I present herein ‘The Quantum Theory of Money.’ The name is not some silly gimmick; it is meant to illuminate, if I may be so presumptuous.
Without further ado, let’s jump into the fray: “Is it credit or is it debt?” The answer lies in another question: “Is it particles or is it waves?” The answers to that (latter question) are (a) it is both, (b) it depends on the circumstances, (c) it depends on the observer and the means of observation. (The reader probably knows what I am adverting to, the essential question of Quantum Mechanics vis-a-vis the nature of Light.) Likewise for the first question. But perhaps professional economists, as obviously brilliant as many (but not all) are, may be embedded in their own particular viewpoint. (And naturally enough, because it is only if they dig one particular foundation that they can erect the impressive theories and doctrines that they have.)
The notions of credit and debt are conceptual constructs. Money is certainly not a conceptual construct. Money is the prime, usually tangible, construct that facilitates, or is the medium through which takes place an exchange, fair acquisition, or voluntary disposal of good(s) and/or service(s). Money in and of itself is not synonymous with credit or debt: it may be one, the other, both, or even neither. I believe that in different Economic theories, the hard classification of money as either credit or debt is not an expression of empirical reality but is an axiom. Partly this is because it is only after the nature of money as being either credit or debt is accepted as an axiomatic principle that theories or doctrines can be built; it would be quite difficult to do so if the nature of money were left undefined or nebulous. A problem related to this fact is that every now and again an Economist (with no ulterior motive, I am sure) uses latterly derived deductions or conclusions based upon an an assumed (or axiomatic) premise to try and prove the premise itself. (I.e. that money is either credit or debt.) Such an argument or ‘proof’ is a logical fallacy. (‘Cueing the antecedent.’)
Because credit and debt are our key conceptual constructs, we define them here: Credit is that state or condition of an entity that enables or allows it to lawfully procure wealth, which action when taken, partially or fully eliminates the condition that enabled the acquisition. Being in possession of credit (such as store coupons or vouchers) allows the possessor to acquire wealth in exchange for such credit which is thus recycled or circulated and may eventually be liquidated by issuer when it reaches the issuer. Debt is the state or condition of an entity that obligates it to transfer or convey wealth to another entity, which action when taken, partially or fully annuls the condition triggering the transfer. Being in possession of debt (such as debt certificates or IOUs) (and not the condition of being indebted) allows the possessor to acquire wealth in exchange for such debt which is thus recycled or circulated and may eventually be tendered for redemption to the floater or guarantor.
Further, with respect to erecting impressive theories upon firm axiomatic foundations, one drawback of doing so is that it restricts flexibility of perception and agility of perspective. It may be the case that different economists ascribe only one specific form to money as if this be by natural law or by definition. I endeavour here to ‘dis-embed’ the reader, be he a professional economist or a hobbyist, from his foundational perspective of money, and provide him with the flexibility and agility necessary to see and understand money in its multiple, chameleonic forms.
With respect to the argument that money, being a human construct, does not require human study and analysis but is subject to human definition: Indeed, one may well think that money, being man-made and not a fact of nature or a natural phenomenon, is a definitional construct rather than a natural artifact to be analyzed and understood. That position turns out not to be the whole truth, upon further analysis and cogitation. The problem is that, unlike an airplane, the NAND gate, or ‘the coefficient of friction,’ money does not lend itself to being defined by one man or one committee because there is money and then there is money. Moreover, Money is not carefully constructed by design by man for the benefit of man, it either is carelessly and imprudently cobbled together by diverse men for no particular advantage or is craftily and greedily devised by-design by a cabal for the benefit of the few. In different nations and societies, different kinds of ‘money’ have existed. I suspect that that is true in our times as well. Consider today’s American fiat dollar vs. the sixties’ gold-tied dollar vs. the nineties’ floating Russian ruble vs. the former U.S.S.R.’s state-controlled ruble. So the first question must be: “Which one of them is ‘money’?”
Clearly, different moneys exist. As we shall see below, we need to differentiate between these different ‘moneys’ instead of treating money as one monolithic whole for those inquiries that are clearly relevant not to ‘money,’ but to a particular concrete form of money. (Doing so would also be in concord with the standards of scientific investigation.)
But first, the chameleonic nature of money may further be explained, again using the Quantum Mechanics parallel (which seems to be oddly relevant, to me at least), by the related Heisenberg Uncertainty Principle: Who is observing it, from where is he observing it, and how is he observing it? I shall illustrate these points about the observer-dependency of money—thrice over.
First off: Consider a man living in one of those Mumbai apartment buildings that has a general store at the ground floor. He, a long time customer of the general store, has an informal, open-ended credit line; he just tells the storekeeper to ‘write it down.’ Every month or two he hands over several hundred rupees and the storekeeper does the arithmetic. One day, the man’s cousin comes to Mumbai to stay with him. Being an absent-minded professor, he has forgotten to pack his toothbrush, cologne, etc. So the man and his cousin go down to the store, the cousin picks out a toothbrush and a few other items, the storekeeper rings it all up and hands the goods to the cousin, and the host yells out ‘write it down’ as he and his guest, proud owner of new toothbrush, cologne, and other items, leave the store. At this time, the man is running a debit balance with the storekeeper. Three people are involved in the transaction: the man, the cousin, and the storekeeper. Did credit just get issued, credit get given, debt get issued, and/or debt get entered into? (Note that I don’t write “Did he . . .”) Well, it all depends, doesn’t it?
Doesn’t the example above analogize how money sometimes comes into existence, say for a federally funded pork-barrel project? That is (one form of) the issuance of money. If so, wouldn’t the conclusions drawn from the above example be germane and applicable to the real-life issuance of money? Finally, make note that it is perfectly possible that the man may never take the money from his cousin but he will pay the storekeeper. But that should not mislead one into thinking that the cousin was not involved in, not one, but two transactions at the same time!
Okay now, here is the second go-around: Everything is the same as the example above except that the man has a good-sized credit balance with the storekeeper at that time. For this variation, no question can be raised about the involvement of actual money (as may be done for the first variation). Have circumstances altered (the nature of) ‘money’?
Now, as promised, the third time over: Everything is the same as the example above except that the host, instead of yelling out ‘write it down’ pays the storekeeper in cash, exact amount. What about this example?
If, from your sole point of view, money either behaved differently or has to be treated differently in the above three variations, then we must accept that the nature of money is not unitary. Sometimes money behaves like credit, sometimes it behaves like debt. Sometimes light behaves, or must be treated, as waves; sometimes as particles. And thus, The Quantum Theory of Money.
Next, isn’t the question as to whether the specific money transacted in each one of the above three money-transactions is credit or debt dependent upon whose perspective the transaction is viewed from?
If the above fluxing of money is hard to imagine or follow, visualize in these terms: All three actors enter each of the two transactions into each one’s individual double-entry book, for a total of six transactional entries. The preceding numbers are per example, not for all three examples.
Still not convinced? I hear someone saying that the entries in the book are different, granted, but that did not change the nature of money. No? Okay, there was only one ‘money’ that did something, that we know. What did that money do for the storekeeper is simple enough: it allowed him to exchange his mercantile goods for the promise or the ability of future acquisition of necessary or desired goods or services. Now here’s what’s interesting: That same money (touch-feely thingies like ‘goodwill’ be damned!) at best gave the man (the host and the customer) the opportunity to regain slightly less money (because of FVM) at some point in the future, or at worst it burnt a hole in his pocket. In marked contrast, that same money at best resulted in the cousin acquiring wealth immediately, or at worst enabled him to make a slight real-value gain in money (because of FVM) at some point in the future. The behaviours exhibited by a money-in-transaction depends upon the observer, or more precisely, the affected party. This is the Uncertainty Principle of Money.
Over and above that, another factor comes into play: It is not only whose perspective you view the transactions from that may influence your conclusions but what (professional or doctrinal) perspective you view them from: Consider the different perspectives of the international banker, the British-style accountant, a third-world tinpot tyrant, and his long-suffering unpaid central-bank economist.
I think there will be a disconnect and disagreement in between the different ‘whose’ perspectives; likewise also in between the different ‘what’ perspectives. Who can say which is/are wrong and which is/are right? Each may well be ‘right’ (even the tinpot tyrant); see my summation that concludes this article. Could it be that money is . . . polymorphous?!
The reader may reflect upon four more variations: periodic payment of the tab by credit-card or debit-card and immediate payment of the purchase’s exact amount by credit-card or debit-card. One may argue that ‘money’ doesn’t come into play here but that would itself be a ‘play’—on words. A credit-card, the concrete representation of an extension of credit and an instrument for its exchange (I would say ‘redemption’ but that would probably be confusing), can be thought of as ‘promissory credit’; a debit-card can be considered a ‘service of currency-less monetization.’
(Digression on example above. I have suggested that the three transacting parties were the only ones involved in the money transaction. So if there are two parties in a simple transaction, two parties are involved in the transaction. Same for four, same for any number, n. Think, and I wonder if you too may conclude that there is no such thing as an n-entity money transaction. There is always another unseen entity, the n+1th entity. Oh, it’s not physically present but it’s there all the same. After all, when the maid comes in the morning to clean your house you don’t give her a square meal plus beetroots and melons from your garden in return—you are using money that was issued by some entity. I say that that issuer is the ‘shadow’ entity in every money transaction because I suspect that every time there is a money transaction, that ‘shadow’ entity will either have gained wealth or the transaction will have allowed or enabled it to acquire future wealth. But it is only a suspicion, it is not grounded in demonstrable reason.)
I convey by exposition another (pertinent) cognitive question now. I don’t have a ‘fax-machine.’ But I do send and receive faxes(!) Did I lie? I use fax-software and my computer’s modem for faxing; further, if I need to fax any physical document, I scan it using the printer-scanner, and if I want to print any received fax, I print it using the same device. And all more convenient and flexible than the ‘fax-machine’ you use! Now, do I have or not have a ‘fax-machine’? Some will argue I do and some will argue I don’t. Actually, here we would veer off not only into Definitional Semantics but also into Metaphysics. But my point is clear enough: Let us focus not exclusively on state but also on behaviour. I do not propose that we give prominence to the latter, but that we be aware of the dichotomy and ask, not ‘whether the shoe fits,’ but which shoe fits.
State or behaviour? ‘Is’ or ‘does’? These questions too are related to the curious nature of money. Hereunder I try to convey my ideas by, hopefully, introducing a sudden epiphany. Here’s an incident I read about in the latest issue of ‘Tinseltown’ magazine: There was this chap, a Ph.D. in software engineering, who was hired by Microsoft as a chief engineer. The poor fellow, it turned out he didn’t write code, he wrote bugs. Everything he programmed crashed. His software even caused other software to crash. This was too much even for Microsoft and they cashiered him. He did have a hobby, and to try to earn some money (money!) he played his trumpet at a couple of gigs. And it was pandemonium! Wynton Marsalis threw flowers at his feet. Capitol and R.C.A. vied with one another to sign him, offering million-dollar advances. Oh, he had no education in music, he was just a ‘natural.’ As of now, he is still playing gigs, still searching for a software job, and has not signed with Capitol, R.C.A., or anyone else. But hey, this confused compadre is your friend! How do you introduce him: As a Software Engineer or as a Trumpeter? One? The other? Both? And is ‘money’ credit or debt? What happens if a money which is created as credit (or debt) by definition, in certain cases starts behaving like debt (or credit)? Do we label some ‘thing’ on the basis of its ascribed role or on the basis of its exhibited behaviour? The answer: It depends. But first we have to be aware that such is-versus-does dichotomies do exist, and we have to be sharp enough to detect them.
At this point, we can see that ‘The Quantum Theory of Money’ is a bit of a misnomer for the ideas I am trying to present. Unlike the Quantum Theory of Physics, no quanta or packets are being proposed here. The reason behind the name is to relate my concepts to the Quantum Theory of Physics and also to the preceding light-versus-particles argument vis-a-vis the nature of Light. Considering these facts, perhaps an apposite title for (the ideas expressed in) this little article might be “The ‘Dual Nature’ Theory of Money.” Even better perhaps, “The ‘Chameleonic Nature’ Theory of Money.”
Consequential to what has been presented above, I question the wisdom of talking about whether ‘money’ (a blanket term, really) is credit or debt or this or that; trying to do so is similar to attempting to tie down the nature of Light to a single hard-and-fast manifestation. For it looks like generic ‘money’ is . . . amorphous!
Would it not be more scientific to inquire whether a money, of which a currency is the concrete, and a particular, representation, in a specific point in time, is credit or debt? (We must recognize here that unlike ‘money,’ currency certainly lends itself to being whatever the particular deviser or issuer wants it to be.) For example, was the American Dollar of 1900 credit or debt? Is the Cuban Peso of today credit or debt? These are valid inquiries. I suggest that ‘money’ is subject to concrete representations and it is these concrete representations, a money, on which (or on whose transactions) inquiry be made.
As a general rule, I have concluded that in its static state or ‘normal’ dynamic state, a sovereign fiat money is credit and a secure ‘backed’ money is debt. We may infer that my beliefs have something going for them, from these empirical observations: Generally, for a sovereign fiat money, the more (militarily) powerful and/or the more (economically) responsible the sovereign seat (i.e. country’s leadership position, e.g. ‘the German Chancellorship,’ ‘the Chinese Premiership’) of the issuing currency in the eyes of the world, the stronger the money, and vice-versa. Generally, for a secure ‘backed’ money, the more valuable or more desirable the money’s backing as a commodity in the eyes of the world, the stronger the money, and vice-versa. I draw the reader’s attention to the fact that both these relationships (of empirical observation) between two propositions are equivalence relationships (‘IFF’); this strongly buttresses my conclusions (i.e. those that open this paragraph). (The preceding is not to suggest that the factors outlined are the only ones that influence a money’s strength or weakness; obviously other factors act upon a money’s strength. I only say that which I say, i.e. the equivalence relationships proposed above.)
On the above observations and conclusions, consider, and you too may conclude that in its normal, static state the post-1973 U.S. Dollar is . . . both. (Quantum Theory! Dual Nature!) It is the first by way of the front-door and the second by way of the back-door. And not only that, the co-proposition of its first nature is a very powerful sovereign seat and the (finagled) co-proposition of its second nature is a very desirable commodity. That singular reality (USD’s dual co-proposition strength) is one of the main reasons—perhaps the essential reason—that, regardless of any roller-coaster rides on the market or unhinged printing of currency, the USD is the de facto global money and remains so (and in a few imperial outposts, has readily been accepted as the de jure money as well). (Though it has just now started to exhibit its death ecstasies, which will be fairly prolonged.)
(With respect to the ideas in the preceding paragraph, the matter of a money being a domestic token facilitating exchanges-of-value within the country versus being an internationally desirable note across countries come into play, I am sure. Those matters are not within the scope of this little piece.)
Money is also referred to as ‘coin,’ so in conclusion I illustrate with this most natural of analogies. If someone tells you “the obverse is the coin,” of course he is right—what is the obverse of the coin if not coin? And if someone else tells you “the reverse is the coin,” he is equally right. But it is the person who explains that “the obverse and the reverse comprise the coin” who is most right, and fully right most—but not all(!)—of the time: it is perfectly possible that some coin has either the obverse or the reverse rusted off or abraded. . . .
The sharp reader will have noticed that the analogy above does not run properly parallel to the question at hand: Rival groups do not claim that “credit is money” or “debt is money;” they claim “money is credit” or “money is debt.” The analogical equivalent would be for dissenting parties to claim “the coin is the obverse” versus “the coin is the reverse.” Well, if a travelling giant Martian pays you a visit and sees a coin lying on a glass table, what will it conclude about the coin? Now what will happen if a diminutive Venusian also happens by, and walking underneath the table, sees the coin? I verily believe that the Martian and the Venusian, like our (truly) intelligent economists, may start squabbling with one another about what the coin is and isn’t: “The coin is the obverse!” “No, you idiot! It’s the reverse!” . . .
I hope that this little tale also serves to show that the credit-debt dichotomy of money is not simply a case of “seeing whatever you want to see.” Clearly neither of our interplanetary visitors are guilty of seeing ‘whatever’ they want to see—even though each (like our squabbling economist friends) accuses the other: “You’re just seeing whatever you want to see!” It is quite obvious that both of them are seeing a reality! (Not ‘reality’ but ‘a reality.’)
Tautologically but illustratively, you have to see both sides to see both sides. But, forgetting about the quarrelling Martian and Venusian, the shape of a coin being what it is, it is well nigh impossible to observe the obverse and the reverse of the coin at one and the same time—if you see one, the other will be hidden from view. . . . And so at any given time, the coin is that face of it that you want to see or are capable of seeing. . . .
(What about the odd, rare money, the post-1973 American Dollar? It has its ‘coin’ counterpart too: and so if you’re lucky enought to find the odd, rare coin that falls into or under some heavy machinery and gets severely bent, you can glimpse both the obverse and the reverse at the same time.)
Lastly, do keep in mind that besides its two sides, ‘coin’ also has an edge—and that is neither the obverse nor the reverse. . . . Hmmm . . . apart from assertions as to what money is, have I not heard professionals also make vehement statements, based on valid explanations, as to how and why “money is neither credit nor debt, money is money”? . . . So there is an aspect of the coin that is neither obverse nor reverse, which reality ought to make even this third camp of economists happy. In a way, this last exposition validates everyone’s claims at the same time because the two main opposing camps also say ‘money is not debt’ (credit camp) and ‘money is not credit’ (debt camp)! Could there be an aspect of form or behaviour to a money that is neither credit nor debt? . . .
Is it not possible that the reality of whether the true natures of money is credit, debt, or whatever could be more complex and multi-hued than what the finest, most astute, economists think? And that that is why economists are economists and the Rothschilds and the Rockefellers are the Rothschilds and the Rockefellers? He who creates the chameleon is the one who best understands it, and can demand: “Now, blue!” “Now, yellow!” “Now, camouflage!” (If I may be so artsy and reductionist!)
In sum, I submit that:
1. Generic ‘Money’ cannot be pigeon-holed into being credit or debt; this fact is ‘amorphism of money.’
2. It is possible to classify a specific money, that being a specific sovereign currency of a particular time, as being either credit or debt; preferably in its static form, not in its transactional usage; this is the ‘specific representation of money.’
3. In the abstract, a specific money may have properties of both credit and debt; this fact is the ‘dual nature of money.’
4. In its transactional form, a specific money may exhibit properties of either credit, debt, or both; this fact is ‘polymorphism of money.’
5. For a specific static case, either the role of credit, that of debt, or those of both, may be imputed to money, as seems most suitable within that particular case; this is the ‘state’ of money.
6. For a specific dynamic scenario, either the exhibition of credit, that of debt, or those of both, might be observeable in money, as seems most suitable within that particular scenario; this is the ‘behaviour’ of money.
Copyright © 2006–2011 Kersasp D. Shekhdar. All Rights Reserved.