Coins and banknotes are now only found in museums, their place in our pockets taken over by smartcards and privately issued e-cash. Our bank accounts are in orbit on satellites, far beyond the reach of the taxman and robber barons. The nation state is no more. And all over the world, cities are declaring their independence. Welcome to the year 2097
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July 2097, and a Sunday to celebrate: the independent city state of London was enjoying its 50th birthday party. Richard Jeffries flashed his smartcard past the household PC and slid himself into the bathtub, wondering how to commemorate the occasion.

"I want to go shopping," he announced. Using the domestic security system, the computer deduced that he was in the bath, and projected the television image onto the ceiling. "What's on at the opera?" he asked, and the Web pages for Covent Garden appeared, details slithering across the screen. He lay back among the bubbles and requested his usual seat. "One for tonight, please." He relaxed as the computer instantly transferred funds from his private account to the virtual coffers of the Republican Opera House. The process took a nanosecond, as the accounts were registered on adjacent satellites. Money - a series of electronic impulses in binary code - streamed through the ether, side-stepping VAT by failing to touch the ground.

This process still gave Richard a thrill of satisfaction. Now most banking was conducted off-planet, there was no way that the robber state could get its hands on his cash. Instead of cumbersome rituals with prettily illustrated bills, he could instantly buy a product or a service from any store or business in the world. Even when he bought a newspaper on the way to work, the actual payment took place - as far as the government was concerned - on a banking satellite in geostationary orbit. The newsagent's scanner got into an electronic conversation with the smartcard in his pocket, and money was switched from his extra-terrestrial account to the Murdoch Orbiter. Nothing could be simpler.

Physical cash now seemed a ludicrous concept. How, thought Richard, as he looked for the loofah, how could people have coped with walking around all day with a trouserful of filthy metal tokens? The weight! And the germs! That, he surmised, must have been the origin of the phrase "dirty money".

Of course, cashless systems had existed for hundreds of years. But cheques had eventually given way to credit and debit cards and they, in turn, had been surpassed by the smartcard. And then the smartcard began to expand its functions, operating not only as money, but as an ID, passport, medical records, DNA print, poll card and his QPR season ticket. Its role as ID helped to facilitate London's post-independence "right-sizing" programme: If you didn't have a bank account, you didn't exist, or "No smartcard, No human rights," as the advertising of one of the bigger banks had put it. Stealing one was a capital offence, and losing one could be tricky - if you couldn't prove your solvency to a policeman, it was his duty to eject you from the city.

Richard strolled out onto the balcony of his Deptford riverside apartment. Pleasure boats were chugging up and down the Thames, and the water looked as blue and inviting as any in post-industrial Britain. Someone was releasing a swarm of helium balloons, each embossed with a gold number 50. Sunflowers, the fruits of global warming, waved in the breeze. London was booming: a lean, prosperous tiger economy reaping the rewards of the dematerialisation of money.

The capital owed much of this wealth to the abolition of the Bit-Tax, a levy on all exchanges of digital information whose dismantling had been as important to the 21st century as the repeal of the Corn Laws had been to the 19th. Although the tax had been talked about since the turn of the millennium, it had proved impossible to enforce. As the old nation states tried to get their cut from the flow of data, a group of wily African countries had opened up a loophole by allowing tax-free transactions on their orbiting satellites. In the way that late-20th-century Britons could dial up sex services diverted via Guyana, 21st-century Britons could open bank accounts on satellites launched by Gabon - and avoid paying the taxman.

Eventually, governments conceded defeat, and went back to the drawing board with an ambitious programme of constitutional reform. Banking, meanwhile, went up into space. Money freed itself from the nation state, and the nation state went into meltdown. Now only the unconnected poor, unable to take advantage of these electronic freedoms, were liable to pay tax - and they couldn't afford their own benefit bills. "Why should London foot the bill for those no-hopers in Hull?" was what Richard's father had said. Better-off Londoners realised that they were going to have to get rid of the hordes of beggars wandering the streets in search of a few credits. How else was London going to boost its economy but by attracting the world's mobile rich - the planet's generators of wealth?

And in the long, hot summer of 2047, three events led London to declare independence. Microsoft's decision to purchase the county of Cambridgeshire proved that it was possible to run a sizeable geographic region as a private company. The burning of Newcastle after a season of bread riots resulted in a flood of compensation claims from those camped out in the ruins. Finally, the revelation that Belgian arms dealers had sold smart torpedoes to the Cornish separatists convinced Londoners that they'd finally had enough, and the general feeling was that the capital, and a nice big swathe of agricultural land, would be much better off without England's troublesome regions. Anyone not making a strong enough contribution to the city's economic life was invited to leave. Businesses and government got together to offer attractive bribes to persuade those on lower incomes to sign away their citizenship. It was the grandest right-sizing programme in British commercial history. The capital cut off the rest of the country like a rotten limb, and was suddenly free to do its own thing. Residual welfare bills were reduced to zero, and since wages in the regions were dwindling to match those of the poorest nations on Earth, Londoners could easily afford to buy water from the Welsh just as they had always bought bananas from the Third World.

All over Europe, the richer cities were declaring independence. Europe reorganised itself into myriad state-lets, some controlled by business, some by robber barons, some by religious organisations. The Vatican had done especially well since it had floated itself on the stock market. Venice tugged itself away from Italy. Totally unsuited to the industrial era, it was now the natural capital of the Information Era, where data magnates marshalled lucrative information by day and guzzled oysters by night. London wasn't far behind, profiting by farming out its industrial contracts to the world's poorest nations: North Sierra Leone, Catalonia, Armagh. Digital money made the process simple, the profits untaxable. Krakov, Madrid and Paris soon followed suit, restructuring themselves on the old Hong Kong model. Beyond their walls, life was problematic. Systems of barter sprang up in the hinterlands, with livestock being exchanged for water and armaments. The dematerialisation of cash had transformed the face of the globe.

Estonia was one of the few countries to survive intact: by cannily organising its economy around the information industries, it had managed to become one of the world's richest areas - a kind of United Arab Emirates of data. Estonia had created information products tailored to the needs of the gangster governments of the former CIS, countries that had chosen to buy in foreign expertise with the fruits of activities that would have been considered criminal a century ago. Muscovy made money from a global network of extortion rackets, Estonia sold them the information they needed to expand and refine that network. All fair game, and one into which Richard was keen to expand.

His company sifted data: there was so much rubbish on the Net that anyone who had a life was forced to employ a sifting firm to seek out the bits they needed. Computers weren't discriminating enough for this process, and, moreover, certain clients required access to texts that were not easily available in electronic form.

He owed his fortune to his mother, who'd told him to specialise and do it quickly. "Learn about something no one in the world knows about - or has the time to find out about." And she'd taken him down to an auction at the British Library, owned by Camelot since the 2030s, and now selling the collection to offset losses on the Global Lottery. "This is money," his mother had said, as her staff loaded up Lot 89, a hundred suitcases stuffed full of leather-bound books and dusty CD Roms. "Get studying."

He'd spent five years converting this data into a manageable form, and another two identifying clients who could make use of it. His mother had been right: it was money. Richard pulped himself a guava and watched the Thames streaming past his window. It reminded him of the flow of his digital wealth from satellite to satellite. And that would keep him in opera tickets for the rest of his life.