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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, 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. She shows
that monetary concepts based on static point-in-time data
are seriously inadequate and introduces dynamic new ways
of thinking about continuous money flows and their power
to move markets in ways never before possible.
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 jut 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 also 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.
Whether describing sophisticated encryption
methods or the Russian computer hacker who managed to steal
$400,000 from Citicorp, or behind-the-scenes transactions
of a simple credit card charge, Virtual Money is
an illuminating book at a very recent phenomenon, one that
can only grow in importance.
Elinor Harris Solomon is Adjunct Professor
of Economics at George Washington University and member
of the Board of Governors of the National Economists Club.
One of the foremost experts in electronic funds transfer,
Solomon has been a writer, international lecturer, and editor
of two earlier books on EFT. She was a financial Economist
with the Federal reserve Board of Governors and Senior Economist
with the Antitrust Division of the Department of Justice.
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