The Death Of Money
, by Joel Kurtzman, Simon and Schuster, 1993, 241pp.
I read this book in 1996 and it frightened me even then! It is ESPECIALLY appropriate reading today as we have seen worldwide economic meltdown! You will understand WHAT HAPPENED and WHY. We have allowed a group of "smarty-pants" economists to invent a NEW KIND of money never before seen. It is MEGABYTE money and exists only as blips in computers all over the world.
THE MEGABYTE ECONOMY is now scores of times larger than THE REAL ECONOMY. Money now has no tangible backing and exists of itself as a commodity to be traded. We see the rise of "The Transacting Economy" where money is made by whipping the megabytes around in a speculative frenzy of trading to exploit the tiniest descrepancies between currency and other commodity values. Today, the derivatives market totals over 62 trillion dollars -- more than the total GDP of the whole World! It has gotten so way out of control recently because, now, every home computer futures and options trader CREATES more NEW fake money each time they hit the "Go" button! This is WRONG!
Mass quantities of this CREATED money had to be loaned out. But bankers struggled to find borrowers. In the late 70s and early 80s, those were Central and South American countries and Nigeria. The loans went sour as those countries couldn't make payments. The world system teetered on the brink then. Today, it teeters again -- this time from bad mortgage loans which were just the tiny pin that burst the whole speculative bubble.
There are too many quotes in this book to list even a good sample. So, I have included the Table of Contents to give an overall feel for the material. The last 5 chapters discuss social impacts of all this economic insanity.
My favorite quote is on page 126 of Chapter 10: "The global economy, where real or imagined facts move markets, functions like a mystic or an individual on LSD. Attention, pure and uninhibited, is drawn not to what is true or important, but to everything equally. As a consequence, anything that catches the market's attention can move it."
--RPC, Thursday February 19, 2009
TABLE OF CONTENTS
Ch.1 MEGABYTE MONEY: How vast networks of computers linked together have created a new global form of highly volatile money and displaced governments in importance.
Ch. 2 THE QUANT FACTOR: How mathematicians and rocket scientists have replaced stock pickers and traders in the world's money markets and shortened the time frame for investing.
Ch. 3 THE ROOTS OF MEGABYTE MONEY: How Reuters Holdings invented the new electronic economy a century ago -- and continues to exploit it.
Ch. 4 A WEIGHTLESS DOLLAR: How President Nixon, choosing expediency over good judgment, inadvertently created megabyte money.
Ch. 5 STORING VALUE: Why megabyte money behaves differently from gold-backed money, and why economists fail to recognize that fact.
Ch. 6 CREATING MONEY: How The Fed was set up to avoid banking failures and issue money but ended up losing power and influence to the private sector.
Ch. 7 THE GLOBAL MONEY-MAKING MACHINE: When money making goes International outside the control of governments.
Ch. 8 THE ELECTRONIC ECONOMY GOES HAYWIRE: When an information overload caused the single world market to collapse with trillions in losses but few people hurt.
Ch. 9 ADVENTURES IN CYBERSPACE: Why the crash of October 19, 1987 was different from anything that preceded it.
Ch. 10 ELECTRONIC LOSSES: Why so few investors were hurt in the largest collapse in history.
Ch. 11 THE MONEY EQUATIONS: How a handful of computer "nerds", mathematicians, and Nobel prize winners propelled Wall Street away from trading products and into a realm of pure abstraction.
Ch. 12 MAKE WAY FOR THE PROGRAMS: How computer Programs were developed to hedge risk and manage money.
Ch. 13 COMPUTERS RUN THE SHOW: The invention of portfolio insurance and how it contributed to the debacle on Wall Street.
Ch. 14: OPPOSING FORCES: How the electronic economy is adding to instability not just in the economic sphere but in the social sphere as well.
Ch. 15 COMPLEXITY AND THE MARKETS: How even the most exquisitely complex and sophisticated systems are also fragile.
Ch. 16 THE CENTERLESS WHOLE: How the global electronic market is fueled by fads and fed by rumors to create shorter time horizons and more volatility.
Ch. 17 THE SOCIAL COSTS: When the economic unit is the Globe, where do people fit in?
Ch. 18 STABILIZING AN UNSTABLE WORLD: How volatility can be buffered to prevent widening chaos and upheaval.