labour that converts resources into wealth. Note that the terms ‘resources’ and ‘labour’ are a convention and are colloquial synonyms for matter and energy intelligently directed by the labourer.  

Money is an invention and has no objective reality. it cannot be assigned a value until until it is converted to real wealth. This is counter to the convention where money is believed to denote value, but money has value only in relationship to real wealth. Money was reinvented many times all over the world. Money is a form of virtual wealth that can be traded for the real thing  at a future date. In this sense money is future wealth, but to be realised the virtual wealth has to be accepted by any provider of real wealth. The acceptability is governed by the wealth provider being able to repeat this process with a third party. Elaborate systems have evolved to ensure that virtual wealth maintains its value over time relative to real wealth. 

This value is set by the transformer function of price. We achieve the conversion of imaginary wealth to real wealth through this transformer function. 

The Price Transformer

The price transformer establishes the value of imaginary wealth,  relative to the absolute value of real wealth.

The price transformer collates and balances all the factors that need to be balanced to establish the price, market scale, rarity, marketing premiums ( brand value, advertising, promotions), consumer price sensitivity. Many of these considerations are entirely subjective and it is normal for a price assigned to a unit of  wealth to fluctuate significantly e.g. a barrel of oil. Thus there is no objectively measurable relationship between price and real wealth. 

Summary:

  • Money is a metric, a form of measurement, and has no direct correspondence to real wealth, which is the physical product of applying intelligence to base matter.
  • The measurement money represents is volatile and formed subjectively, it has no objective physical reality.
  • The Price Transformer is the function that provides money’s value relative to a quantity of real wealth at a given instant in time.