This kind of sounds like a fusion of solipsism and monism. Extreme pantheism, if you will. Certainly not a new idea in theology. I believe there have been a couple of Christian mystics who believed that nothing existed save for God; a similar notion was taught by the Alter Rebbe (Rabbi Schneur Zalman of Liady, 18th century, the founding rebbe of the Lubavitcher Hasidim, an ecstatic sect of Judaism): he said "Alles ist Gott, un Gott ist alles." ("un" not "und," as he was speaking Yiddish, not German). I wouldn't be surprised to learn that Sufi mystics have a similar teaching. And I know some Hindus teach that all Creation is but the dream of Brahman while he sleeps.
Personally, although I admit that-- as with most theological postulations-- one cannot disprove this hypothesis; nonetheless, I find it deeply ineffective. It leaves little room for the support of meaning or ethicality in interpersonal relationships, and provides neither support nor motivation for humans to relate to God.
I think theology/religion is only useful if one presumes A) a sane God, and B) the existence of Creation as Other than the Creator. If God is insane, we might as well be atheists, because nothing matters or makes sense anyhow, spiritually speaking, so we might as well make Reason our Master. If only God exists, and our lives and our universe are merely illusion, then what's the point? This whole world is just God playing with Himself, and it's all one thing, and nothing really happens or changes or is destroyed.
Both A and B are as unprovable as any other postulations or hypotheses about God; but they are necessary, I think, if one wishes to operate in the theistic context.
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Dull sublunary lovers love,
Whose soul is sense, cannot admit
Absence, because it doth remove
That thing which elemented it.
(From "A Valediction: Forbidding Mourning" by John Donne)
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