One of the great benefits of living through the dotcom boom was that it disabused anyone involved of the notion that grown-ups run the world economy – a useful perspective during the current global credit crunch.

It never ceases to amuse me that people who recoil in horror at the idea of living in virtual worlds like Second Life or World of Warcraft, have no problem with US bankers chopping up the debts of the US poor. They have turned them into abstract financial ideas and sprayed them over the global financial system like a sort of ghastly noxious slurry -this is about as virtual as it gets.

In performing this particular bit of imagineering the banks involved forgot to properly evaluate the amount of risk associated with these debts. Of course, this risk has turned up like a monstrously large bad penny.

A counterpoint to this strange, virtual abstraction is the solid, material, dismayingly physical presence of large queues around the block at various branches of Northern Rock - the first run on a bank since 1866.

The one constant for me here is that every ten years or so a smart bunch of young guys – in Enron’s case, the smartest guys in the room – turn around to the world and say they’ve found a way to make water run up hill and porcine aviation a living reality.

We saw it in the massive US savings and loans debacle, we saw it in Enron, we saw it in the dotcom boom and bust, and we’re seeing it again in the US mortgage fiasco.

The interesting thing is what happens afterwards. Each time older, wiser men in suits - like the Bank of England’s magnificently coiffed Mervyn King - appear to restore confidence in the system. There’s talk of bad apples, new legislation, and honeyed, mellifluous rhetoric about judgement and common sense. Then we all forget it about it until the next time.

This all gives me pause because of a curious thing that happened to my father in his retirement.

He was a practical-minded engineer who, toward the end of his life, came perilously close to joining what newspaper hacks call the ‘green ink brigade’ – that caste of misguided souls who spend their free time writing passionate letters about obscure subjects. He became obsessed with crazy ideas about money, banking, and the global financial system, and wrote furious screeds to the Guardian, the Economist and various think tanks about the depredations of central bankers and the wicked fictions of global finance.

As someone with a career that had been more about physics than finance, he was extremely suspicious about what Alan Greenspan called the ‘weightless economy’ – a move to a world in which the trade in services conducted by people as different as barbers and biochemists had become increasingly important. He thought people should make real things, not try to get rich by doing each other’s washing. Yet the inexorable logic of digitisation and global communications means that more and more of what is bought, sold, valued – and hyped - is an intangible passing over global networks.

There’s no question that more and more aspects of our life are becoming digitised, networked, and global. The forces that made him uneasy are getting stronger. I’d like to believe that there are smart grown-ups running the world who understand all these complex issues. On the other hand, during the first dotcom boom I saw a start-up called Pets.com spend over a million dollars on its SuperBowl ad, squandering huge amounts of cash to build brand equity in a sock puppet dog. There was very little that was sensible or grown up in the financial markets then, and I don’t think much has changed. As the saying goes, the older I get, the smarter my father becomes.

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