Why financial heists are getting bigger and we put less value on moneyRogue trading, identity theft, massive debt and broken banks – what do you expect when money is just numbers on a screen?
Emanuel Derman theguardian.com, 29 June 2014
Greenpeace International, an environmental charity, just this month announced that one of its employees lost €3.8m while carrying out unauthorized foreign exchange trades.
It's strange to see rogue trading at environmental charities, gambling away hard-earned money donated by idealists who spared time for Greenpeace’s politely insistent representatives on street corners. Yet, actually, €3.8m isn’t such a large sum.
I was recently a participant in a panel in Mexico City that included Nick Leeson, the Singapore-based options trader who, through years of unauthorized, secret trading in Japanese derivatives, brought down Barings Bank in 1995 with a cumulative loss of about €800m, more than their entire trading capital.
Leeson was trying to cover up and recoup a small initial loss with increasingly giant bets, concealed by fake accounting, and then things accelerated.
"What", the panel asked, "can we do to avoid such situations in the future?"
The answer is: we can't. There have of course been many more such situations since 1995, including Jerome Kerviel, who in 2008 lost €4.9bn at Société Générale through allegedly similar deceptions.
Crooks are a fiat dime a dozen. Leeson’s strategy, for all the glamor of trillion dollar losses, wasn’t very different from the cleaning lady of a man I know. She came weekly and always drank a little of his vodka while he was out. Then she filled the depleted bottle with water to the previous level. He put up with it for the sake of her services, but he wasn’t fooled. It was a fair trade.
What is interesting about financial crooks as opposed to vodka embezzlers is that they can abscond with such vast sums and go unnoticed for so long.
What is it about money that makes it easier and easier to steal larger and larger sums as time goes by? Why do we see scandal after scandal of mind-bogglingly large sums frittered away in bad trades or theft on a scale that would have shocked previous generations?
Money is insubstantial now. It used to be a solid thing – coins or paper. To create it you had to dig, smelt and cast, or at least print. You had to store it in a vault.
Then one day money became vaporous. When we lost our tactile connection to money, we also lost our sense of its psychological reality.
Not only are dollars now digital, but central banks, with suitable lubrication, ease out piles of it in order to bail out banks, corporations and governments. Money doesn't belong to people any more – there's always some sentinel of capitalism behind it, some faceless institution that makes us less connected to the impact of the loss of currency.
How can anyone have any respect for the idea of money, as opposed to money itself? To get back to my original point, it's only natural for people to treat it like the insubstantial, fictional thing it has become.
Embezzlers and central banks show money the same disrespect. The endless runs of stimulus, the billions and trillions being racked up at the Federal Reserve and other central banks, show that money is not taken seriously.
Even bank architecture supports this idea. When I was a kid in the British Commonwealth, banks were imposing temples, ornate teller cages on marble floors sheltered by vast vaulted ceilings. Working in a bank was a profession one could aspire to. Being a teller was a good, if boring, lifetime job, straight out of an Orwell novel like Keep the Aspidistra Flying. Armed guards stood by, ready to try to shoot anyone who dared attempt the bank’s precious vault. It didn’t seem strange to be asked to give your life for a stack of gold bars that had been created at great cost.
Now armed guards are gone. Customer services sit in the open at formica counters with trays of dog biscuits and lollipops. There are cash machines in every convenience store, unguarded. If your credit card is stolen, your bank will refund you the money that thieves take. You’d be a fool, an idiot actually, to die to protect money any bank could replace.
Money isn’t serious any more. Expect to see a lot more of it disappear. more
Tuesday, July 1, 2014
Are we really going to let a bunch of pre-industrial, techno-illiterate, computer-chip idolaters march this country down the road to ruin? Really?
Elegant Technology, Chapter Six
The moment it dawned on me that we as a species were actually going to destroy the biosphere to satisfy the money guys who "only" wanted to reprogram a few computers, I was physically stunned. So I can empathize with the writer below who asks in relation to all the financial crimes these days, "What do you expect when money is just numbers on a screen?" That moment when money becomes nothing more than just a video game is certainly an eye-opener.
The irony here is that it is mostly the folks who own the important computers who know that the supply of money is limitless and utterly ephemeral. It's someone who has to decide whether to buy insulin or heating oil who is almost infinitely removed from the idea that money is just electrons that have been given instructions. Money is so real for most people, countries are thrown into economic catastrophe by politicians elected to serve the public good in the name of those magic electrons.
Of course, the folks who understand the game have a strong vested interest in keeping the money myths alive. And they do a damn good job of it. Try explaining that money is just electrons. Most people are so invested in the myths about money—including the really goofy one that money was more real when we made it from gold—that they usually react the way a very religious person responds to the idea that their god has died. Considering how many people actually worship money, this response is quite logical.
Don't get me wrong, I WANT money to be just electrons. I just do not want this electronic money used to ruin societies and enslave people. That same electronic money could EASILY be redirected towards the construction of a sustainable world. But first we must understand the possibilities of enlightened banking so the electronic money will be better spent.