In a blog about Finance , I think it is good to talk about an enabler of Finance - Cryptography. Today millions of dollars are being transferred all over the world on its basis alone. It secures all data traveling through the net. But how does it work ?
Let us take Jack who wants to make a deposit with his Bank. He decides to do it over the internet . But unknown to him is the fact that his soon to be ex-wife Jane, a supreme computer hacker is monitoring all data flowing from jack's computer so she can't be cheated out of any money in her settlement.
Now Jack does not know all this. He logs on to the bank's website and clicks the necessary buttons and the money goes to the bank, but this data also goes to Jane. Now can Jane find out the information from this data. In today's day and age - No. Why ?
Well Jack has used public key cryptography to ensure the safety of his data. How does this work ? Let us for simplicity imagine that if Jane knows a special number she will be able to break Jack's code. So how does Jack ensure the code remains secret ? He knows about a certain mathmetical function of the form R = p^q ( mod (N))
Now the Bank has a public key ( or say 2 number which everyone knows ) called q,N . The bank forms N by multiplying 2 prime numbers a,b ( say 3, 5 ) and chooses q which is relatively prime to the (a-1) x ( b-1 ) , say 7. In this case q=7, N = 15 ( Usually they are very large prime numbers ). It then makes it available to the public . Now say Jack wants to send the number 2 ( p) ( which tells his bank to make a deposit to his account ) to the Bank. He hence uses the formula and calculates R ( in this case R= 2^7 ( Mod (15) )= 8 )
Now Jane knows R = 8, q = 7, N =15, So she should be able to find out p easily ! Right ? Wrong ! The mathmetical function is a one-way function , which means calculating R is easy once one knows p, but it is impossible to figure out p given the value of R . But if one knows the components of N ( i.e the 2 prime numbers chosen by the bank ) one can easily calculate p by a special method given a value of R.
Thus it is possible to transmit data for Jack without Jane getting to find out about it as she can't find out p, but the bank is able to find out p, and based on it make a deposit in Jack's Account leaving Jane hanging in the air.
[Note: This is a very simplified version of explaining public key cryptography. If any one wants to know more read the book by Simon Singh called the 'Code Book']
Another factor to consider when studying the degree of inequality in a society is the amount of income mobility. Income mobility refers to the ease with which workers can move up and down in the hierarchy of earning power. If the rich always stay rich and the poor always stay poor, then an unequal income distribution is a permanent and serious problem. But if they can move then it is much better for national economy.
Top government sources said the inflation figures for March had initially been projected at 406 000%, but were still being computed as the Central Statistical Office (CSO) continues to fiddle with the consumer basket. However, the CSO projection, sources said, has placed inflation for May at over 1 200 000% if the trend continues. The central bank introduced the $500 million bearer cheques for the public and the $5 billion, $25 billion, $50 billion agro-cheques for farmers. The new notes come hardly two weeks after the introduction of the $250 million bearer cheques. The Zimbabwe 10 million dollar note pictured below, is currently worth about only $4 (USD) on the black market.
Until 2000, Zimbabwe was the 'breadbasket of Africa', exporting wheat, tobacco, and corn to the rest of the continent and beyond. Zimbabwe contains the most fertile farmland on the continent, and until recently was a tourist Mecca, home of Victoria Falls, one the seven natural wonders of the world, and numerous game reserves, now nearly emptied by poachers and starving peasants. It’s hard to comprehend exactly what living within such a catastrophic economic crisis actually means. Imagine going to the pub buying a drink and then two hours later returning to the bar to order the same drink again but only to learn that the prices have now doubled – would you pay?
Ans.) The death of Game Theory ( in practice at least).
Let us find a small kitten and put him in a box. And put the lid on. Add in the box a tiny capsule of cyanide gas, which breaks when the cat steps on it and kills the cat. Now close the lid of the box.
