A. Stadlen: "... I must agree with Jerry Friedmann... it is the "phallic symbol" that is now, alas, the universally recognised emblem of Freud's passion. Whereas his true originality (in the first edition) was in the idea that the dream interpreter cannot read off the dream's meaning from a dictionary of banal symbols, but must rely on the dreamer's 'Freier Einfal'."
 
JM: If we advance to Freud's "New Introductory Lectures n Psychoanalysis" (1933[1932] we may read:
 "It is therefore of special interest to us, in the particular instance of the theory of dreams, on the one hand to follow the vicissitudes through which psychoanalysis has passed...and to learn what advances it has made...You will be disappointed in both these directions."(7); " a few formulas have become generally familiar, among them some that we have never put forward - such as the thsis that all dreams are of a sexual nature - but really important things like the fundamental distinction between the manifest content of dreams and the latent dream-thoughts, the realization that the wish-fulfilling function of dreams in not contradicted by anxiety-dreams, the impossibility of interpreting a dream unless one has the dreamer's associations at our disposal, and, above all, the discovery that what is essential in dreams i the process of the dream-word - all this still seems about as foreign to general awareness as it was thirty years ago."(8)  "The associations to the dream are not yet the latent dream-thoughts. The latter are contained in the assotiations like an alkali in the mother-liquor, but yet not quite completely contained in them... an association comes to a stop precisely bvefore the genuine dream-thought" (12) "Can we interpret all dreams by its help ([symbolism]? "No, not at all...Because the work of interpreting dreams is carried out against a resistance, which varies between trivial dimensions and invincibility ( at least so far as the strength of our present methods reaches" (13)
 
 
Just to avoid oversimplifictions in connection to the importance of the "phallic symbol", I extract from an earlier work (1926) "Inhibitions, Symptoms and Anxiety"the following ( my point had to be stated in my own words, presented in the end and underlingned). 
"Affective states have become incorporated in the mind as precipitates of primaeval traumatic experiences, and when a similar situation occurs  they are revived like mnemic symbols... In man and the higher animals it would seem that the act of birth, as the individual's first experience of anxiety, has given the affect of anxiety certain characteristic forms of expression .."(93)...We are inclined to regard anxiety-states as a reproduction of the trauma of birth...anxiety arose originally as a reaction to a stte of danger and it is reproduced whenever a state of that kind recurs" (133/34)... When "anxiety appears as a reaction to the felt loss of an object...we are at once reminded of the fact that castration anxiety, too, is a fear of being separated from a highly valued object, and that the earliest anxiety of all - the 'primal anxiety' of birth - is brought about on the occasion of a separation from the mother (137)  "Each period of the individual's life has its appropriate determinant of anxiety. Thus the danger of psychical helplessness is approprriate to the period of life when his ego is immature; the danger of loss of object, to early childhood when he is still dependent on others; the danger of castratio, to the phallic phase; and the fear of his super-ego to the latency period.  (142) 
I haven't yet found the right lines I need to copy down, so I'll use my own words to sum it up at present:
Every infant/adult passes through successive stages of loss (trauma of birth, loss and separatoin from the mother's breast, fears about harm coming to the cherished penis, loss of the object's love, loss of a place in society...) Since a baby's (and mankind's)  first trauma cannot ever be represented by adequate words and it is the basic one related to beginning to lead an independent life  (the birth trauma) it will mark the following traumas with something "ineffable" and terrible. Freud chose to represent this situation,  using the phallus as a symbol for all catastrophic losses endured by an individual. 
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