Posts Tagged ‘trading’

“Yes”, the ‘I’ says. “You shocked me with what the real world looks like beneath the surface. I will be open minded and look at things with a sense of wonder. You have given me enough reason to do so, but….”

Yup. There’s always a ‘but’ at the end of every good sentence. Go on.

“The real world I live in day-to-day is not weird at all, like the world of atoms and energy you showed me. In fact it is very orderly. There is nothing at all that I can look at and wonder! ”

You are right. It is not. It is very orderly. If it were to be like the world we just saw, it would be very different.

I designed a small game for us to play. It’s called the ‘Quantum economy‘.


Here’s how it goes. In the game, the financial sector contributes close to 40% of an entire country’s domestic profits and nearly 25% of the country’s GDP. But people are clever. They do not feel upset or angry with these companies. They read their economics textbooks. If one sector is making such huge profits, it has to be the most productive sector in the economy. So, they conclude – that’s the place to be in. So, this is what happens

Everyone in the world joins financial services.

You wake up in the morning. You take some particles (money) and go over to your friend’s house. You offer him a different particle (loan). He then burns up the original particle (money) and uses the fire (energy) to make a cup of tea. Don’t worry, the original particle (money) is not wasted. It is counted as part of the country’s GDP, since it was consumed. So, the government is happy. The country is growing. What to do for collateral? You take your friend’s childhood photo. You quickly rush back home.

You log in to your PC. Open the loan. Make a few bets on the loan. Make some side-bets that the loan will default. Cover the side bets and place a bet that the side bet will fail. In no time, you will create a new particle (a derivative) almost six times the size of the original particle (loan) you gave your friend to burn.

You then take the new particle (derivative) and go to another player, who will register it as another particle (asset). You go to another player who will give you a new particle (a loan), based on the asset as collateral. You then take this loan and go to an emerging market and buy up more particles (stock) of any company that begins with the letter ‘L’, for luck. You know that as you submit the trade, a mysterious particle called a high-frequency trading computer somewhere in the world, will recognize your intention and create demand for ‘L’. That raises the price and everybody’s happy there as well. You make profits.

You buy a new particle (loan) based on the profits as collateral and then go through your son’s chemistry textbook. You search through the periodic table and pick an element – say palladium. You use the particle (loan) to buy a lot of new particles (shares) in palladium. You then quickly write a few blogs on how all computers of the future will be built on palladium. Palladium prices start to rise. You profit. You are happy. You use the profit to create a new particle (loan) to return the original particle (loan) you took earlier in the day.

All elementary particles (money, loan, deposit, investment, expense, debt, equity, asset, and liability) will have the ability to change into each other all the time, and even behave differently depending on the observer (accounting rule used). You will know that they do not have any real essence. They can’t hurt you nor can they make you happy. So, you are at peace.

By sunset, you and your friend sit in the courtyard and watch. Several bubbles of particles that you created during the day (loans, assets, shares, commodities) go up in the air. Some of them burst and you clap your hands with glee at the spectacle. One of them burst too early, close to your face and you lost some energy (profit), sooner than you expected. Uh-oh! Trouble brewing; But you don’t worry. You quickly change yourself to a new particle (Bank holding company), go the Fed, who will then give you more particles (money) to play at 0% interest.

You go to your friend’s house the next day.


Of course, there will still be some silly people making real products and building real things. Soon they’ll get enlightened. They’ll pull down the shutters, stop making ‘useful’ products like anti-wrinkle cream and high-bounce shoes and join the game. Everyone will soon be making real money. We’ll only need a few bags of popcorn, some wine and movies. Over time, lesser trees will be cut. Nobody will waste time mining or drilling. Greenhouse gases will be reduced. The environment will be spared and over time the planet will heal.

Pity – no one will take anything seriously, if we keep playing like this, with empty subatomic particles. Even if we were to build such a game, would anyone be willing to play this all their life?

I wonder!

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