The world has been defying financial gravity for too long: Satyajit Das

Kolkata-born, Australia-settled Satyajit Das (seen here) is that rarest of rare whistleblowers.

An insider's insider in the world of high finance, this world-renowned derivatives expert had been calling attention to the ruinous power of modern finance well before the 2008 crisis hit the world.

We've been defying financial gravity for too long, Das reiterates in his latest book, the engrossing and enlightening Extreme Money, underlining that we must all now end the reliance on financial engineering and return to real engineering and a simpler world.

In an interview with R Rajesh Kumar, he explains what extreme money is and how it has ended up ravaging the world.

Das also reveals his reservations against Warren Buffet and George Soros, states why China might not be growing at all, and lists the dangers that India and the rest of the world faces in these troubled times.

Your book is titled Extreme Money. What is extreme money?

Money, traditionally, was a mechanism of exchange and a store of value. Nothing more, nothing less.

In the later part of the 20th century, though, we began to broaden both the amount of money in circulation and its velocity (that is, how quickly it circulated through the economy).

Initially this was through the banking system when we increased leverage - reduced the amount of capital and liquid assets a bank has to hold. This enabled them to create more debt – liquidity.

Then, we layered financial alchemy on top of that - various techniques which when you strip them apart are little more than ways to increase debt.

Gillian Tett from the Financial Times called it 'candy floss money' - spun sugar but mostly air.

Financial engineering spun real money, expanding it into ever-larger servings - candy floss money - which drove growth and prices of financial assets. This is 'extreme money'.

This allowed money in modern economies - money moved from facilitating business and activity to driving everything.

Of course, in trying to solve the problem, we are resorting to an older form of extreme money - the printing presses.

How that can possibly help is beyond my comprehension?

Image Courtesy: Satyajit Das