Money & Markets: Smoke-and-mirror money – the incredible vanishing companies

From Engineering and Technology:

Money is no longer a physical thing; it has become an abstract concept, little more than a shared idea. This is why even huge companies are susceptible to simply vanishing overnight. 

How is it that a company like Carillion, with 43,000 employees, can go bust and vanish overnight? How can a listed company, with millions of audited profit and cash in the bank, like a recent retail bakery, suddenly collapse with a massive overdraft and huge losses? How can a financial system or a market support entities with such complex activities whose existence or otherwise is catastrophically binary?

If engineers erected buildings like financial engineers build companies, skyscrapers would be collapsing in every city, in every country, every year. It’s not just small enterprises that fall to bits but huge companies apparently run by super-smart people being monitored by highly paid private and public sector regulators. Even behemoths like GE, an industrial giant of over a century’s vintage, can show cracks.

It wasn’t long after science discovered quantum theory that philosophy came up with the postmodern concept that nothing can be certain.

Not only can a cat be both dead and alive in science, postmodernism suggests we are all in an impenetrable state of permanent inescapable uncertainty, but sadly there is no collapse of probabilities to help us out.

You might doubt it, but postmodernism owes a debt to quantum physics. Stretched metaphors from science and technology are not uncommon. Our brains were said to function like telephone exchanges when telephone exchanges were the pinnacle of technology. Then they were computers when computers became a thing, and now that we have got our heads around simulation, the universe itself might be a simulation. Clearly our brains are like dark matter, predicted to be critical but hard to locate.

So what has this to do with markets?

Money, markets, companies and economics as a whole carry a huge amount of uncertainty with them and are often like Schrodinger’s cat, both alive and dead at the same time....

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