As I understand it, the U.S. Bureau of Printing and Engraving has announced it has stopped minting pennies. For me, this is exciting new, because I have two large glass containers, each with, I am sure, thousands of pennies. I had been previously led to believe that once pennies were no longer being minted, prices for all items would be rounded up to the nearest nickel and pennies would be given the value of nickels. So my, say, 2000 pennies will no longer be worth $20, but now be worth $100, making my investment in pennies the most successful investment I have ever made.

Now, no one has yet publically stated that one penny equals one nickel, but I assume that will come in time. The delay may because there is now talk about eliminating the nickel and moving its value to a dime. It is my understanding that it costs the government about a dime to make each nickel, so this would make sense and double the value of my portfolio to $200.  When the dime becomes a quarter, I will be up to $500 and then we are talking real money. For $500, for example, our furnace people can come to our house and say “everything looks good”.

Well, I read the other day that about 90% of U S. money is imaginary anyway. If I write you a check for $50 from my bank account and you deposit the check into your bank account, no money moves from one to another. We just pretend it does. And our bank supports our imagination by sending us every month a piece of paper showing how much imaginary money is in our account. And it lets us use that imaginary money to buy real things.

Of course it used to be much different. At one time, real money was the only money. And then, paper evidences of money were printed, but you could take that money to designated places and exchange it for gold. And later, you could exchange it for silver. You can’t exchange your money for anything like that now. What you have, with regard to your paper money, are “Federal Reserve Notes”. The role of the Federal Reserve in this instance is to convince us that this money really is worth more than the paper it’s printed on. And it can only do that by playing on our gullibility, because in fact, outside of our imagination, it is only  worth the paper it is printed on.

Of course, we think it also has the backing of the government.  But does it? And what does that even mean? Inflation can tear its value to pieces.

That gets me to cryptocurrency, about which I understand not very much. But I think I understand this much. Cryptocurrency is just a different form of imaginary money. But cryptocurrencies are not backed by the Federal Reserve or by any other governmental agency. They are only backed by others who are invested in cryptocurrency, all of whom are determined to keep the imaginary value of this non-existent money very high. We will see how long they can do it and what happens if they can’t.

Now here is where my understanding collapses. U.S. imaginary money exists because the Federal Reserve says it exists and decides how much of it should exist at any given time.

Without the Fed, who decides how much imaginary cryptocurrency exists? Naturally, it is the original inventors of the imaginary cryptocurrency concept, who want to make sure the imaginary supply of this imaginary money is kept to a limited amount.

In order to do this, they developed the imaginary concept of “mining” this imaginary money using not pickaxes, but computers. And they developed a way to mine cryptocurrency that is very technical, very expensive, and very time consuming, and which requires a large amount of expensive equipment and uses an unimaginable amount of energy and electricity. All to “produce” something that you can not feel or see, because it does not exist.

But in order you produce this imaginary currency that benefits only those rich enough to play a part in this game, you (1) have to build large data centers that eat up a large amount of land, (2) and use an inordinate amount of electricity, putting a strain on real customers of that electricity as they see prices rise and capacity diminish.

What is the government to do in this situation? It could limit and regulate cryptocurrency, or it can ignore the problem because one of the big beneficiaries of the sordid business is the president of the United States himself.

Getting back to my pennies….