Comments on a cultural reality between past and future.

This blog describes Metatime in the Posthuman experience, drawn from Sir Isaac Newton's secret work on the future end of times, a tract in which he described Histories of Things to Come. His hidden papers on the occult were auctioned to two private buyers in 1936 at Sotheby's, but were not available for public research until the 1990s.

Wednesday, July 24, 2013

Cybermoney and the Age of Immaterialism

Image Source: Telegraph.

Last week, CNN and other media outlets ran a little story about a PayPal error, wherein a minor eBay seller found his PayPal account credited with USD $92 quadrillion:
When Chris Reynolds opened his June PayPal e-mail statement, something was off. The Pennsylvania PR executive's account balance had swelled to a whopping $92,233,720,368,547,800.
That's $92 QUADRILLION (and change).
Money that would make Reynolds -- who also sells auto parts on eBay in his spare time -- the richest man in the world by a long shot.
Rich, as in more than a million times richer than Mexican telecom mogul Carlos Slim. And he's worth $67 billion.
Oh, if only.
"It's a curious thing. I don't know, maybe someone was having fun," Reynolds said.
So he logged online, and reality bit back. His account balance read $0. The correct amount.
PayPal admitted the error and offered to donate an unspecified amount of money to a cause of Reynolds' choice.
"This is obviously an error and we appreciate that Mr. Reynolds understood this was the case," PayPal said in a statement.
Before this incident, the most Reynolds ever made on PayPal was "a little over $1,000" selling a set of vintage BMW tires on eBay.
So what would the would-be quadrillionaire have done with all that cash? "I probably would have paid down the national debt," he said.
Image Source: CNN.

In February of 2013, there was an equally curious article about PayPal at the neoconservative Website, World Net Daily (WND). The article was written by Jerome Corsi, a Boomer conspiracy theorist who has been accused of bending facts in his criticisms of the Democrats. The source is odd, and so is the report:
A former employee of one of the world’s largest international banks who has provided WND with more than 1,000 pages of evidence alleges the Internet giant PayPal and American Express are implicated in an international money-laundering scheme involving hundreds of billions of dollars. The whistleblower, John Cruz, was a relationship manager in the southern New York region for the London-based global bank HSBC.
“I found many accounts where PayPal and American Express were used as conduits through which hundreds of thousands of dollars were deposited or withdrawn from HSBC customer accounts in a pattern of suspicious transactions that should have been reported to legal authorities under various banking statutes, including the Patriot Act,” Cruz told WND. Neither PayPal nor American Express responded to WND email and telephone requests for comment.
Image Source: Socialist Unity.

A piece on HuffPo from May 2011 remarked that prepaid credit cards are commonly used to launder drug money and are reloaded with PayPal and similar services:
No one knows how big a role the cards play in moving the more than $20 billion in drug earnings that U.S. authorities estimate crosses from the U.S. to Mexico annually. Yet while anyone crossing that border with $10,000 or more in cash must declare it, prepaid cards are legally exempt.

Visually, the cards are barely distinguishable from credit or debit cards and the most versatile let users reload them remotely without having to reveal their identity, using cash, moneygrams, PayPal and other online payment services.
Some cards can process tens of thousands of dollars a month. Just load them up in Connecticut or Texas with, say, the proceeds of cocaine sales and collect the cash in local currency from an ATM in Medellin, Colombia or elsewhere in Latin America.
"I'm not so sure we have a sophisticated understanding of how to deal with this," said Richard Stana, who oversaw a report on prepaid access for the General Accounting Office, the U.S. Congress' research arm. "It's just a whole new way of doing business."
Then there was the PayPal goes to space idea, which I mentioned in a recent post:
“As we travel through space and explore new planets, we will still need to pay for life on Earth and out there…” There is no indication that he stopped ... to ask the obvious. Explore new planets? What new planets?
What new planets, indeed? Does it matter? The sooner we stop expecting to connect with reality as far as the economy is concerned, the clearer we will be about what is happening. It is not surprising that incidents like PayPal's clerical error occur behind the scenes in financial circles. Who can say what they really signify? What are three extra zeroes, or fifteen extra zeroes, on a computer ledger? None of it is real.

This is why the conspiracy theorists' ideas about the economy are wrong. For example, to believe a potential conspiracy theory about PayPal and $92 quadrillion, you would have to be very literal-minded and assume that there was something out there worth that amount of money that needed securing. To its credit, the Silicon Valley Mercury News actually realized this. What, out there, is worth $92 quadrillion? Perhaps the most sensible of its suggestions was that with $92 quadrillion, you could buy - or create - 1.37 million Bill Gateses.

Poster depicts President William McKinley's endorsement of the Gold Standard Act in 1900. Image Source: answers.com.

Money was perhaps the first virtual reality concept, a paper token became a medium of exchange between real things of assumed value. Even barter economies involved a virtual concept of exchange. The paper medium worked well even after gold, the guarantee of real value behind the medium of exchange, evaporated behind the paper token. From time to time, money did not work when people had a crisis of faith about the fact that money was virtual.

Hyperinflation of currency: "Sweeping up the banknotes from the street after the Hungarian pengő was replaced in 1946." The pengő "survived only for 20 years and experienced the most serious hyperinflation ever recorded": prices in its worst month doubled every 15 hours. Image Source: Mizerák István via Magyar Nemzeti Múzeum Történeti Fényképtára, Budapest, http://mek.oszk.hu/01900/01906/html/index1433.html via Wiki.

Nixon Shock: "The Nixon Shock was a series of economic measures taken by United States President Richard Nixon in 1971 including unilaterally canceling the direct convertibility of the United States dollar to gold. It helped end the existing Bretton Woods system of international financial exchange, ushering in the era of freely floating currencies that remains to the present day." Image Source: Living in a Bubble Blog.

The rise of credit cards: BankAmericard (1970). Image Source: Vintage Ad Browser.

The rise of credit cards: Chargex, a precursor of Visa (1973). Image Source: Vintage Ad Browser.

The rise of credit cards: Mastercharge (1978). Image Source: Wiki.

Departure from reality: the growth of increasingly virtual debt, post Nixon Shock, in the form of revolving credit via credit cards. Image Source: My Budget 360.

The decline of the purchasing power of the dollar, post Nixon Shock. Image Source: WSJ.

Faith is the key word. Despite periodic crises of faith, money continued to evolve away from gold. In fact, the downturns were simply the depressed side of the larger picture - that money became ever more about mass values. Wiki explains briefly how philosophical value and economic value converged:
Philosophical value is distinguished from economic value, since it is independent on some other desired condition or commodity. The economic value of an object may rise when the exchangeable desired condition or commodity, e.g. money, become high in supply, and vice versa when supply of money becomes low.
Nevertheless, economic value may be regarded as a result of philosophical value. In the subjective theory of value, the personal philosophic value a person puts in possessing something is reflected in what economic value this person puts on it. The limit where a person considers to purchase something may be regarded as the point where the personal philosophic value of possessing something exceeds the personal philosophic value of what is given up in exchange for it, e.g. money. In this light, everything can be said to have a "personal economic value" in contrast to its "societal economic value."
Money became a pure idea, drafted into the service of different political ideologies, such as capitalism and communism; and its version of instrumental value became a rough shorthand that served moral philosophies, such as materialism (see here), deontological ethics (see here) and pragmatic ethics (see here). Then money evolved again, and became a global index of national popular psychologies.

Bitcoin (2009). Image Source: The Stateless Man.

Litecoin (2011). Image Source: Wiki.

Namecoin (2011). Image Source: Wiki.

Ripple - a protocol for "a peer-to-peer distributed social network service with a monetary honour system based on trust that already exists between people in real-world social networks; this form is financial capital backed completely by social capital. However, it is currently not substantially implemented and is currently closed source and centralized." Ripple was created by created by OpenCoin Inc. (2013). Image Source: Wiki.

Behavioural finance analysts consider the growing acceptance online of Bitcoin to be a significant marker. This April, MarketPsych described its agenda to subvert the banking system with cryptocurrencies and why Millennial mentalities may make that happen:
"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose." ~ John Maynard Keynes, "The Economic Consequences of the Peace" (1919 [read it here]).
In 2008 MarketPsych’s CTO Thomas Hartman worked on a secretive software project in Panama. The goal of that project was to disrupt and supplant the global banking system. The fruits of such efforts are emerging in the increasing importance and acceptance of cryptocurrencies.
Last week Eurogroup chief Jeroen Dijsselbloem revealed that the Cypriot bank bailout package is a template for future euro rescues. European bank depositors can expect seizures of uninsured deposits if their bank becomes insolvent. In Cyprus today bank account holders, including accounts of a Russian MarketPsych team member living in Cyprus, are effectively frozen, limited to withdrawals of 300 Euro daily.
The freeze of Euro-denominated bank accounts in Cyprus corresponded with a spike in the price of gold and a massive bull run in the value of cryptocurrencies such as Bitcoin, LiteCoin, and Namecoin. As the realization dawns that similar seizures could happen in Portugal, Spain, and Italy, capital will continue searching for a haven away from the sticky fingers of banking and government officials.
Cryptocurrencies are currencies without a government sponsor, composed of unique cryptographic codes (solutions to complex mathematics problems), and consensus legitimacy. Their conversion value to national currencies depends entirely on supply, demand, security, confidence, and the whims of the investing crowd and businesses who accept them. The most secure and popular cryptocurrency is Bitcoin. Bitcoin was released in 2009 as the financial crisis smoldered, and there is now over $1 billion of Bitcoin in circulation today and hundreds of legitimate (and many sketchy) businesses who accept it. In the first three months of 2013 Bitcoin has appreciated 6-fold versus the U.S. Dollar. Cryptocurrencies are benefitting from the loss of public trust in fiat currencies issued by currency war-prone governments.
We are in a unique position to comment on cryptocurrencies and the psychology of currency valuations.
For one, our software team includes early crypto-currency speculators and Thomas - an evangelist in the development of Ripple - an early player in the alternate currency space whose assets were recently bought by investors with BitCoin-derived wealth.
Secondly, our psychological data is the world’s largest database of currency-related sentiment, and we have been mining that data for currency predictive models.
It is easy to see why confidence in the conventional system is flagging. Central banks are printing money like never before. The major economies of the world are swamped in virtual debt. Japan, a G8 country, has just reelected Shinzō Abe, whose optimistic Abenomics policy involves pumping the economy up with demand-driven hot air in the hope that it will float again. To some degree, you can't blame the Japanese, who are sick and tired after two decades of economic doldrums, haunted by crony capitalism, zombie banks and zombie firms.

Stop the presses! Image Source: The London Evening Standard.

Money is worth less and less, and it costs more and more to borrow. Saving is nearly impossible. Now, not just gold, but any kind of real economic foundation is difficult to find. Cybermoney breeds moral hazard; it is moving as far as it can from consequentialism. The technologically-enabled virtual economy breaks the link between those creating the risk and those who will feel it.

From that break comes a collapse of the middle classes, who, for better or worse, are the guardians of the standard values of their societies. And by standard values, I don't necessarily mean bourgeois stereotypes. As people from the middle classes rise, or mostly fall, we see them drift into normlessness or anomie. When that happens, the social contract of which they were guardians is broken.

Baby Boomer Jaron Lanier, a virtual reality pioneer, has become disenchanted with the way virtual reality has run out of control in the information economy. In his view, the virtual information industry has destroyed the middle class, who once preserved a valuable social contract, which became the seat of democracy. It was a contract about transforming labour into a commitment to society through callings, careers and professions; Lanier spoke to Salon.com about this in May 2013:
Of course jobs become obsolete. But the only reason that new jobs were created was because there was a social contract in which a more pleasant, less boring job was still considered a job that you could be paid for. That’s the only reason it worked. If we decided that driving was such an easy thing [compared to] dealing with horses that no one should be paid for it, then there wouldn’t be all of those people being paid to be Teamsters or to drive cabs. It was a decision that it was OK to have jobs that weren’t terrible.
[Salon.com: So it wasn’t inherent in the technology. In other words, there’s nothing inherently different about digital technology or the Internet than there is with factory technology or the assembly line or these other technological shifts that have developed?]
Yeah. I mean, the whole idea of a job is entirely social construct. The United States was built on slave labor. Those people didn’t have jobs, they were just slaves. The idea of a job is that you can participate in a formal economy even if you’re not a baron. That ... everybody can participate in the formal economy and the benefit of having everybody participate in the formal economy ... . [T]he benefits are really huge ... you get a middle-class distribution of wealth and clout so the mass of people can outspend the top, and if you don’t have that you can’t really have democracy. Democracy is destabilized if there isn’t a broad distribution of wealth.
... [T]here’s no reason technically for any technology to ever create a job. In other words, we could have had motor vehicles, and we could have had film cameras, we could have had all these technologies without any formal jobs. We just had a social contract in which we decided that we’d allow formal jobs in factories and in drivers and in users of cameras and creators of cameras and film.
[W]hat changed ... is that at the turn of the [21st] century it was really [Gen Xer] Sergey Brin at Google who just had the thought ... if we give away all the information services, but we make money from advertising, we can make information free and still have capitalism. But the problem with that is it reneges on the social contract where people still participate in the formal economy. And it’s a kind of capitalism that’s totally self-defeating because it’s so narrow. It’s a winner-take-all capitalism that’s not sustaining.
Imagine Mark Zuckerberg digging one foot of a ditch for every piece of personal information from which he made one dollar. There's no relationship between an entity like Facebook and real goods or real labour. More broadly, the same rule holds. There are almost no connections between virtual concepts of value and seemingly correlated actions - or between those actions and final responsibilities.

For all the talk of accountability, there is less and less of a connection between those who immensely inflate imaginary values and those who will foot the bill. Nor is there much serious effort being made to discover what the final cost of disconnection between the virtual and the real will be. Who will pay the price for the growing gap between unreality and reality?

Oddly, few are worried about debt or hyperinflation. Why does this situation not inspire total alarm?

People are being offered a choice between the material and the virtual, and their choices may well dictate their survival. At present, there is a growing struggle over who will control the virtual sphere. On one side, we see a reactionary bid to monopolize virtual reality with an increasingly debased economic concept. On the other side, there is a revolutionary cyber-counter-culture. The age of materialism is ending. This is the age of immaterialism.

Image Source: The Mists of Avalon.

Image Source: Failure to Integrate.

If economics becomes even more generally discredited, there could be a popular push to safeguard general prosperity in developed countries. There will be a price to pay when all these bubbles burst. It will likely not involve a dollar value, say, 92 quadrillion dollars. Rather, the toll will be philosophical and psychological. The middle classes, particularly in the recession-plagued western nations, face a crisis of faith. They are on the brink of the bankruptcy of a whole way of looking at the world, and a decimation of many ways of life. However, we should not underestimate their resilience, or their automatic decline in relation to the new Asian middle classes. Why? Because there is much more to the middle class social contract than wealth.

A character at the end of Whit Stillman's 1990 film, Metropolitan, observes of the bourgeoisie, 'you're going to have to accept the possibility that you're not doomed.' But renewal of the social contract after the age of materialism will require a huge change of perspective, a leap of faith. The greater question is how to reconcile the the virtual and the real. In some future technocracy, economics may be replaced in its role as totemic prophetic creed with popularized (mis)conceptions of physics, genetics and bioengineering. The value of exchange may be indexed in a new virtual market of a pseudo-scientific, ultra-rationalized religion. Money's materialistic cult could be replaced by a worship of the immaterial world.

See all my posts on Cryptocurrencies. 

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