This article develops the idea from my recent post, Is money like energy
Money is very difficult to understand; it seems to behave like nothing else in the universe such that every analogy captures only a part of its behaviour. Its properties as both a commodity and as an agreement seem deeply paradoxical. This may be an indication that we need to look at it from a level. It is easy to examine the tokens which move from hand to hand - their inscriptions and their value, or the transactions - their form and meaning. The tokens flow in the opposite direction to the goods and services; their value is a counterweight that enables every transaction to balance and indeed to close without the need for risky credit.
This describes very well how gold money works. But most money has no value-in-itself. By this view fiat money is a massive fraud foisted on the people using legal tender laws which inject into the tokens some kind of value based on fear of bailiffs.
But that flowing tokens model is even more inadequate when it comes to explaining credit money, which makes up 97% of modern money and even precedes coinage.
Bank deposits have value because they are (supposedly) matched by equal and opposite liabilities. A bank deposit comes into existence through a contract which creates an asset and a liability simultaneously ex nihilo. It then moves around (the banking system) until it is reabsorbed when used to repay a loan. These bank deposits have another property that differentiates them from a commodity: they lack individuation; there are no individual tokens which enable the route of any particular dollar to be traced.
It seems to me too far-fetched that this bank-deposit money is some kind of bastardised pretend commodity, and that another analogy is far more fitting. Credit money viewed from the perspective of a trader, may be like a particle with mass which bounces against against other particles, but viewed from the perspective of a whole system it looks more like a wave.
In physics, a wave is an oscillation accompanied by a transfer of energy that travels through space or mass... Wave motion transfers energy from one point to another, which may or may not displace particles of the transmission medium. Wikipedia.
The full analogy has not revealed itself to me yet (PhD thesis, anyone?) but I invite you to consider.
Instead of value being exchanged for liquid value, what if money had negative value which pulled goods and services into it?
- What if the economy was a field through which money flowed?
- Does the wave split into two, with one half staying in the bank and the other half going through the economy?
- Or do both the positive and negative sides of the wave travel along a trajectory of transactions.
- How does the practice of interest and the perpetual deferment of debt repayments (such as national debts) affect the wave dynamics of the field?
- What happens when one side of the wave is used as collateral to emit another wave? This is what Paul Grignon calls twice-lent money?
It is clear to me that the difficulty we have conceiving of money is because it can be viewed on many levels, much like the particle/wave duality
In a way, all future possible transactions of a borrower are a kind of probability space that expand in the future like a wave. Thus, credit money could be conceived as probabilistic money that becomes real money, once we open the box and see if the cat was there or not, that is the credit was paid back or not paid.
It is not energy that you want to model money on, it's entropy or information (to be specific, the information is accounting record of credits and debts). Physical analogies are not entirely apt, because fiat money takes negligible energy to create, it's just electrons in computers these days (in the past it was ink strokes on ledger books). The "free energy" needed to raise the entropy of money is thus something more abstract, it's the legal system that allows banks to issue loans, or the votes in parliament which allow governments to spend and then tax. Note, your dismissal of State money and bank credit money is weird. It might be all bad, unfriendly, system, but it is not fraud. State money is a tax credit, and the tax liability is what gives it value, and it's been this way for at least 6000 years. People used to know this, so it was not faurd. The fraud is neoclassical economists who perpetrate the insane idea that money is irrelevant and we essentially have a barter economy. Not only are they frauds, they are delusional fools and dangerous idiots, who use complicated mathematical models (like DSGE) which ignore banks and money and pretend to inform central banks what to do! Idiots!