Money is an invention of consciousness used to coerce behavior in others. Put more clearly, it’s a device used to get you to do what you would really rather not do at the moment. It is based on human memory and the human ability to believe that there is such a thing as “the future.” When you combine memory and belief, you can get faith and hope. Thus, the power of money is founded on faith and hope.

Historically, Money has proceeded from the utterly tangible and intrinsically useful such as sheep, land and salt, to the symbolic (i.e. you can’t eat it or plant it…gold, silver, jewels) to the abstract/hypothecated (paper money, big stones with holes, sea shells) and finally for the first time in history, we have virtual or invisible money (electronic bits in the cyber ether, ledger entries). At each step in the process of virtualization of money there are dramatically lower transaction costs and dramatically higher probabilities and ease of counterfeiting by either criminals or governments.

In the first instance, there’s not much use in trying to counterfeit a cow. It’s pretty easy to discover that two guys in a cow suit are an udder fraud when there’s no milk coming out. So, the trust component of physical property / commodities is high…not much need for faith or currency laws…but transaction costs are also very high. At the other extreme, where we are today, money has become so hypothecated – so gaseous that it’s like the barely remaining grin left over as the Cheshire cat disappears – managed by rat’s nest of rules and regulations to ensure the continued legitimacy of the currency.

Opportunities and temptations for market manipulation correlate with virtualization and speciation of money. Today we have literally 10’s of thousands of money creators tenuously connected with official mints of governments. Each of these creators contributes a variant species of money. Some examples of these species are: stocks, bonds, derivatives, credit cards, receivables factoring, loans, balance entries in computer networks, futures contracts etc.

Let’s take a look at stocks as one example of money creation. Who creates stock? An entrepreneur gets an idea, gets two experienced business buddies to join in and incorporates a concern with 10,000,000 shares of stock. The stock has zero value, or for legal purposes, par of .0001. The founders then use their reputations from past success and a back of the envelope plan to get funding from angel investors. The stock is now worth 10 cents per share. The company has no product whatsoever.

Why do angel investors invest in nothing? Because they believe in a highly abstract concept called a market. What does this “market thingy” purport to offer to angel investors? A collective group of individuals who have more money than they need today who out of fear of and greed for the future are willing to bet excess money for the promise (see: mutual fund salesmen) of additional money in the future to fund a thing called “retirement” – otherwise known as “slow death”…i.e. I want the best slow death money can buy. (see: www.methuselahfoundation.org)

In aggregate this excess money (capital) presents an opportunity to take the original nothings (stock) that the angels bought from the entrepreneur and to later offer it with more nothings (the angel’s money electrons floating around in a network somewhere). By the time the stock gets to an IPO, there may really be some “somethings” in the company – perhaps some patents and a proof of concept with some reference customers who say they are gonna buy lots more of these somethings. So, long story short, the original par value of nothing has grown infinitely to perhaps $15 – $135 a share at the IPO. No one from the Federal Reserve or the mint has created any money. The company did it through “the market.” Legal counterfeiting.

With these fundamental dynamics in place we can now examine and compare similar phenomena in nature…Earth – the ultimate venture capital incubator.

Our story begins as the sun beats down on the ocean, where tiny sea plants (phytoplankton) objecting to the heat respond by releasing high quantities of cloud-forming particles on days when the sun’s rays are especially strong. The compounds evaporate into the air through a series of chemical processes that result in especially reflective clouds. This, in turn, blocks the radiation that was bothering the phytoplankton. In other words, collectively, they make umbrellas made of clouds. These clouds move over land masses and drop rain onto savannahs where gravity collects the excess water into pools. Over time, an ecocosm emerges at the pool that attracts animals interested in the benefits of the pool – even though they did nothing to create the water or the ecocosm. As the herds grow, predators arrive who discover that when the herd’s heads are down while sucking from the pool, their backs are turned and are easy prey. The predator’s strategy is to get as much herd as possible, while the getting is good. Naturally such easy prey attracts more and more predators – eventually leading to organized and cooperative behavior – such as lions who hunt in packs. This makes it more and more difficult for an individual predator to compete – in fact, the pride will turn the individual predator into prey until they are removed from the competition. Thus, predation becomes institutional in nature.

Of course the herd notices that some of them are getting “killed” from time to time, but they have very short memories (http://www.adm.uwaterloo.ca/infocs/Study/Curve.html) and frankly don’t really care about what happens to the “other guyzelles.” They herd simply because each member of the herd has a better probability of not being dinner when it’s hunting time than if they were alone. If the herd gets to drinking too much of the pool, the whole system adjusts as both prey and predators die off proportionately.

Gradually equilibrium of prey/predator emerges where everyone gets what they individually decide they need. The herd gets its low energy / low yield slow, but steady food and the predators get their highly concentrated hits. As long as the predators don’t scare the herd so bad that they induce a stampede, everybody not dead is happy. If however, the predators go too far, they will induce a stampede and everybody in sight gets trampled, exhausted and totally terrified…interestingly, the pool is not mobile – so while the pool may have been depleted due to overdrinking by the herd, gradually the incubator function (remember the phytoplankton?) will cause more rain to fall and the pool will once again begin to fill. The stampede will become a hard wired memory in the herd and many will refuse to return…but some, who’ve been through it all before, will come back early and get lots of free drinks. The ecocosm of sun, clouds, rain, pool, herds and predators is – “a market.”

Are financial markets manipulated? Of course. The real question is: are they IMMORALLY or ILLEGALLY manipulated. One can answer the question simply by asking – Is it in the nature of predators to be nice and play by the rules?

For a clear “spin-free” answer, try entering the following query into Google …
“neither admitted nor denied” OR “admit or deny” settled

Go ahead…do it now.

What you get is a list of over 160,000 hits listing the very clear proof that market predators do what they do…and unlike most industries, Finance has a special “get out of jail free” capability built into the law…all they have to do is turn over a large portion of the carcasses – the settlement – over to the masters of the feast – and then they can go back to their predations.

So, to review, entrepreneurs make stock out of nothing to generate money (which is nothing) to convince angel investors to contribute their nothings in exchange for nothing (stock) in the hope of getting lots more nothings. Gradually there’s enough nothings that sometimes there’s actually Something (product/service) that pops out. Then in the hope of getting lots of these and similar somethings in the future (which never actually exists – there’s only NOW), the herd invests their nothings in the hope of getting lots more nothings in the future to buy the somethings. Along the way day traders (piranha) and brokerages / investment bankers (organized predators) convince themselves that they provide a service to society by managing the pool, culling the herd and shepherding the sheep…and the master of the feast works to preserve the natural order of things.

Now some of you may object to the characterization of so much activity is based on nothing. As anecdotal evidence, I offer up the curious case of Therese Humbert whose apparent wealth generated enormous economic activity in late 19th century France. “…In her elaborate Parisian apartments on the Avenue de la Grande Armée, Thérèse kept a strongbox. It was supposed to contain four documents. The first was the final will and testament of an American millionaire, Robert Henry Crawford, naming Thérèse as sole beneficiary…” Until it was found that she actually had – and had always had – nothing – resulting in the near collapse of the French banking system and the destruction of many fortunes.

See: http://www.nytimes.com/books/00/07/09/reviews/000709.09kaplant.html

How can it be that almost no one on the planet has ever heard of perhaps this most powerful economic actor in late 19th century France? Because more than anything, those who sell investments in the Emperor’s new clothes can never ever admit and therefore remember that after all is said and done – the emperor was and is naked. There is no money. Therefore Markets are indeed manipulated – or rather, PEOPLE are manipulated. To spend their lives in pursuit of a mass psychosis of nothings. For my part, I’d say, once you have enough of nothing it’s time to move on to something really valuable…like curiosity, applied intellect, love, kindness, air, water, fire, perception, mountains, family, death, Life – the key thing is Life!