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April 29, 2018 | Money: before the Computer Age and After!

Donald B. Swenson: Born January 24, 1943, Roseau, Minnesota. Graduated H.S. 1961, Moorhead High, Minnesota. Graduated College 1968, Moorhead State University, Minnesota. Designated member of Appraisal Institute (MAI), 1974. Employed with Western Life Insurance Company, 1968 – 71; Iowa Securities Company, 1971 – 73; American Appraisal Company, 1974 – 81. Part-time teacher/valuation consultant/bartender, 1979 – 2008 (taught workshops at Waukesha County Technical Institute, Wi. and Madison Area Technical College, Wi.). Retired 2008 (part time teacher/blogger), AZ. Self educated economist/philosopher/theologian:

My son and I talked today about the issues of money and how these concepts have changed during my lifetime and his. If we assume that our computer age emerged in the 1980’s and 90’s, then we can use a date like 1990 as the date when computers, electronic money, and cyber objects emerged globally. Prior to say 1990, money was mostly an outer object (paper notes, metal coins, and certificates printed from paper). Bookkeeping was mostly a paper driven system. This world is now mostly over. Today, all is electronic and our world lives in cyberspace (the computer screen).


I like to think of historical money as being an OUTER object (like a paper note or a coin) prior to the emergence of the computer age. Outer means that our money was outside the mind. After the emergence of computers and then the connection of computers to form our internet, money was viewed as inner and it could not be held in one’s hand. All this changed since the dawn of our network of computers and these cyber digits which we now use for monetary transactions. The operative words in economics have changed as a result of cyberspace, the internet, the web, the cloud, and this concept called virtual reality.


Today, we live in a new world which is mostly invisible and which is electronic in nature. Computers rule the world of finance and the world of communication. This network of interconnected computers and smart phones (created mostly since 1990) has created a new world with new words and ideas. The nature of money has changed from outer objects to inner objects. Cyberspace emerged from connecting computers into a network of computers. There is no cyberspace without a connection of computers. I never heard this word until late in the 1980’s or early 1990’s. My first computer was purchased in the mid-1980’s.


We could say that our cyber money emerged from this connection of computers into a global network of computers. Cyberspace is invisible and non-physical but it describes what happens when computers are connected into networks. We can now create cyber digits (call these digits money) and use these digits to price all goods and services in our marketplace. Physical money (paper notes and coins) are no longer needed for commerce or for price discovery. We now live with invisible cyber digits as our tool for valuation of goods and services. Virtual money has emerged from the connection of computers into a network of computers.


If we disconnect our computers and eliminate this new cyberspace concept from our thinking,  then all our cyber money also disappears. Cyber objects (digits in the computer screen) can not emerge without a connection of computers to computers. Cyber money is virtual, artificial, and a product of this connection of computers to computers (and servers to servers). If the electrical grid is destroyed (via an EMP or similar), then all cyber money gets destroyed instantaneously. Today’s money is a product of computerization along with the utilization of the electromagnetic spectrum for its circulation. All this emerges from connecting computers into a network of computers.


The strengths of today’s digital world are speed, centralization of administration, and the abundance which emerges from associated technologies such as drones, robots, artificial intelligence, 3-D printing, and the automation of production globally. Abundance of goods is what I now witness everywhere. A nation like Japan is trying to inflate their cyber digits (money) to extreme levels (now for over 8 years) and still inflation is not occurring. Why is this so? My view is that abundance is now everywhere. Inflating the digit supply (money) has not kept up with the abundance of goods being produced for the global consumer.


Digital money can now be created in unlimited amounts and yet I witness no real inflation in prices (globally) from all the QE, lending activity, and Central Bank pump-priming. The inflation number is still low globally and in Japan it is mostly non-existent. Abundance is the reason and this emerges from all our automated production and the computerization of the distribution system. Digital money has not caused global inflation and it is unlikely to occur (with minor exceptions such as Venezuela). We live in a world of abundance (especially in the West) and this could continue for a season. Thanks to our new technologies.


The problems with a digital marketplace are many, however. Digital finance creates a centralized computer driven marketplace. Our Central Banks become the administrators of the system. A few elites who operate behind closed doors can now rule the entire world of finance and commerce. All Central Banks are now interconnected via computers and the administration of commerce is now mostly centralized and controlled by AI, robots, and computers. Automated trading is now the Standard. Central Bank monitoring of the global markets is now the standard. Computers rule over all our markets and over all price discovery.


Digital money and computerization does work for a season. We have witnessed some nine (9) years of market growth and asset increases to date. Central Banks and their interconnections have been the stabilizing factor (for now). The U.S. Fed, the European Central Bank, the Peoples Bank of China, the Bank of England, Bank of Japan, Central Bank of Switzerland, and the Bank for International Settlements, along with the International Monetary Fund, have all played a role in stabilizing our global markets to date. This will continue until it ends! The end is still future!


At some point the business cycle will prevail and a huge change in psychology will emerge. When trader confidence wanes substantially (due to whatever might happen) then we could witness the change that I have been writing about for 10 years. Our digital money system is actually rather fragile. This fragility will emerge when a serious correction arrives. This could happen in 2018, 2019, or 2020. The exact date is impossible to predict. So far our centralized financial system (computer driven) is working to prevent this outcome. But confidence will change at some point. Watch and learn. Enjoy for now! I am:

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April 29th, 2018

Posted In: Kingdom Economics

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