Feb 18, 2002
Allfirst Financial announced the loss of 750 million dollars last week in Baltimore. The bank blamed the loss on a currency trader who either made bad or fraudulent trades in currencies over the past year.
Allfirst was quick to say the problems concerned only this one trader and would be thoroughly investigated. They wanted to reassure their customers that nothing much is wrong. Some point out that a loss of 750 million dollars is nothing to the parent company of Allfirst, Allied Irish Banks, the largest bank in Ireland with assets of 75 billion dollars.
Even if all this turns out to be true, the fact is that even small losses can be the breath of air which blows down the house of cards.
But, in fact, one person losing all this money without anyone knowing it is beyond belief. The head of foreign exchange for Barclays Capital said, “I can’t think of any scenario that a loss like that would happen in a small trading operation. It defies belief.” And he ought to know!
Banks, financial institutions and most corporations frequently trade currency, betting on small rises and falls among the currencies of the world. This makes them a profit on cash not being used at that moment. The Baltimore trader, like all the traders, was simply gambling on the financial markets, but he lost.
The entire world economy has become a giant gambling casino. Every day trillions of dollars streak around the globe by computer seeking profits. This is not money used in the most basic way to provide the goods and services people need to live. No, this is financial speculation.
And this speculation, this giant crap game that all the corporations, governments and institutions indulge in, threatens to bring about a complete collapse of the world’s economy.
Sometimes a crooked trader is caught; sometimes a chief executive is brought up on charges. But the game – using “accepted accounting procedures” – continues. The money actually comes from the work which everyone does to make the goods and services all the members of society need. What we don’t need is capital’s system of gambling – keeping the profits for themselves, forcing us to cover their losses.