Guest post from John Wilder at Wilder Wealthy Wise.
Dale: You know what the problem is? It’s a Ford. You know what Ford stands for? Fix It Again Tony.
Hank: Dale, that’s a Fiat.
–King of the Hill
If you have nasal congestion and want to blame the monetary system? Sudafed®.
In 2020, we’re pretty proud of ourselves for making use of virtual reality. We have students taking virtual classes while never leaving home. We have virtual assistants. Heck we even have virtual assistants for people that can’t spell, like that new one from Amazon®, Dislexa™.
As much as we think of virtual reality as a new concept, it’s not. Much of life throughout recorded history has been conducted using virtual systems. Some of them are common, like clubs. You’re either in or you’re out. The only thing that makes a difference is the virtual acceptance of others. You were either a Roman Senator, or you weren’t. You were a member of Legio XIII, or you weren’t. You were a Roman citizen, or you weren’t. Just because a virtual distinction of being in or out of a particular club has existed for thousands of years, don’t think that it doesn’t have significance.
The law is another virtual system. In this case, it exists so we just don’t go killing each other willy-nilly in a never ending cycle of vengeance. All that vengeance makes a great movie, but it’s pretty rough unless you have a lot of relatives. But through the invention of law, a virtual system, revenge violence could be avoided. We voluntarily gave up our right of vengeance to a virtual system so that we could have peace.
Another virtual system is religion. The exception, of course, is if your religion allows you to draw a series of weird sigils and glyphs on the ground and chant a mysterious incantation dating from the time the Old Ones walked the Earth and make a blood sacrifice. If you do that, I’ve heard it said you can summon my Ex-Wife. Nothing virtual about her, and all you have to do to get rid of her is give her half of your stuff. But most religions are virtual. Faith itself is a concept that is virtual right on the label. I’m not discounting religious experiences that people have, (having had profound ones myself) but the systems that are created are in large part virtual.
My relationship with my ex-wife is good. She texted me the other day: “Wish you were here.” She was at a funeral.
What are some other virtual systems we make use of? What about property lines, last will and testaments, corporations, and, gasp, even government? These systems have been around for thousands of years, and in the case of religion, certainly longer than that. But outside of religion, the biggest and oldest virtual reality system we interact with regularly is money.
Wait, what? Money is virtual?
Yup.
Money has always been and will always be virtual. “But what about gold, John Wilder? Gold isn’t virtual!”
Sorry gold is gold, and it’s not worth a lot unless people are willing to trade you something for it. Gold is just one way to represent it in such a way that it’s hard to fake and easy to divide. Lots of things have been used as money, from the reasonable (like gold) to the silly (massive coins of copper). One thing that surprised me in doing research for this post was that the oldest minted coins date only back to about 700 B.C., and were promptly left in car ashtrays all throughout the ancient world.
This coin weighs over thirty pounds, and was used by the Swedish in the 1700’s. To buy popcorn and a Coke® at a movie, it would take sixty of these coins. Thankfully, movies had yet to be invented.
There is historical evidence of using sea shells for money in Ancient Asia, Australia, Africa and Arabia and the Americas. Why? I’m assuming that was what the vending machines took, but I may be mistaken. Or maybe it was only used in places that started with the letter ‘A’? But, as you can see, money didn’t have to be gold, or even a coin. Money is what we believe money is.
Why does money being a virtual system matter?
Systems based on physical laws like gravity and entropy and time and mass are what they are. You can invent ways to “overcome” them, like an airplane, but as Chief Engineer Montgomery Scott taught us, “Ya canna change the laws o’ physics, Cap’n.” The systems are what they are, and ceasing to believe in the system doesn’t change it. You can’t click your heels to change dimensions and end up back in Oz or the Matrix®.
You heal cuts in the Matrix® by using Neo-sporin©.
Those real systems we run into are required (for the most part) to make our entire Universe run in a way that allows living things to grow. Change just a few terms, say, Pi=357, or Planck’s Constant=Pizza, and the Universe couldn’t have life at all. And they behave in rational (though sometimes complex) ways: it’s not like one out of twenty thousand times when you start a car all the gasoline doesn’t ignite at once blowing the car up, just because. I mean, if you have dirt on the Clintons or are involved in certain, umm, families that might happen but otherwise it’s a statistical impossibility. Real systems just don’t work that way.
But money? We made it up, so it can do whatever we all collectively agree it will do. And when our belief about those systems changes the entire economy can blow up in just a few days.
I don’t want to scare you, but bankers are messing with fundamental constraints on the monetary system all of the time in 2020. From 1787 or so until August 15, 1971, the United States operated on some sort of standard based on gold. The nice thing about gold was you couldn’t just print more of it. On August 16, 1971, the United States left the gold standard and had a currency backed by – nothing. Money was already a virtual invention, but Nixon went Full Mario Brothers™ on it. If you’re a banker, calling someone who plays video games stuck in a fantasy is a bit of hypocrisy.
If you’re really rich, you can afford two-ply.
A currency backed by nothing is called “fiat” money, which is Italian for “Fix it again, Tony.” No, wait, that’s a car. “Fiat” in this context is from the Latin for “let there be” as in “let there be money.” Since the United States dollar isn’t backed by gold anymore, it was just wished into existence.
Essentially, in 1971 the bankers exploited what a gamer would call a “cheat code.” In a video game, a cheat code might make you invulnerable, or give you infinite ammunition. That’s what this did – the printing of dollar bills was no longer constrained by how much gold the United States had. It now had infinite money.
But physical systems like gravity have been around since the Universe began. It’s well known, and people have been observing what gravity does since they were wearing saber-tooth tiger for evening wear and bathing once a lifetime whether they needed it or not. Gravity is a real system, and we can’t game it or pop in a cheat code. Because of that, it’s predictable – a black hole isn’t going to spring into existence for no particular reason the same way a cell phone won’t spontaneously assemble itself out of the spare silicon leftover from Kardashian butt surgery.
And the Universe would explode every twenty years.
Monetary systems don’t behave like gravity, they behave like a video game. Bankers can change the rules at any time, and I mentioned that bankers can and do drop in cheat codes. During the Great Corona Panic of 2020, they’re doing it weekly. They can also reboot the system – that’s what every country ever has had to do to end the hyperinflation that seems to nearly always eventually follow the introduction of fiat currency systems.
And that’s the problem. As much as economists would like to pretend that they know what happens when you apply cheat codes to the system, they really have no idea what will happen. It’s like when Albanian lawyers who have an office next to the JCPenny® have a broken copier. Oh, sure, they can take their hairy, greasy Albanian fingers and poke and prod the copier with their ballpoint pens, but it’s only going to fix the copier if they get miraculously lucky. It’s far more likely that their grunting and pointing and prodding with only a dim understanding of what gears and rollers are will cause the copier to catastrophically fail.
One time I found our copier full of peanut butter, which is weird. Normally it jams.
There’s nothing more pathetic than watching Albanian mall lawyers trying to fix a copier. Unless it’s watching the Federal Reserve trying to fix the economy that’s crippled by debt by injecting more debt. I mean, the Albanian mall lawyers can at least call a professional to fix the copier after they gum it up.
Who is the Fed going to call?
Sublime truth with sarcasm and wit. Love it.
Just Sayin’
Printing another $3 Trillion on top of the previous $4 T is pushing the envelope. No problem, the sound barrier is nothing when your target is hypersonic. We must get there before the Chinese come to collect on our dollar denominated debt.