It might be useful to consider further the relationship between the production of paper news and the production of paper money.
I observed that both paper money and paper news are forms of informational transaction. This might be more accurately described as the transfer of meaning. In this sense ‘meaning’ is the value measurement of information; Meaning is the unit of value of information because meaning transforms data into information and makes it valuable. The construction of meaning is exactly the assigning of value to data.
Consider hyper inflation in the money supply . In the traditional monetarist model (the one that has more or less taken over all mainstream economics), this is caused by an oversupply of money into the market. In other words Monetarists argue that the problem of hyper inflation and inflation generally is one of quantity. Actually the problem is one of quality. We can show this with the following:
There is a direct relationship between publishing an edition of a newspaper and publishing an edition of money, which is effectively what is done each quarter when the interest rate is set. The interest rate is news about how things are going to be according to a central bank and money notes carry this news.
Money published at 0.5% base rate is a different edition of money from that published at 1% base rate. Same ‘newspaper’, same publisher, but different news, different information, different headline.
Just as each particular edition of a newspaper contains information specific to a particular time and place (as I mentioned last time), the paper money note also contains information. I will describe the nature of this information below but for now lets stick with newspapers.
In the example of a newspaper, let us say that the edition of January 6 has the headline: ‘War Is Declared!’. And the edition of January 7 has the headline that ‘Peace Is Declared!’. Taken in sequence the meaning of these events is clear.
First there is a state of war, then there is a state of peace and the present condition of affairs is that of peace.
Now imagine that the newspapers in question were not dated January 6 and January 7 so that there was no way of telling which was the first headline and which was the second. It could be the case that war is declared and then peace declared or it could be the case that peace is declared and then war is declared. So in the first instance we are now in a state of peace and in the second instance we are now in a state of war.
Now let us say that an unscrupulous news agent receives both editions of the undated newspaper from the publisher in correct order but chooses to release them to the local population in either one or the other order for his own personal advantage. If the local newsagent wants to promote the idea that we are at a state of war he will release the newspaper with a war headline second and if he wants to promote the idea that we are at peace he will release that newspaper second.
Just such an instance as this is described when banker Nathan Rothschild famously withheld news of the British victory at Waterloo in order to take advantage of market uncertainty as to the outcome of the battle. By the time the markets received the news that Wellington had won, Rothschild had bought equities at knock down prices and made a killing on the rising market.
If the local population becomes aware of the possibility that news may be manipulated by a local newsagent for the purpose of controlling perceptions, they might hold on to one or more editions of a newspaper in order to compare headlines and get some idea of what the actual facts of the matter are in sequence.
Logically, in such a case the local population will have to conclude that NO particular edition of a newspaper is to be objectively trusted and that all editions are either wrong or lying. In other words the paper in its entirety is worthless rather than just this or that edition. This is the qualitive nature of the problem.
After all, how can two editions of the same newspaper with the same editor and the same journalists and with no differential date information be judged between? How can you know which is the truth NOW and which is not? This is in effect what happens in the case of hyper inflation.
Think of a paper money note as a generalised abstracted unit of information. On a more sophisticated level we can think of a money note as a unit of evidence. We can say that one or more units of evidence goes up to make an argument and that therefore the more units of evidence you can muster in support of any particular argument the more likely you are to win that particular argument.
In a standard economic transaction the argument in question is that you should sell a car,(or any other commodity), to me for this number of paper notes. Or to put it another way, you should swap your car for this number of paper notes.
The more units of evidence that you can muster in support of this argument, i.e. the more paper notes that you offer in return for the car, the more likely you are to win that argument.
But there is an unfortunate corollary to this. If you win the ‘argument’; by offering more pieces of paper money evidence than the other guy, you also implicitly argue that each individual piece of paper money evidence is worth relatively less.
We can return to the practical consequences of this shortly but first, as I argued last time paper bank notes or units of evidence are introduced into the market at a particular time and particular place and at a particular price. So in this sense, they are first and foremost evidence in an argument on behalf of central government made to the general population.
The individual argument that paper money notes are evidence for is: ‘These pieces of paper are valuable to this or that extent not only in comparison with objects such as commodities, but those pieces of money paper that have gone before and those pieces of money paper that will come after’.
This is of crucial importance.
From this perspective the crisis point of hyper inflation occurs when too much information is presented at any one time which results in not a quantitive problem but a qualitive one.
Let us say that two purchasers are competing to buy a particular car. They both make the argument that you should swap the car for this number of pieces of paper money. The number of pieces of paper money is the totality of evidence that this or that exchange argument is true and valid.
Obviously they cannot offer the same number of pieces of paper as evidence/arguments or the seller will have no way of differentiating between the two. So let us say that Buyer A offers 100 money units and buyer B offers 110 money units. Buyer B wins the argument because he has offered more ‘evidence’ in support of his argument. So far so good.
But what if Buyer A offers 100 units as before but Buyer B offers 5000 units? What is the seller to make of that? These two arguments are wildly different, they containing wildly differing amounts of evidence in the form of money notes. (bear ‘fake news’ in mind at this point)
Well surely the answer is simple, the seller takes Buyer B’s offer.
Not so fast. Most sellers would want to know a little more about it before making a decision in these circumstances. The problem is the totality of evidence.
Instead of 210 units in total chasing the car,(both bids), which might be seen as reasonable there are 5100 units chasing the car which is not seen as reasonable given what the seller knows or thinks he knows. Something else is going on…
What if a third buyer comes along ten minutes later and offers 10,000 units for the same car? Now the seller will be pretty sure something is seriously going wrong. And the inevitable effect is that he will be forced to distrust all money notes in whatever amount because they are all the same.
If ten information money notes are worthless then 10,00 money notes are equally worthless, this is both the strength and weakness of the informational money system. The implication is that the seller will be forced to distrust the overall message he is getting from the government. But it is a qualitive and not quantitive problem because it does not rely on amounts.
So what was that central bank/government message I referred to above? It is that ‘We are in charge and everything is all right’. That is the basic unit of money news implicit in every money note.
The second piece of money news is the interest rate, which is the price at which private banks buy money from the central bank. This can be understood as that particular headline for the quarter. But this piece of money news is intimately tied up with the distribution mechanism of the paper notes themselves.
A newspaper printing and distribution operation will have a central printing press, regional distribution warehouses and sub warehouses which distribute to newsagents and even paper sellers on the street.
Each element of the distribution chain decides how many papers to take and to move on down the chain of distribution according to how profitable they predict this process will be. This depends to a large extent on the nature of the headline. ‘Queen Dies!’ or ‘War Is Declared!’ will tend to sell more copies than ‘Water Supply Goes Off In Addis Ababa’ or whatever. (perhaps not in Ethiopia though..) So the headline affects and ultimately controls the distribution process.
The same is true with interest rates. Depending on what the Central Bank decides the interest rate will be, each element of the distribution chain, from the large commercial banks downwards decides how much of this edition of money they will take and distribute according to how profitable they calculate it to be.
But what is of the utmost importance to understand is that in the case of money news everyone in the chain acts like the unscrupulous news agent I described above. Everybody is encouraged to withhold editions of the news and to release them onto the market only when it is in their individual best interests!
When you receive any particular edition of money, you either release it into the public by means of spending it or you withhold it by means of saving it. You manipulate the information contained in the note for your own best interests. That is what you are supposed to do- to lie, to spread disinformation.
Of course everybody is therefore equally dishonest and so no-one can point the finger at anyone else. The system is based upon everybody spreading corruption and lies. Wouldn’t such a system be inherently unstable and prone to periodic collapse?
Wouldn’t someone try to contain this corruption and tendency to collapse? Wouldn’t they try to devise a system to mitigate the problem?
Yes they would. They would take the logical step of trying to date and order the headlines on each edition so they could be read and understood in sequence. How would they do that?
By means of a code that can be read and understood by themselves but importantly, not by you. If you doubt this, take out a currency note and find the identifying code printed on it, usually referred to as the serial number. Do you know what this code means? If you do not, why don’t you? After all it is supposed to be money issued by a democratically elected government in your name and for your benefit!
The purpose of this code is for the people who issued the notes to understand each ‘headline’ and the order it was issued in, but not for you, or anyone like you, to be able to.
The system is built on a small minority being able to fully understand the meaning of the money news and the vast majority below them taking part in a game of charades where they lie to each other and manipulate the news supply to each other for the purpose of individual advantage.
As a simple illustration of this suppose you had 500 units of currency and you found out that this denomination of money would be abolished or worthless the next day. What would you do? You would try to go out and buy something with it wouldn’t you? You would try to use the information advantage that you had to pass the problem onto someone else. This is the key to inflation and hyperinflation.
We are building up a picture of a central money news/information agency that is issuing news on a regular basis. That news/information is then taken up by the various parts of a supply chain and manipulated and distorted in order to obtain the best possible individual outcome but with inevitable damage to the system as a whole. Assuming that he purpose of the system is to transmit information that is.
With this news information model in mind we can now go back to look at hyper inflation. The trouble with hyper inflation is that the seller has no way of knowing which is the most valued up to date piece of information on which to base his decision.
This problem presents itself as there being too many pieces of money information in circulation. Discrepancies between the amounts of money evidence offered in any particular argument (trade), force the seller to increasingly regard all pieces of paper money as being equally invalid- hence the hyper inflation.
But the root of the problem here is not validity of any particular trade argument and the money evidence presented in support of it but the equality between each and all pieces of evidence. Because of this money is actually only credible and valid within a relatively narrow and stable bank of circulation. The sameness of each piece of money information requires sameness of prediction and sameness of outcome to work.
No matter how many paper notes are issued in any financial period they are all of equal validity to paper notes issued in another given quarter. In other words any episode of inflationary money printing activity is absorbed into the whole of the financial system and is only ameliorated by later activity.
Just as any incorrect news report is absorbed into news production and distribution system as a whole. The system relies on its credibility to absorb the effects of any mistakes and keep people believing in the system even as they curse and dispute virtually all of the specific outcomes the system produces!
Since individual savers and consumers effectively act as newsagents, storing the information and only releasing it when it suits the particular interest of the moment, it is inevitable that conflicts of meaning and value will happen.
Hyper inflation is an insane babble of arguments that taken collectively can only mean that each individual argument is more or less worthless since in the last analysis it is all the same argument, that we are in control and everything is alright.
Periodically the logic of worthlessness produced by exchanging paper money arguments is expressed by and through a significant number of news agents going from one door to another desperately seeking a way out as they sense the impending doom.
As the doors are increasingly closed to news hawkers selling bogus information brands the volume of money seeking any way out increases exponentially until an overwhelming tsunami of money at any and every exit guarantees it cannot escape. Think of it as a house besieged by fifty street newspaper sellers shouting:
‘Extra! Extra! Your House Is Burning Down!’
while the house owner cowers within.
In conclusion I will ask: Is there anything we could do to rectify this state of affairs?
And surprisingly perhaps, there is a very simple and very straightforward solution. To date and value stamp money. So that instead of being interchangeable all money is clearly given a value – a ‘sell by date’ at which time it becomes valueless.
The closer this expiry date comes, the less the exchange value of the money note. This would solve all the problems now associated with inflation hyper inflation and Monetarism then we could…
Oh wait a minute.
This form of money already exists. It is called a bond. It is what the banks themselves use when they are dealing with central banks.
If there is only one thing you take away from all this it should be:
THERE IS MORE THAN ONE FORM OF MONEY, THERE ALWAYS HAS BEEN. EACH MONEY FORM SERVES THE NEEDS OF ITS CREATORS. ANYONE CAN CREATE MONEY BECAUSE MONEY IS A COMMONS. MONEY IS A COMMONS BECAUSE IT IS NOT ANY PARTICULAR THING IT IS A FUNCTION- SOMETHING THAT AN OBJECT CAN BE MADE TO DO.
GOVERNMENTS MAKE MONEY FORMS TO CONTROL THEIR POPULATION. BANKS AND CORPORATIONS MAKE MONEY FORMS TO CONTROL THE PUBLIC. BITCOIN IS A METHOD OF CONTROLLING ANY SUCKER WHO BUYS INTO IT.
PRIVATELY ISSUED DEMOCRATISED MONEY IN THE FORM OF DERIVATIVES IS THE MOST COMPREHENSIVE ATTEMPT EVER DEVISED IN HISTORY TO CONTROL THE WORLD POPULATION DIRECTLY THROUGH THE PRODUCTION AND DISTRIBUTION OF A NEW MONEY FORM.