Synopsis
The amount of virtual money that circles the globe every day is truly staggering. The Federal Reserve's Fedwire and the New York-based CHIPS alone send out well over $2 trillion daily. Retail systems such as credit and debit cards deliver several hundred billion more. In fact, the combined dollar flow in one day equals over one-third of our gross domestic product for the entire year. Trillions of dollars of ethereal money soar around the globe, perched atop a very narrow "real" money base, and with the recent dramatic growth of the Internet, these vast numbers can only grow. In Virtual Money, the first book-length account of the electronic money phenomenon, economist Elinor Harris Solomon takes us on a fascinating tour of money's brave new world, offering an informative look at the pluses and minuses of virtual money in its myriad forms.
Solomon provides a wide ranging introduction to electronic monies, describing in down-to-earth terms how each system works. Starting on familiar ground, with gold and paper money, she examines the growth of the credit card from the mid-sixties, when it was a status symbol for the wealthy, to its present nearly universal use throughout America, and she offers an engaging discussion of exotic new e-monies, such as "Smart Cards," e-cash, electronic wallets, and cybermoney, as well as upcoming innovations such as electronic benefits transfers (EBT), which may replace food stamps by 1999. Equally important, the book offers a clear picture of the advantages and disadvantages of electronic money. Clearly there are great benefits to consumers, investors, and corporations, as goods and services competing in world markets can be purchased instantly from anywhere across the globe. Yet there are hazards as well. For instance, the very size of virtual money movements creates an enormous float that exceeds the amount of monetary reserves to back it up at any given moment. Digital glitches can mean chaos, as in 1995 when a snafu that delayed the opening of Wall Street's Big Board by just 60 minutes caused the Nasdaq Composite to fall 27 points. Moreover, we face increased risks of fraud, piracy, and invasion of privacy, as well as threats to national security. Solomon takes us inside the world of international money laundering--a three-hundred-billion-dollar-a-year business--to show how today's vast electronic wire transfers help conceal illegal activities. For example, in 1994, two agents for American Express Bank International were convicted on eleven counts of money laundering and four counts of deceiving the Federal Reserve. Their countless wire transfers of seven figures had proved far simpler than smuggling duffel bags of cash across the border.
Whether describing sophisticated encryption methods, or the Russian computer hacker who managed to steal $400,000 from Citicorp, or the behind-the-scenes transactions of a simple credit card charge, Virtual Money is an illuminating look at a very recent phenomenon, one that can only grow in importance.
About the Author
About the Author:
Elinor Harris Solomon is Adjunct Professor of Economics at George Washington University. She was a Financial Economist with the Board of Governors of the Federal Reserve System and Senior Economist with the Antitrust Division of the Department of Justice.
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