Wednesday, October 10, 2007

Jonathan Coe on the Illusory Nature of Banking

Banking, as he once told a television interviewer, had become the most spiritual of all professions. He would quote his favourite statistic: one thousand billion dollars of trading took place on the world's financial markets every day. Since every transaction involved a two-way deal, this meant that five hundred billion dollars would be changing hands. Did the interviewer know how much of that money derived from real, tangible trade in goods and services? A fraction: 10 per cent, maybe less. The rest was all commissions, interest, fees, swaps, futures, options: it was no longer even paper money. It could scarcely be said to exist. In that case (countered the interviewer) surely the whole system was nothing but a castle built on sand. Perhaps, agreed Thomas, smiling: but what a glorious castle it was ...

--From p. 310 of Jonathan Coe's The Winshaw Legacy: or What a Carve Up!

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