It
sometimes seems as though every day another bank or building society
needs to be shored up as fast as possible - or else life as we know it
will come tumbling down. And as the emergency scaffolding becomes ever
more byzantine, so the whole thing becomes ever more baffling to those
of us who didn't do economics at school, and had to have our mortgages
explained to us very slowly, in words of one syllable.
What we do
understand - or, more realistically perhaps, often don't quite
understand but are gobsmacked by - is the size of the numbers involved.
£500bn rescue packages. £37bn bailouts. Responsibility for £260bn-worth
of risky assets. £75bn in quantitative easing. £20bn stimulus packages.
(Not to mention President Obama's nice round trillion-dollar rescue
plan.) That, regardless of your levels of comprehension, sounds
like a lot of money. Where is it coming from? Surely our taxes can't be
paying for all of it? Where is it going? Will we ever see any of it
again? What do all those words mean? I called economists, I called
thinktanks. I contacted the Bank of England. Some were very patient,
others condescending. The Financial Services Authority simply referred
me to the Treasury. Nearly everyone, in fact, eventually pointed me to
the Treasury. The Treasury sounded tired. In the end, I began at
the very beginning. The nature of money seemed a very good place to
start. Money is all about trust. Even cash is only a promise. Look at a
£10 note: "I promise to pay the bearer on demand the sum of ten
pounds." As the economic historian Niall Ferguson puts it in his most
recent book, The Ascent of Money, "Money is a matter of belief, even
faith: belief in the person paying us; belief in the person issuing the
money he uses or the institution that honours his cheques or transfers.
Money is not metal. It is trust inscribed. And it does not seem to
matter much where it is inscribed: on silver, on clay, on paper, on a
liquid crystal display. Anything can serve as money, from the cowrie
shells of the Maldives to the huge stone discs used one the Pacific
islands of Yap. And now, it seems, in this electronic age, nothing can
serve as money too." |