When I removed the inside moldings around a window in our house, 1 found six old pennies. Since the house had once served as a kindergarten, I supposed that playful kids had pushed the coins into the space, making a kind of time capsule for me to discover so many years later. It was fun to notice that one of the pennies was zinc, minted in the years of copper shortage of World War II suggesting a time for the kids’ game. The copper cents were greenish with age.
Then a thought occurred to me. I wondered if the Washington bureaucrats still counted the six cents as part of our national debt. Does every old house harbor hidden pennies, hidden national debt.
There must be billions of hidden pennies, and it is possible that our national debt is far greater than admitted to us by our leaders.
The thought depressed me. After all, pennies are a product of the mechanical age. They were and still are the product of a relatively primitive technology: the minting machine. Even the fastest coinage press is limited in its production to the laws of mechanics, and can only make one coin with each stamping. Such laws held for and still rule the printing presses, which make our paper money.
My gloom deepened because I knew well that we have left the mechanical age and are now in the age of the electron and its familiar partner, the computer. Therefore, the units of debt are no longer pennies or dollars or any physically expressible unit, which might actually be mechanically produced. Rather, the true units of debt are tied to the ever-increasing speed of information transfer by electronic device. Expressed in nano-seconds, debt has become liability for electronic information
The flip side of this coin says that wealth is no longer expressed physically, as it once was, in bars of gold. At this moment in time, wealth resides in the possession of Information, encoded in electronic form. The National Debt may therefore be assumed to be spread as electronic information in computers throughout the world. The information moves at an awesome rate. The owner of this dollar denominated information is the modern parallel to the bondholder of more primitive times.
On the other hand, if kids could hide pennies in the mechanical age, can electronic information he wandering around unknown to those who calculate the debt? Is it possible that, somewhere in the computer-modem-satellite network of information, there is an electronic pirate, who has the electronic age equivalent of great chests of pirate loot?
Even more sepulchral: If a counterfeiter, in the last stages of the mechanical age, simply printed hundred dollar bills on his color Xerox, why couldn’t the counterfeiter of the electronic age merely hack Into the computers of the banking system and transfer dollars to his off-shore accounts?
So the final recipe for electronic terrorism becomes clear. The medium of terror is no longer the bomb. Terror now resides in the electron. In the future, wild-eyed terrorists will purchase Cray Research Mega Computers and spread disaster by hacking into the worldwide electronic net of information about money and injecting errors into the system. The Reign of Terror will not be symbolized by the guillotine, but by the mega-bite of false information about money.
I cannot expect those in the federal bureaus to understand my concerns, and that is why I am writing this. I have become convinced that the major problem for the United States, and perhaps for the entire world, Is that we have an aging bureaucracy which does not comprehend the nature of the Information age and its impact on economic decisions at all levels.
One simple example will make my point. In the Federal Reserve System, decisions about the amount of money to create, electronically, by simply adding digits to the consumable reserves in the computers of the banking system, are made on the basis of the “money supply” counted in several ways. But, as I have said, the count is seriously flawed, because much of the electronically encoded information about dollars is circulating in computers whose information is unavailable to the counters.
To stay with my metaphor of kids and pennies, many electrons are snoozing quietly in the Swiss Alps, on the placid islets of the Caribbean and in nooks and crannies far beyond the eyes of the Fed. When the central bank adds, reserves based on its spurious count, we may confidently assume that a good bit of each addition joins the electrons already in hiding.
But, do our aging bureaucrats show signs of comprehending such huge changes? I do not think so.
Here is a test to put to all that work in government offices, which make financial decisions:
1. What is index arbitrage, when done in the foreign exchange markets?
2. How might one put on a butterfly spread in Swiss Francs versus the dollar?
3. Is it legal for an American citizen to send a personal check to a foreign bank, which has no branch in the United States, and not report the transfer?
4. Name one form of hedge used by American grain exporters in which the cost of the hedge leaves this country.
5. What impact will the North American Free Trade Treaty have on the ability of the Vancouver Stock Exchange and Mexican Bolsa to sell direct, to American citizens, without registration?
Here is a bonus question for those who answer three of the above questions correctly:
6. What contribution to the costs of the American bureaucracies do foreign workers make, when their products are imported into the United States without tariffs?
Dick DeBold
email: rcdebold@mindspring,
Born July 20,1927, New York, NY Married, September 27, 1957, to Marjorie Cope Warren. I son, William John DeBold. Education, The Stuyvesant High School, NYC, 1945, Arista The New York state Maritime Academy, 1947. Ensign, USNR Ships Officer 1947-50 Various ships and steamship companies Licensed as Master, expired due to injury. Naval Officer, Korean War 1950-1953 (Now Lieut. SG., ret.) BA, University of California Berkeley, 1957. Phi Beta Kappa, Highest Honors. Major Psychology. MS, Psychology, Yale University, 1958 Ph.D., Psychology, University of California, Berkeley, 1963. University Teaching Fellow. Teaching Experience: Wesleyan University, Asst, Assoc. Professor 63 67 Harvard University, Visiting Assoc. Professor 1966 Hobart College, Dean of the College 1967 68 Long Island University, Professor 1969 84 Long Island University, Professor Emeritus 1984 pres.