Money Creation and Pricing Signals

In the last post, we postulated a money creation event and then lightly explored responses from decision makers who had two different theories of money positioned in their minds. Disruptions to otherwise stable work patterns and resource allocations were found. Here we focus more carefully on the financial and economic forces at work when money is created.

Model Justification for "Trade Between Ontologies Needs Hard Money"

The essay "Hard Money, Soft Money, and Economic Ontologies" described the differences between hard physical money and soft ethereal money in a very general way. It then went on to build on the concept that trade between ontologies depends upon physical money. Here we will use a model to demonstrate why this might be correct and add some reservations related to valuation over time periods.

We will build the model by using what might (at first) be considered a two sector model. To dismiss the model as a simple two sector economic presentation would be to miss the essence of the concepts presented. This model is about two ways of economic thinking driven by two different circumstances positioned in the minds of decision makers in each of two ontologies. We use the word ontology in place of 'sectors' to emphasize that the two groupings have, for good reasons, different time-related concepts of 'money'.