Three Penny Candy for a Nickel

Responding to a question, Kalam said the nuclear non-proliferation treaty has become useless as cyber war would be more devastating for all the countries with networked financial and economic resources.

Rather than insert an extension into the previous page, I decided to post separately. I've spent a free afternoon trying to follow the ins and outs of our economic system, as opposed to the system of making and selling things. I also borrowed an e-book, Through the Looking Glass, from the library. Guess which one makes more sense. Hint: it also contains some great illustrations of what looks like a fun tea party.

A small entertainment can stand in for the current state of affairs, as best as I can sus them out. Suppose I asked you, the reader, to dig into your pocket and lend me three cents. The understanding would be that I would return your three cents in ten minutes along with an extra penny for your trouble. Now in our part of town, three cents is enough to buy a penny candy and you might assume that that was my plan. Nope. Upon receiving the pennies, I discover that their value is in fact one million dollars. Scoff all you want, but my rating agency has confirmed this fact. (it works real darn quick cuz I'm the owner and have a deadline) Since I want to turn this serendipitous windfall into regular money you can use at the grocer, I insure it with my very own insurance company. This is fine because now my insurance company has a million dollar account in paper debt. Discount the paper by $20 and AIG will buy it and in turn sell it to Uncle Sam. I'm left with an insured, AAA piece of paper, which I sell to the Fed, and still hold your three pennies. I return two pennies and intone the magic words: market swing, front loading, management fees, and of course, Our Way Of Life. Sadly the price of penny candy has gone up because the new millionaire on the block is willing to pay a nickel for them.

In real life, there are more people on the chain, so the individual profits are smaller, and somewhere on the concatenation a spoilsport might call the debt. It crashes, we bail the participants, a speech or two and maybe a baby for the wolves, then back to tending the Engine that Pulls our Economy. Sorry, even when you study, follow the math, look up the numbers and references, and make a good faith effort to understand, it makes about that much sense.

The Bill's Not Virtual

Computerized Stock Trading: Most of those trades aren't coming from trigger-happy day traders and mutual fund managers with billions of dollars at their disposal. It's a flood of machine-gun speed fury coming from an army of computers programmed to obey complicated algorithms that are hyperactively buying and selling.

In other words, the original idea of a stock being a share or investment in a company, i.e. Aunt Mary saving for her retirement or Dr. Tan building a nest egg, has been ditched in favor of a Second Life style virtual game. Producing a product or service doesn't seem to have much to do with anything. All well and good as far as it goes, but add to this lark a Government entity (the Fed) that pegs the value of virtual money to real money, i.e. markers exchangeable for real goods or services , at a strict one to one. An electronic hick-up awards a million e-dollars to Princling, Princling and Lickdicker, the Fed dutifully prints up the cash, and the market readjusts the value of your stash to keep everything on an even keel. Boy howdy, you're in the game without having to lift a finger. Mention the idea of a market determined exchange rate from virtual to real and you too can learn the definition of constructional dyspraxia. (but it sez I produced the equivalent of 60,279 bushels of wheat by clicking this here button. It's right on the screen...) At your next dinner party, try serving a picture of the meal to get a sense of where the problem lies.