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He used to be the most powerful banker in the world. Now he's talking like a cypherpunk. An amazingly frank Wired Interview with Walter Wriston about money, the economy, and the Digital Era.

Want to know about the future of money? Talk to Walter Wriston.

Wriston was there at the creation of the modern wired economy, when money began turning itself into bits and bytes and started flowing around the world through satellite transponders and fiber-optic cables.

Wriston bet the bank on technology during his 17-year reign as chair and CEO of Citicorp/Citibank. Under Wriston, Citibank set out in the 1970s to "wire" its customers into automated, online, checkless, international users of "financial supermarkets" based on CATs and ATMs. This "thin branch" of customers wired into a global network would be the engine of Citibank's financial growth.

By the time Wriston retired in 1984 - turning the bank over to John Reed, the wunderkind who had implemented much of Wriston's technological vision - Citibank was America's largest bank, and its investment in computer hardware and software was approaching US$1.75 billion.

Wriston, who has served on the boards of several dozen companies ranging in size from Silicon Valley start-ups to General Electric, is the author of two books on money (Risk & Other Four-Letter Words, 1986, and The Twilight of Sovereignty: How the Information Revolution Is Transforming Our World, 1992). The basis for wealth, he says, has evolved from land to labor to information. "Information about money has become almost as important as money itself," he said - a famous remark now inscribed in the lobby of New York's Library of Science, Industry, and Business.

Wriston is the subject of a 1,000-page biography called Wriston: Walter Wriston, Citibank, and the Rise and Fall of American Financial Supremacy (1995), which regards him as the kingpin of modern American finance. "I'm too busy to read it," says the 77-year-old banker. "That's the past. I'm interested in the future."

You've said the Eurodollar market - the offshore trading of American dollars - is the most perfect market in the world. No one regulates it. No government controls it. Is this our financial future?

The Euromarket was created at a time when American banks were prohibited from paying interest on checking accounts. So all our money began moving overseas. It became stateless money. The Euromarkets are now the greatest mobile pool of capital in the world. Money goes where it is wanted and stays where it is well treated, and that's all she wrote. This annoys governments to no end.

This huge pool of stateless money is destabilizing. It can move instantly, and it does. It's also annoying to governments because the market isn't in any one place, geographically. It resides in cyberspace. London today is the center of Euromarket trading, but if the British put on reserve requirements or other controls, Bahrain is waiting. In just a couple of keystrokes, the whole market could be gone.

Technology has overwhelmed public policy. People keep predicting this will lead to a crisis, but I don't think it will.

Who invented the Euromarkets?

The Russians. They were afraid we'd freeze their dollar accounts, so they wanted to put them in Europe. Bayer - as in aspirin - had its assets frozen during World War II, and they didn't get unfrozen until Bobby Kennedy negotiated their release in the 1960s. So a lot of people are justified in not trusting the US government.

As well as frozen money, you bankers also talk about hot money. What is hot money?

Money that can move. It's the opposite of patient money. But money really has no volition of its own. It all depends on the people who own it and use it. If you get nervous and pull everything out of the market, at the end of the day you'll be holding hot money.

What are the destabilizing influences of the Euromarkets and hot money?

I'll give you two examples: during the heyday of the huge Japanese trade surpluses, the Japanese bought United States government bonds to use up their dollars. They owned a sizable percentage of the American debt. So the folks who specialize in terror wrote articles about how someday, if the Japanese "pull all their money out of America," the government bond market will collapse.

My second example comes from the Arab oil embargo. When the price of oil went from 2 bucks to 20 bucks, people said, "The Arabs are going to own the world," and one day they'll "pull all their money out of America," and the country will collapse.

What happened in these two scenarios when the world was supposedly headed for destabilization? Today Saudi Arabia has a huge balance of trade deficit. They're not paying their bills on time, while the Japanese are trying to sell Pebble Beach for a third of what they paid for it.

Were we ever in danger of a financial meltdown?

It can't happen. If the Japanese own US government bonds, and they decide to "pull out" their money, they have to find somebody who will buy those bonds and pay them cash. Now they have US dollars, which they can't spend in their own country, so they have to find somebody who will buy those dollars for Japanese yen. "The money is always there, but the pockets change," said Gertrude Stein, and she was dead right. Speculators and other destabilizing influences can churn a market, but the dollars in America never change.

Is stateless money moving around the world with increased velocity?

No question about it. What annoys governments about stateless money is that it functions as a plebiscite on your policy. There are 300,000 screens out there, lit up with all the news traders need to make value judgments on how well you're running your economy. Before the Euromarket and floating exchange rates, the president could go into the Rose Garden and make a statement about the dollar, and the world would quietly listen. Today, if the president goes into the Rose Garden and says something dumb, the cross rate of the dollar will change within 60 seconds. This creates what I call the information standard. The information standard is more draconian than the gold standard, because the government has lost control of the marketplace. It overwhelms it.

As the power of sovereign governments wanes, who is left in charge?

Everybody.

"Everybody"? Aren't you really talking about a bunch of 23-year-old yuppie foreign exchange traders sitting in front of their Bloomberg boxes punching up deals? Are foreign exchange speculators really the voice of democracy carrying on a global plebiscite?

Why does the guy who changes your oil at Jiffy Lube have a vote in the presidential election? This is the way democracy works. Whether you're a 23-year-old yuppie with a Mercedes on time or a guy changing oil, we all have the same vote.

But the 23-year-old yuppie churning the foreign exchange market has a lot more influence on world trade than the guy at Jiffy Lube.

Traders are a different breed of cat, I'll grant you that. The US unemployment numbers come out at 5.3 percent. A trader in Frankfurt looks at them and says to himself, "I wonder what that clown at Bankers Trust in London thinks those numbers will do to the US economy? As soon as he makes a move, I'll trade against him." Like any referendum, you have a lot of people making independent judgments, which all come together in the marketplace and show up on your screen as a dollar/deutsch mark cross rate. You can argue that the 23-year-old yuppie with the Mercedes is a very poor judge of the integrity of the United States of America. But no single yuppie is going to influence the market that much, and by the end of the day, the market will have conducted a referendum reflecting the collective wisdom of people all around the world on what they think of our economic policies. This is one reason I'm an advocate of floating exchange rates.

What's to keep the yuppies from flushing Bolivia or some other national economy down the drain?

They won't do that, in their own self-interest.

But hot money jumps in and out of markets all the time. The crash of the Mexican peso is the latest example.

Sure, markets reflect the yuppies' view of the world, but yuppies are also very interested in their ability to make a buck. If the marketplace doesn't share their view, they either switch gears or get run over. Markets are self-correcting. That's why I trust markets more than governments. Governments usually aren't self-correcting, until too late.