Commentary on the Pitāputra Samāgama Sūtra (XVI)

What is meant by "all phenomena are mere consciousness"?

Nothing whatsoever truly belongs to oneself; it can only be utilized by us, used for a period, yet ultimately cannot be grasped. All external phenomena will perish, and our own body of five aggregates will also perish. What can we grasp? We will die, the world will vanish, everything is unreliable. Even if we were to live forever, the world would still be destroyed. When the Earth is destroyed, when even the universe and empty space are destroyed, the physical body will have no space to inhabit. Therefore, we cannot cling to any phenomenon, including ourselves; we can grasp nothing. Gold, silver, and jewels are also composed of earth, water, fire, and wind; they too are manifestations of the Tathagatagarbha. When the conditions cease, they vanish. Even a trichiliocosm will be annihilated.

If there were no earth element, from where would that solidity come? If there were no Tathagatagarbha, there would be no earth element. All phenomena are manifestations of the Tathagatagarbha; the Tathagatagarbha is the source of all phenomena. Understanding that all phenomena are illusory is what is meant by "all phenomena are mere consciousness".