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SELL, SELL, SELL! by Zack Breslin

Nearly all of the dysfunctions of financial capitalism that existed pre-2008 are present today but there are also newer, unfamiliar risks. Market trading is increasingly conducted using complex computer algorithms that buy and sell shares in microseconds (one millionth of a second) and in nanoseconds (one billionth of a second). In 2013, a group of physicists published a research paper which identified an “emerging ecology of competitive machines featuring ‘crowds’ of predatory algorithms” in global financial markets, arguing that algorithmic trading had gone beyond the control and understanding of the humans who had designed the system.

These trades now amount to a third of all market transactions in the UK and up to 70% of trades in the U.S. The stock market falls of the last few days can be viewed, partially, as a case of panic selling by Wall Street robots. Of course, it is rational to panic when stocks are falling, and the algorithms that conduct these trades are programmed to respond to economic indicators the same way the very best human traders would, only infinitely quicker and backed up with immense computational power. Needless to say, the risks associated with algorithmic trading are poorly understood but one can imagine a number of scenarios where algorithms initiate a stock market crash similar to 1929. These include malicious hacking, programming errors, and even algorithms designed to initiate a crash and subsequently profit from it. At the very least, algorithms take their cues from stock prices and economic news just as human traders do; there is nothing to suggest that the herd mentality that contributes to stock market crashes couldn’t occur amongst our robot friends.

We live in a brave new world of weird and poorly understood risks to our economic system. But these new risks are complemented by longer standing risks such as speculative bubbles and risk-prone investors. It is worth remembering that history has shown that capitalist economies can function with a high degree of risk for decades, before eventually succumbing to a calamitous crash. A crash is inevitable, but it might not occur in the next ten years. Or it might come next month. SELL SELL SELL!!!



Zack Breslin is the News Editor at The Scum Gentry Alternative Arts and Media. You can read his blog on Irish politics at www.thezackattackblog.wordpress.com or follow him on Twitter at @zack_breslin to keep up to date with his latest writing projects.



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