[11948] in Commercialization & Privatization of the Internet
Re: Digital Cash
daemon@ATHENA.MIT.EDU (Peter Deutsch)
Tue Apr 26 03:47:29 1994
From: Peter Deutsch <peterd@bunyip.com>
Date: Mon, 25 Apr 1994 23:39:29 -0400
In-Reply-To: Bruce Fancher's message as of Apr 22, 0:10
To: com-priv@psi.com
g'day all,
Talk about your coincidences. Last week we had this thread
in com-priv on digital cash, electronic money, et.al. and
then I go to the airport to head off on a trip. In
scanning over the local bookstall for something to read on
the plane I find "The Death of Money" by Joel Kurtzman
(subtitled "How the Electronic Economy has Destabilized
the World's Markets and Created Financial Chaos").
I bought this book because in skimming through it I
noticed the first clear and understandable description
I've ever found describing exactly how the Fed controls the
amount of money circulating in the economy. This is
something I've always scratched my head about, since it
seems like it has to be a something _really_ basic (and
thus a fairly simple mechanism) yet nobody I know could
ever tell me how it was done. This guy explains it all in
about one paragraph and it even seems to make sense (go
on, you cheapskates, buy the book and find out yourself! :-)
I've only got a couple of chapters into the book, and the
style is sometimes a little breathless, but I'm enjoying
what I've read so far. The author seems to deal
particularly well with the impact that global coupling is
having on the world's financial markets (which is what
makes the role of the Fed increasingly insignificant in
controlling money supply) and he also goes to some length
to examine the increased volatility that this new global
coupling causes and what it means for the future. I think
the book would be of interest to anyone in this group who
enjoyed the digital money thread.
This all makes compelling reading, the more so since it
was obviously written before the recent bond-market
meltdown (apparently caused by incredible over-leveraging
by speculators and a consequent loss of liquidity when
there was a downturn and all those computer programs
around the world decided that holdings had to be dumped at
the same time. In effect, there just weren't enough buyers
to go around at that point and prices plummented. I think
Proctor and Gamble alone reported losses of something like
$100,000,000. Although it may seem abstract, such losses
are real and do affect us all).
Sobering stuff. In our quest for the ideal perfect market,
we seem to have created a system which is inherently
unstable, and one in which the pursuit of paper profit for
its own sake has replaced a market for consumable goods as
services as the primary engine of the economy. According
to Kurtzman, the market for financial instruments,
derivatives, futures and so (what he calls the "financial
economy") is now somewhere between 20 and 50 times larger
than what he calls the "real" economy.
- peterd
--
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