A Monetary Thought Experiment.
In the world today when it comes to money everyone’s an expert.
If there is one thing you hear over and over again is people telling you what they think about the market and rarely if ever what they know.
In the pursuit of objective scientific knowledge observation and calibration are the keys to understanding what it is we are observing. The way money and financial markets behave and the specific system dynamics involved are no exception.
The real question is not how money behaves but what is money in the first place?
What is it made of ?
Where does it exist ?
What are it unit dimensions ?
What is are it units of measure?
To do the thought experiment take a bank note out of your wallet, if you do not have one handy take one out of your imagination and place it on the table in front of you and ask yourself the following questions.
Question :How do I know it’s money and not just a piece of paper/plastic?
Answer: Because you can see it.
That is to say the way the information was transmitted from the object on the table to you mind was via patterns of light and nothing more.
Question: What exactly is money?
Answer: Money is information that travels from point to point at the speed of light and nothing more.
Question: Where does money exist?
Answer: As images we store in our memories as pictures and symbols for later comparison.
The reason you recognize a bank note is due to the information encoded in the complex patterns on the note itself which you compare to what you have in your visual memory.
They are there for the specific purpose of making it hard to counterfeit as most printing presses are incapable of printing with such a high degree of accuracy, and if you do have access to the equipment necessary then you have no real need to do it in the first place as there is plenty of well paid work for such machines and it takes considerable talent to operate them in the first place.
Now that notes and coin are somewhat obsolete the patterns on the notes take the form of computer encryption system with same results.
What can we conclude from this ?
That money as we know it is nothing more than information that travels at the speed of light which only and I cannot stress this enough “only” exists in our imaginations.
It is just an imaginary number that we use to exchange real goods and services and I use the term imaginary number as part of a complex number.
More to the point if money and light are to all intents and purposes are the same thing then the question arises.
Does it exist on the quantum level and if so does it obey the laws of Quantum Probability?
This becomes especially important when it comes to our measurement and calibration of time in our charts as the quantum level knows nothing of the passage of time.
It is also reasonable to consider that if money exists on the quantum level and obeys the laws of physics relating to the very small it will only be knowable in terms of a probability density fields and not exact predictions of future locations in time and price. In other words a pricing model such as the Black and Scholes.
Given that all financial exchanges really do is exchange information at the speed of light, the equations we seek may already be well understood science and we just don’t know it yet.
If this is indeed the case then it is also reasonable to assume that it is possible to discover important information about the future variance of the market from existing data with the use of the correctly selected band pass filter that are configured to measure the trend.
Additional Reading in this series
- The All Ords as an Indexed Function of Pi
- Markets as Wave Functions.
- Accurate Measurement.
- Laplace and Compound Interest
- Introduction to Financial Interferometry
- Making Sense of the Gold Price Using Euler.
- Defects in the Roman calendar