Money is no longer tied to any scarce commodity such as gold or silver and all values in all markets from currency to real estate are merely intermeasured against each other. Where in all this do we find any “real” value? The paper money we transact cash business with is essentially no different than a bank’s certified check from the Federal Reserve. It’s even signed by the Secretary of the Treasury and countersigned by the Treasurer of the United States.

Consider deposit banking at it’s simplest. I deposit $1 with you, you lend the $1 to John, and you keep this on your books as $2, one owed to me and one owed to you by John.

Obviously this wouldn’t work if we were the only people involved, but get enough depositors and enough borrowers together and you have a bank which carries both deposits and loans on their books as separate amounts of money. So, in effect, banks actually create money, making $2 where there was $1 before. So which one is real and which one is “mere paper”?

Economists actually have a description of this process called levels of money: M1 is my dollar that I gave you and you lent John. M2 is M1+the extra dollar that magically has shown up to my credit on your books. Because there is enough M1 circulated by the government, deposited in banks, and lent by banks, M2 functions in the economy exactly as if it were just more M1.

When they speak of the Fed “controlling the money supply”, it’s not merely a question of issuing more greenbacks. It’s also a matter of the Fed loaning more M1 to Whosis National Bank to support the M2 that Whosis is carrying on the books against the eventuality that too many depositors will withdraw their deposits at once.

If this “run” on the bank happens, and they can’t pay all their depositors at once, which is the “real” money? The greenbacks that the lucky people at the head of the line got before the vault was empty? The money the bank owes but can no longer pay to the rest of the depositors? The money still outstanding lent by the bank to it’s debtors? Or all of these together?

The same problem occurs with things like common stocks. The value of a stock share on any given day has no relation to any standard of absolute value. It is merely a bid/ask price in a market changing through time, exactly the same way that a cash transaction for goods is a bid/ask price expressed in terms of greenbacks. So what is the difference between these transactions?

If I accept a bid for my share and receive it in the form of greenbacks, is that somehow more “real” than if I accept it as an electronic transfer to my bank account? Does the money I receive in any form become more “real” than the money quoted in the next bid/ask price when the stock share gets sold again tomorrow?

All of these conundrums of “real” and “paper” profits stem from the “just price” theory–the notion that for anything you buy or sell there is a just price determined by an outside standard of “true value” that all transactions can be measured by.

When we operated with “commodity money” where money was tied to the amount of a single scarce commodity like gold, a just price theory was arguable, because the “real” money was gold of a certain purity and weight, the stamping of coins a guarantee of purity and weight by the state, and the issue of paper money was a convenient way to transport and transact value which the state guaranteed could be redeemed in precious metal.

But in a world where all monetary values float against one another, a just price is impossible to determine, and all money is as “real” as we accept it to be and only as we accept it to be.

I guess some think so. My sister, 27, is campaigning for Obama which is fine. She collects disability (instead of working the one job she held down for more than a few months in her entire life) for an accident she has fully recovered from. Doesn’t pay her own rent (my parents pay it for her because she is, thank god, sober). Or her cell phone bills (again, parents). And never went to college even though she is intelligent and had good grades. She’s done nothing. And wants everything.

I think it’s okay to want everything. But I look at my Mom. I look at my sister. And I look hard in the mirror and think NONE OF THIS has to do with life, liberty and the pursuit of happiness. For all her wealth and hard work, my Mom isn’t happy. But come to think of it, my sister is happy. Maybe I should rip up my degrees and loan bills and join the “free” world. Ha ha. Weeee!