The discussion about computers is interesting, but what is not realised is
that one of the present-day uses of computers is going to be our downfall.
At present, the use of computers in the field of finance is producing a
world which is as unreal as the computer games that my grandchildren play.
Computers have allowed a world of finance to be created in which 49/50ths
of all the "money" in the world is really only created within computers,
and doesn't exist at all. When the chips are down -- and it cannot be long
delayed -- we will discover that a great deal of it has vanished. And can
never be recreated while the present financial regime exists.
It will vanish in the developed countries of America, Europe and East Asia
in exactly the same way as most of the "money" in Japan has already
vanished. That is, almost all the Japanese banks, as well as their
government, as well as most of their major corporations, as well as many
ordinary Japanese, are broke. They are more than broke. They all have debts
that can never be repaid with the insufficient quantity of "real money"
that's available. Their banks have "assets" that have only a fraction of
the value that they are supposed to have. Japan has been treading water --
indeed, sinking -- for the past 10 years. The rest of the world is not far
away from following suit.
The amount of "money" that is being circulated around the world every year
is about 50 times the value of goods that are created. Ergo: most of it
isn't real money at all. It consists of future options, packaged debts,
fictionalised collateral, promises, sophisticated algorithms, hopes and
fears dressed up as expert strategies, and what-have-you. One thing is for
certain -- it isn't money.
The use of computers has allowed the creation of credit which has now
ballooned so greatly that it only has a flimsy contact with the everyday
world of work and value creation.
The world of the Italian Renaissance in which private banks could create
credit was pretty risky, but at the end of the day only individual bankers
and their own customers suffered.
The world of fiat money of the last century in which governments could
create credit at will was much riskier, but at the end of the day only the
populations of individual countries suffered.
The world of computer-created credit which has come into existence in the
last decade or two is the riskiest game of all so far. It has now captured
all the investment banks of the world and at the end of the day the whole
world will suffer.
The Finance Ministers of the developed countries are meeting today in
America wearing their IMF/World Bank hats. You can bet your life that they
will be talking about this unreal (and growing) situation. You can bet your
life that they know that all the central banks of the world added together
can do nothing to prevent it. But you won't hear about this interesting
discussion from the press releases. They won't want to frighten the horses.
That's enough from me this morning. My teapot is empty, and I have to walk
my dog.
Keith Hudson
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�Writers used to write because they had something to say; now they write in
order to discover if they have something to say.� John D. Barrow
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Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED]
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