As early as the twelfth century it was realized that money, like information but unlike material objects, can be made to exist in more than one place at a single time. An early embodiment of this principle, preceding the Bank of England by more than five hundred years, were Exchequer tallies — notched wooden sticks issued as receipts for money deposited with the Exchequer for the use of the king...BONUS
Until the Restoration tallies did not bear interest, but in 1660, on the accession of Charles II, interest-bearing tallies were introduced. They were accompanied by written orders of loan which, being made assignable by endorsement, became the first negotiable interest-bearing securities in the English-speaking world. Under pressure of spiraling government expenditures the order of loan was soon joined by an instrument called an order of the Exchequer, drawn not against actual holdings but against future revenue and sold at a discount to the private goldsmith bankers whose hard currency was needed to prop things up. In January 1672, unable to meet its obligations, Charles II declared a stop on the Exchequer. At the expense of the private bankers, this first experiment with derivative financial instruments came to an end.
Today's Exchequer, distributed across the global banking network, splits digital tallies by the millions in milliseconds: above human scale in magnitude and beyond human scale in time. High-speed trading programs not only have access to unlimited funding; by dividing time into ever-smaller increments they also, effectively, have access to unlimited time, and, in the words of Ampère, "must then be considered as a single opponent whose fortune is infinite." Can this be stopped?
Financial systems exhibit the Gödelian incompleteness characteristic of all sufficiently powerful formal systems: within the given system it is possible to construct statements (or financial instruments) whose value appears to be sound, but cannot be proved within the system itself. No financial system can ever be completely secure and closed. There is no limit to the level of concepts (including fraudulent ones) that an economy is able to comprehend. The system depends on trust.
Establishing a bank requires secure information storage to keep accounts, a license from the government (or an entity beyond government), a small amount of capital, and a large amount of trust... We should be less concerned with loss of money and more concerned with loss of trust. If we have to start over with more trust and less money, is this really so bad? ... Charles II had the right idea. He trusted (and endowed) the small group of oddballs who were forming the Royal Society, and put a stop on the Exchequer. If he had rescued the bankers, and ignored William Petty's band of Natural Philosophers, where would we be now?
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