Monday, March 08, 2010

Abstract Abstraction - The Nature of Banks in the Current Era

Banks are often viewed as repositories of cash, evoking images of vaults with currency stacked to the ceiling. And we talk about the money banks hold as if it actually had substance. In reality, the concept of money is quite ethereal. Money, after all, derives its 'substance' solely and only from our confidence. Money has always been abstract.

Banks, on the other hand, were always places of substance. You put your money in there and they locked it in a safe. "Here for you anytime you need it." They also kept important documents for you and the image of that safe with the big doors made you feel like not only were your documents and money safe, you were, too. But, alas, times haves changed. Now, banks have gone over to the abstract side. Today, banks are not institutions with cash in the vault. Instead, they have become Government-Authorized Digit Allocation Centers.

Think of it this way - the bank operates a computer server on which, for a fee, one is allowed to create an account. Using a numeric code assigned to that account, customers may execute a defined set of transactions with other accounts on similarly authorized servers located around the world. Digits may be shifted from the simplest account (a time deposit, for instance) to specialized accounts through which complex transactions may be executed (brokerage accounts, for instance). At any given time, all or a portion of the digits in those accounts may be converted to a national scrip - paper currency or metal coin - or converted to a printed or handwritten draft drawn upon the institution that operates the server.

In this way, pizza can be ordered from the local pizzeria by entering the correct numeric code on the pizzeria's server authorizing it to notify the bank's server to subtract digits from a hungry patron's account and add them to the pizzeria's account. This is abstract abstraction. You can obtain pizza - actual, real, tangible food for your hungry belly - by entering a numeric code on your computer that tells the pizzeria's computer to notify the bank's computer to create a numeric image on the pizzeria's computer screen.

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