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History has shown that information grows and spreads and tends to grow and spread at an increasingly rapid pace.
Money is information. Thus, all finance is about information in one way or another.
Right now, we are experiencing the acceleration of the evolution of money and finance.
This acceleration is unlikely to slow down in the near future.
Many of the latest battles in this space have been waged in the world of cryptocurrencies.
The latest prominent name to be linked with this period of evolution is FTX, the cryptocurrency exchange that just recently went into bankruptcy.
The U.S. Department of Justice is now very active in the FTX situation and is also working in many other areas connected with cryptocurrency activity.
“A surge of Justice Department resources into cryptocurrency investigations more than a year ago helped prosecutors quickly charge FTX…,” writes Aruna Viswanatha and Dave Michaels in The Wall Street Journal.
Then they quote Deputy Attorney General Lisa Monaco who says,
“You should expect more!”
The efforts of the DOJ to combat corporate crime “are paying off in the prosecutorial firepower you are seeing.”
So, the government is really in the game now.
About time, say a lot of critics.
“Critics of the U.S. government’s approach to crypto say authorities have been too slow to rein in the freewheeling industry. Exchanges such as FTX are hubs of the crypto market, consolidating under one roof functions that are handled separately in the capital markets by banks, brokerages, and custodians. They hold traders’ assets desp[iteregulators’ worries about loose internal controls, hacks and other customer threats.”
What’s happening?
The New Digital World
The future is digital.
I have been arguing this point for quite a few years now.
It is going to happen, and I am wondering if this year is going to be the tipping point.
I know that the battle against inflation will go on throughout the year. I know that a recession, and even a fairly severe one, may become a reality this year. And, then there is the Ukrainian situation along with other things going on in the year.
But, we are in a new environment. Through the economic expansion following the Great Recession and especially experiencing the dislocations that accompanied the events of the Covid-19 pandemic and following recession, the U.S. economy is really disjointed.
And, we see that in terms of how industries and sectors are responding to the events that have been taking place over the past year-and-one-half. We ask how is the economy doing?
And, we get answers like, well this sector is doing very well and the economy is going to continue to expand. But, then another sector or two don’t behave well and analysts say we are going into a recession.
It seems that different industries or sectors are not connected, for we get a completely different answer about the state of the economy depending on where we look.
Some people believe that this is how the modern world is going to be.
Steven Pinker writes in his book “Enlightenment Now,”
“[A]ggregate statistics like GDP per capita and its derivatives such as factor productivity…were designed for a steel-and-wheat economy, not one in which information and data are the most dynamic sector.”
People are not going to have to focus more on sectors and industries and follow the evolution of information technology and information usage in all the different sectors and industries in order to more fully understand what is going on in those sectors and in the economy itself.
“Many of the new goods and services are expensive to design, but once they work, they can be coped at very low or zero costs.”
“That means they tend to contribute little to measured output even if their impact on consumer welfare is very large.”
Analysts are not going to be able to draw conclusions just from the economy as a whole.
And, this goes particularly to the areas of money and finance.
This is where the world is now.
Evolution Of Money And Finance
I don’t think the regulators have ever really had a handle on how technological change has affected money and its uses.
I ran banks for quite a few years, and I studied them at the Finance Department at Penn’s Wharton School for many more.
Bankers, in general, did not like change, especially technological change, and the regulators liked change even more.
But, change happens. It was a hard fight at the time, but I still believe that the development of Automatic Tellers Machines was a good thing for bank customers and for banks.
Money is a precious thing.
People want to protect it and people want to keep it from being abused.
Change is an uncomfortable thing for the banking world.
However, technology changes…and, banking changes.
But, banking changes and regulatory changes move slowly. And, as a consequence, banking…and finance…are always lagging behind.
And, that is where we are today
We need movement. The world needs movement.
Since so many people have been hurt by the changes in money and finance and because many more are going to be hurt, regulation is going to finally begin to catch up.
It’s A Global Thing
One very important thing that comes out of the cryptocurrency failure is that cryptocurrencies…and all digitally formatted finance… are global.
Money and finance are just information.
Information technology is global.
Cryptocurrencies are all over the world.
Therefore, regulators have got to move.
Expect them to move in 2023. I believe that 2023 is going to be a key year in this space and I think that there are many opportunities for growth, for profit, for excitement, in these developments. I plan to trace these movements and write more about the changing digital world this year and beyond.
This world is going to be happening regardless of inflation, recession, or world conflict.
This is where the money is.
Let’s see what happens.
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