Aplutism again

From: NH

To: LF, DSL, PMA, TP, RW, BJ

Subject: Once more, with feeling

Check out:

http://www.rollingstone.com/politics/news/the-last-mystery-of-the-financial-crisis-20130619

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"Lord help our fucking scam . . . this has to be the stupidest place I have worked at," writes one Standard & Poor's executive. "As you know, I had difficulties explaining 'HOW' we got to those numbers since there is no science behind it," confesses a high-ranking S&P analyst. "If we are just going to make it up in order to rate deals, then quants [quantitative analysts] are of precious little value," complains another senior S&P man. "Let's hope we are all wealthy and retired by the time this house of card[s] falters," ruminates one more.

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Please note that these are the ratings agencies. They are the official determiners of value; the other money men turn to them when they want to know what is worth what.

And so once again I return to the aplutic question! Does money exist? Is there such a thing? Does the concept make sense?

I realize that you consider aplutism fallacious, and I myself am a partial plutist; money does make some sense in some circumstances. But I am skeptical about it making sense in others; note the quotes above. I wouldn't keep asking this question if the money men themselves didn't keep raising it.

I am perfectly comfortable with the inner reality of social games, if they are consistent. Strikes are strikes, balls are balls, outs are outs, runs are runs, even if the blind crooked umpire miscalls them. But if the game's Calvinball, then to what reality does play refer?

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RW:

I may have diagnosed Nate's position:

There is a common sloppy confusion between valuation and money that is, under normal circumstances harmless.  When my stock goes up from $1000 to $2000, it is commonplace to say, "I made $1000.". That is, of course, untrue. I have not made $1000 until I have sold the stock, the transaction settled and all fees and commissions paid. The proper statement would accordingly be, "The estimated value of my portfolio has gone up by $1000." Insisting on this in ordinary discourse would be seen approximately as pointless as insisting on the distinction between "octet" and "byte" in everyday conversation. In a normal market, I can reliably exchange my stock for something close to its recent close, just as on normal machines, the byte is 8 bits.

Nevertheless, there are occasions when the distinction is critically important. Bubbles and massive frauds are just such an occasion.  If my tulips have rapidly gone up in value from 200 guilders to 20,000 guilders, it is a capital mistake to say that I have gained 19,800 guilders. (pun intended)  I had tulips yesterday, I have tulips today, and I will continue to have tulips until I find someone to actually exchange 20,000 guilders for my bulbs and the transaction is settled.

Those who conduct massive frauds sometimes rely on just this sort of confusion. When deliberately used as a blind, it now becomes a lie.  Nate has seen the fraud, and rather than disbelieving the lie (value is money), he enshrines the lie and come up with other conclusions, much as Tycho, unwilling to admit that the Earth moves, came up with his clever, but fallacious model.

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PMA:

Nate, that's not money, any more than tulips are money. It's what an extraordinary popular delusion got these people to give money for...

http://www.gutenberg.org/ebooks/24518

Again, why do you question money? This is value falling apart.

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BJ:

Just because a game has some crooked aspects doesn't mean that the goal of the game or the means by which the game is measured doesn't exist, or that such goals or measures are inherently a bad thing, it just means that the referees are somewhat incompetent or crooked and we need a better system for playing the game, or at least measuring who is winning, what a successful shot is, etc.

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LF:

"Money" (the trade standard) exists, but the "financial industry" is a complete scam -- and should be destroyed.

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NH:

A wonderful set of responses! Hard critique of my follies; yet it seems to me that all of you are partially aplutist. You affirm the existence of money, but also admit the existence of fraud and delusion. So how much can you trust the money in your hand, or on the books? That is the question.

RW and PMA both agree with me that value is not money; but they put the reality on money, not value, which seems paradoxical to me. They say that money is real, and it measures value, but sometimes value is fictional. But when money is the measure of a fiction, isn't it then also a fiction? In fact, isn't it always a made-up thing, a social convention not found in nature? Whereas value is a lived experience. Food and drink are valuable, as are clothing, shelter, and sanitation. All of these things can be had for money, but they do not disappear when a bubble bursts. The tulip is still a tulip even when the bottom falls out of its price; which then is the illusion, the tulip's price or its value? Also there are things of value which can't or shouldn't be had for any amount of money. So this is my upside-down, Tychonian theory; that value is real, that money is its attempted measure, and that money is always a fiction, sometimes a delusion, and often a fraud.

Kudos to RW for erudition, and to LF for concision.

BJ calls for reform, LF calls for revolution. Riddle me this: what is the difference between a libertarian and an anarchist? Answer: $100,000.

I end this email with the words that inspired me to start this thread:

"Lord help our fucking scam."