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New "Circuit Breaker" Imposed To Stop Market Crash
Lucas123 writes "The SEC and national securities exchanges announced a new rule that would help curb market volatility and help to prevent 'flash crashes' like the one that took place on May 6, when the Dow dropped almost 1,000 points in a half hour. That crash was blamed in part on automated trading systems, which process buy and sell orders in milliseconds. The new rule would pause trading on individual stocks that fluctuate up or down 10% in a five-minute period. 'I believe that circuit breakers for individual securities across the exchanges would help to limit significant volatility,' the SEC's chairman said. 'They would also increase market transparency, bolster investor protection, and bring uniformity to decisions regarding trading halts in individual securities.'"
What happened on May 6th was that sell orders were present without matching buy orders for an instant, and that allowed some really wacky trades to complete... nearly every Dow and S&P 500 component was affected, and some ETFs even traded for a penny a share for that brief instant. Then when news got out that there was bargains to be had, the buy orders started showing up and things returned to a run-of-the-mill down day.
Now, the NYSE and NASDAQ have always had this circuit breaker rule that allowed them to call a "time out" where they wouldn't process orders in order to draw attention to the wacky situation and give all involved time to react. The problem is that these new "market centers" allow trades to be completed rapidly, but also without the same oversight rules. While the big exchanges had the time out in effect, orders simply routed around them and the wacky drop continued. So, now the SEC is taking the NYSE/NASDAQ rules and making them their rules, so all the new players have to observe the timeouts. That should fix this problem.
I'm so saddened by these stories about stock traders getting electrocuted. It was about time they added circuit breakers.
There's no -1 for "I don't get it."
If you follow this sort of thing, you'll remember that this isn't the first huge event caused by automatic trading triggers. Pretty much everyone uses them and if too many of them think alike, it's bad news. The real mystery is why nobody blamed this first when it's a lot more obvious than some idiot with a fat finger typing a B instead of an M or something. I think we would have heard from that guy or had a way to trace a billion dollar deal somewhere in the system in about 1 second and have their face on the news.
Google's Super Secret Search Algorithm: SELECT @search_results FROM internet WHERE @search_results = 'good'
This is what happens when people who aren't competent in a field start dictating the activities in it.
How many legislators are Series 7 licensed? Series 66? 63? 6? Do any of these buffoons know how the market works? No floor also means no ceiling, there is no cap to how much an investor can make/lose.
The story behind the flash crash was foretold more than 20 years ago: VAXen, my children, just don't belong some places.
We tried listening to the stock market "experts." And look how well that worked out!
There's no -1 for "I don't get it."
This regulation will only strangle growth and innovation, slowing our economic recovery. But I guess it's easier to carry out a regulatory vendetta than it is to appreciate that the simple, universal truths of Austrian economics.
Nah. We don't even have to resort to generic arguments for this one. The regulation is brain dead because it doesn't affect ETFs. So when the S&P500 drops 10% and gets frozen, the S&P500 ETFs will still be traded. The end result? The same result you get every time you have naive regulation... the insiders make out like bandits... the public gets screwed.
Exactly what harm are they trying to mitigate here? Volatility isn't a bad thing in and of itself. If the underlying value of the stock is there, the price will recover. If not, well, it needs to go down.
More and more the markets seem decoupled from reality. Why is it so hyper-urgent for a trade to complete in milliseconds, even if it means selling at rock-bottom price? Isn't that just really dumb programming?
Imposing a global circuit breaker seems like one way of fixing it... but why is the trading so frenetic in the first place? Why this absolute pressure to trade nownowNOW?
These are real companies people are betting on. Companies have lives in the years to decades, and at best their profits are measured in quarters - and even that's far too short-term thinking compared to human society, the biosphere and the ecological damage our industrial activities are doing.
There just isn't any meaningful data that can be generated about the activities of corporations on the millisecond scale. Not really any on less than a yearly scale, if you think about it. The biggest news right now is the Deepwater Horizon oil spill, and what's the timeline for fixing that? Weeks to months.
What does society actually gain from ultra-fast gambling on the markets? Other than a cheap thrill and massively increased risk?
You are not a brain: http://books.google.com/books?id=2oV61CeDx-YC
They should just install it to only allow trading on sales that increase the value of the stock. Prices only go up. Everybody wins. Right? RIGHT?
Problem solved!
I do not have that kind of access to get rich off of other investors. The big boys should not be any different.
I am sick and tired of these guys playing with my own money as well as, pensioners, my grandmas, and my employers money. A single mistake effects me and everyone reading this while the traders get bonuses. Where do you think your money goes when you deposit it? It does not sit in the bank or go to loans to help small businesses anymore. It goes to risky trading where you lose and the CEO of your bank gets rich if they gamble it right.
http://saveie6.com/
Well can you blame them? If you have a simplistic, fundamentalist view of the world then of course your simple truisms seem obvious and everyone else sounds like some kind of elitist, telling you to read books and go to school and shit. Everything you need to know you read on Lew Rockwell's blog, so these elitists are obviously persecuting you for your beliefs.
Ron Paul free marketeers favor their interpretations of the constitution in exactly the same way that fundamentalist christian sects think they have the true interpretation of the bible. Except instead of "faith" they rely on "smug" to insulate their egos from information that does not fit with their world view.
they will make a better idiot. In this case the financial people will find a way to prevent the circuit breaker from tripping. I would like to find a way to get these financial people to "old Sparky" and bypass the circuit breaker and....
"During the congressional hearing last week, NYSE Euronext's chief operating officer, Lawrence Leibowitz, said FINRA had already adopted market-wide circuit breakers after the 1987 market crash, but added that there are "no pre- established mechanisms to address precipitous declines on a stock-by-stock basis, or trading problems that result in market-wide drops of less than 10%.
"
I think that qualifies as an expert.
Also, this is a pilot program.
The Kruger Dunning explains most post on
It is so obviously simple. Simply forbid selling anything on the NYSE at a price lower than you purchased it at! We would all be RICH I TELL YOU!!!
Markets seems to don't to like to be regulated, as with latest Germany measures. Next days we will see how they will take this regulation, if well won't happen in a 5-min period probably at the end of the day will get the kind of hit they want to prevent.
. . . but "circuit breakers" are not what is called for here. The market needs fuses. Not to be funny, but circuit breakers are too easily reset. Most trading is not done on the floor of the NYSE. If you want to stop trading AND get everybody's attention, then somebody needs to get burned. Otherwise, this breaker is going to go off, get reset, go off, get reset until it sounds just like chicken little. Think I am wrong? Well, the NYSE already has circuit breakers, since 1987. Notice that they do not get mentioned.
Sound the alarm but do not stop trading. Have traders be responsible for all price deviations from the time of the alarm until the 'crisis' is over. If they suddenly have to "cover the spread" then they will stop trading until they figure out what is wrong.
...is to let those that use the "auto trading systems" ACTUALLY FILL THE TRADES THEIR SYSTEMS PROMISED TO. You'd see a rush of investors switch to brokers that trade on fundamentals and things would settle down. Quit @$%! mollycoddling bankers and stock brokers - they are causing more problems than they solve.
Millisecond trading provides absolutely no benefit to the market. It is simply a creative way for those closest to the market (New York) to steal from everyone else.
They could make the market fair, but they won't. It's just organized theft from the rest of the world.
Real human business and investment does not have to travel at lightspeed. Near real-time (milliseconds) trading of $billions is just plain dumb. That system will always be seriously abused and provides tremendous advantage to those closest to the trading center for no valid reason. A trader deserves no special advantage because he happens to be located in New York.
These traders provide no added value. They contribute nothing to the system. They are destructive parasites. They'll try to rationalize and justify their behavior a thousand different ways, but at the end of the day, it's all just a pack of lies.
The fundamental economic problem in the US and most of the world:
These people now make loans, that they know they cannot ever collect, using investors (other people's) money. They do this just to skim their profits from the transactions. Then when the debtor defaults, they assign the "loss" to the investors and reloan/resell to someone else they know cannot pay. They do not give a DAMN because they make their profits on the transactions. They are professional skimmers. They want you to BELIEVE in the economy, regardless of condition, so that they can continue their obscene skimming.
Now, when most buyers have greater than 80% DTI and the system is in danger of collapsing, they get the government to step in and PRINT MONEY for them so that they can continue business as usual. Eventually, the system becomes so overleveraged that it crashes. People's retirements, life savings, businesses, and dreams are ground into dust. The parasites have killed the host. If the body somehow survives, they start again.
Just tax the fuck out of those speculative scumbags, that should reduce "volatility" a lot.
As the US legislature is preparing to impose new regulations that certain financial industry giants would not be too happy with, it sure was convenient to give the politicos in Washington a good scare... just saying
"Politicians and diapers must be changed often, and for the same reason."
I wonder if there are any corner conditions that can be exploited with such an automated rule? Large firms executing trades to intentionally freeze individual stocks while they hedge against specific related verticals. Just a thought.
If you're going to advocate telling people how, with whom, and when they are allowed to buy or sell items with other willing individuals, you should at least have the common courtesy to clearly explain why such voluntary trades should not be permitted to occur.
Except that they're not happening between individuals, but between computer systems.
No one prospers unless he renders benefit to others.
-- Tadao Yoshida, founder YKK zippers
What benefit are these paper-based profits? You're not investing in an idea or invention, or building something that people can use, or manufacturing anything.
How about another idea: a tax that's paid on any profit you make from stocks with the percentage being based on the time between buy and sell: less than 5 minutes, 90%; 5-119m, 80%, 2-8h, 70%; ...; greater than 5 months (which doesn't divide evenly into 12, so you can't mess around with financial quarters as easliy), 20%; etc. Speculators are dinged heavily, investors are marginally taxed.
wow I managed to incorrectly use both it's and its simultaneously.
Also replace that "make take most" with "make/take the most"
But... the future refused to change.
If you want to gamble, thats your business.
If you invest too much money in stocks, you don't diversify, and you loose your life savings on the stock market ... thats YOUR problem.
I have a really REALLY simple solution ... don't invest in the stock market if you can't deal with the consequences.
The stock market has no basis in reality. They like to pretend it does, but it doesn't. There are all sorts of excuses and 'reasons' why it does, but it has no more basis in reality than paper currency.
And yes, I think paper currency is retarded as well. When you're trading something that can be easily manufactured you are going to loose unless you're the guy who makes it.
Persistent Volume manager for Kubernetes - https://github.com/dwimsey/openshift-pvmanager
The amount and frequency of trading of stocks should be on roughly the same order of magnitude as the practical ability of the corporate entity to reallocate its real capital.
And who decides what an appropriate frequency would be? On what basis? How do you efficiently decide and how often do you reconsider? Do you have any idea how fast massive amounts of capital can be brought to bear if the need arises? (hint - it is REALLY fast if there is a good reason) Bear in mind that under your proposal you have to do this for EVERY asset which, to grossly understate matters, is an unbelievably huge and difficult task. Planned economies haven't historically worked especially well. Well designed and managed markets are generally MUCH better at efficiently allocating capital where it is needed. Perhaps you have some new insight that will change things?
Do it any faster, and you're not reacting to real information, but noise, and you're making the system worse.
The fallacy in your argument is that you think the real information is "facts" about the asset. Markets are about collective opinions above all else. Sure, tangible facts get into the mix but when you are evaluating any investment the real question you are asking is "will enough other people want this asset to make the price increase?" Stocks go up and down because of what people believe about those stocks - whether it is true or not is almost irrelevant.
No, the best argument against it is that it allows automated front-running by allowing the high-frequency traders to issue and cancel small orders in quick succession to discover an ordinary buyers or seller's limit price, and then profiting by offering a sale that would have otherwise happened at a price more favorable to the initiator. To quote the link (which is highly recommended):
Are you adequate?
No, it's much worse than this. High frequency trading allows its practicioners to cheat, quite literally, as I pointed out in another comment that linked to this blog post.
When a buyer or seller places a limit order, their limit price is supposed to be a secret, and the market is supposed to deliver the best possible price for them relative to that limit. Flash trades and "immediate-or-cancel" orders allows high frequency traders to issue a flurry of really quick orders to discover a slower trader's limit price, and then trade at that limit instead of the price that the slower guy would have otherwise gotten.
So if ACME is trading at $26.10, slow buyer A enters a limit buy order for $26.40, and slow seller B enters a market sell order, the high speed trader is able to use really fast trades to discover A's $26.40 limit, buy B's shares at $26.10, and then sell them right away to A for $26.40, all before A can learn about B's more favorable sell offer and accept it.
Are you adequate?
I have a degree in Electronics Engineering and had to go through three courses on feedback systems and servomechanisms. What you are proposing may seem sensible, but that's not how nature works.
Feedback control systems can become unstable, but inserting delays into the feedback loop is about the *worst* thing you can do to destabilize them. If you want to stabilize a feedback system you should insert a "low pass" filter in the loop, not a delay.
A delay means that a lot of change will accumulate and suddenly be released. Putting a one day delay would mean that all the buy or sell orders would be stored hidden somewhere and then, all of a sudden, the market would become aware of that trend.
A low pass filter is, more or less, like a moving average. With a low pass filter, the market would get information on the average of the last X hours or days of transactions. That way everybody would be allowed to update instantly, to a microsecond precision if they wanted to, their estimates of the market trends, but those would not be instantaneous trends, they would be longer range.
Instead of limiting how fast market transactions can be done, it would be much better to limit the speed of the information on the system. Do not divulge *every* price for every transaction, but only the average of some period. This average can be updated every nanosecond if people want so, it will make no difference.
If varstockprice(now()) 0.5*varstockprice(now()-1) then msgbox(Something fucked up is going on!)
While I certainly agree that once-a-day is too strict, your example is very flawed. If Ford's 5 o'clock bankruptcy is public knowledge, then its price will be zero-ish now, because nobody's going to want to pay a high price for a company that goes bankrupt in the next few hours. If it's not public knowledge, then you'd be trading on insider information, which is fraud. So being able to trade a second time that day only helps you if crime helps you.
Are you adequate?
The stock market has no basis in reality. They like to pretend it does, but it doesn't. There are all sorts of excuses and 'reasons' why it does, but it has no more basis in reality than paper currency.
The first part of statement was wrong. Then when you said your bit about paper currency you confirmed the fact that you simply don't understand economics. Instead, you're another gold standard guy enthusiast. I'm going to explain to you why that's not a good thing.
The price of gold is set by the quantity of gold available and the demand for it, as is everything else. Since the total quantity of available gold isn't related at all to the production in any other industry, that's a really poor measure of the economic status of any one nation.
Paper currency is easily manufactured, but the guy who makes it isn't guaranteed to win anymore than everybody else is guaranteed to lose. It's called supply and demand. If you print too much of it, you have inflation, and the paper will soon be worth nothing. If you take money out of circulation, you have deflation, and the paper is worth more. Consequently, that's exactly the same situation you have with gold. If we start mining a whole lot of gold, the price of gold comes down and you can exchange it for less things. If you start producing less gold, the price goes up, and you can exchange it for more valuable things. The value of everything in relation to everything else is constantly fluctuating, and you don't make it "stable" or more "real" by having a mineral or a very difficult to manufacture thing as your currency. It's all the same. If we suddenly print ten times more money than we currently have available, assuming everything else stays the same, the cost of everything product will go up because the people with that extra money in hand will be willing to spend more, people's salaries will go up, because employees will demand more money to compensate for the increased price of goods, and now everything you could buy with a $1 bill you buy with a $10 bill. But it's ok, because your salary will have gone from $70,000 / year to $700,000 / year. It's exactly equivalent and no actual value was lost anywhere.
I don't know why this couldn't work. Really. Can someone who's had even basic economics explain this to me?
I come from an Agricultural background, so for those unfamiliar - a contract for corn can only trade up or down so much ($0.60 per bushel per day), with that limit expanding on sequential days where that limit has been reached. (see "Daily Price Limit" here: Chicago Board of Trade)
JGG
This cant be good.. say a stock is trading at $1.10, news comes out, it hits 1.20 quickly, then they halt it? ppl read over news, shit opens 1.50, 1.20 to 1.50 no way to make $.. then what happens if moves 15 cents in the other direction after the halt? another halt? unless you get stuck in halt i guess then u good.. this is not a well thought out plan..
You can't fix greed with a software patch.
What's needed seems not so much a circuit-breaker as a brake of some form, a drag on the speed of trading. We do it in electronics all the time, we add electrical drag (in the form of reactive elements (capacitors or inductors) or feedback loops) on a circuit to keep it from being overly sensitive and going into oscillation. We even do it on car suspensions. You're all familiar with shocks and struts and springs. The springs let the wheels bounce over bumps and holes in the road surface without the car body moving, the shocks/struts limit the rate the springs can move at and damp them so your car doesn't start bouncing up and down after hitting a bump.
So. How to limit the speed at which transactions are processed. Two possibilities. One, set a market interval, say 1 second. Every trade in a given interval gets the timestamp of the interval, and at the end of the interval they're all processed as if they'd arrived at the same time. The only prohibition is that actual arrival order/sequence can't be used as a tie-breaker, some random number has to be used instead (eg. if you get two orders of the same size for the same price in the same interval and you need to decide which one to fill first, you roll the dice for each one and low man goes first). That puts paid to HFT and sub-millisecond trading, since the market won't recognize timing finer than the market interval and the trader can't predict where in line the market will put his trade. Two, set the same sort of market interval. Then, as each trade arrives, generate a random delay [0,interval) and add that delay to each trade. Again that'll put paid to HFT and sub-millisecond trading, the trader knows his trade'll be executed within a market interval but he doesn't know exactly when within that interval it'll get put. But in both cases for people not trying to time it to sub-interval precision it shouldn't make much if any difference. All it does is put a limit on the speed of trading, which should act like a shock absorber does to limit the rate the market can change over the short term without affecting the long-term movement rate.
I'd suggest floating this idea to the high-frequency traders and advocates of sub-millisecond trading and gauge their responses. If they scream bloody murder and vow to oppose it to the death, it's probably a good idea. If, after studying it, they're all in favor of it, drop it like a hot potato because they've found something in it they can exploit even more than HFT.
I could swear that this already existed, except that it didn't work on the 6th because of a threshold setting.
No, this is just not true. The market can work without speculators, with investors selling to each other. Why? Because some investors will need to sell their investments in order to consume the return, while others will defer consumption in order to invest. If Joe bought AAPL at $10 on 1990, and then Mary then bought it from him at $45 on 2005 and holds it to date, both Joe and Mary are investors, not speculator.
Are you adequate?
You post has drawn a lot of flak because Slashdotters are an egotistical bunch who think they are smart enough to beat the system, but they are mistaken.
The reality is the current system benefits the big players and shits on everyone else. It's a rigged game, but the big guys want the little people to think it's fair so they'll continue to play.
Like you said, the casino that is Wall Street adds absolutely nothing of real value to society. It is simply a way to redistribute wealth from those who have less to those who have more, while telling those who have less that they could "make it big" if only they tried a little harder.
Do what thou wilt shall be the whole of the Law
What the original poster means is that the brokers are, against fiduciary duty, siphoning money from their customers. Consider the following, very rough, case:
I'm Mr. Megabroker. A new multibillion dollar marketing campaign hits, and suddenly I have a ton of BUY orders for SLUSHO stock. I hold those orders for a split second and buy up SLUSHO, knowing that the ton of orders I hold will drive up the price. Once I secure my stocks, I submit my ton of buy orders after my own.
Suddenly, I'm sitting on a bunch of SLUSHO stock that's had a guaranteed jump in price. If I had executed my customer's orders immediately, that increase in price would have been theirs, not mine.
Baby Cloverfield hits Manhattan, and suddenly SLUSHO is radioactive waste. I get a ton of SELL orders. I dump my SLUSHO holdings before the ton of SELL orders hit, having perfect knowledge this is about to occur because I'm the one who's about to do it. I sell my SLUSHO when prices are still high. My customers bleed out.
I've made money coming and going for no other reason than I hold the orders in my pocket and therefore have perfect knowledge of the future. The money I make is not reflective of any real productivity, but is instead theft I can get away with by ignoring my fiduciary duties for a brief while.
He put his boots up on the table and made a face. "The sig," he smirked. "You can waste your life in search of the sig."
Okay, so the market dropped 1000 points in 20 minutes... but it recovered 600 points in the 30 minutes immediately following. Most people looked at the market and said BUY BUY BUY!
So, how many times has this happened? If it were a fluke, accept it and move on. Just because it happened doesn't mean you have to do something to "make sure this never happens again!" because invariably the cure is worse than the disease. If you slow trading, then orders are only going to stack up, then you'll have a problem of the market not matching reality - but operating with a lag.
If you do have a legitimate reason to sell a stock, say a company comes out with bad news - its stock price could drop for very legitimate reasons.
Good security is based upon reality and common sense. Common sense is a function of having common knowledge.
You have a real problem with loose things. Why do you give me your address and I'll send you a wrench.
This will be allowed only if it prevents small traders from abusing the market while not affecting the profits of the big traders.
I'm a good cook. I'm a fantastic eater. - Steven Brust
Just learn to make paper currency :P
Trading = Zero-sum
Investing != Zero-sum
I'd like to buy homeland for our 10 million people. http://twitter.com/mahadiga
Hi,
Normally I would be content to sit by the sidelines but I'm jumping in just to clarify, there is a lot of misinformation swirling around this discussion, a lot of conjecture by smart people who really have little to no experience in high frequency trading which is rapidly becoming the new wall street boogeyman. HFT dramatically improves liquidity and price discovery. It has helped lead the way to more efficient markets, and for the most part helps stocks and various other instruments reach their "true" value faster than ever before.
There are a lot of whiners out there complaining about how HFT is somehow "not fair", while they continue to get taken to the cleaners by their brokers, the banks, and hundreds of other middle men. Why do you think the spreads are so tight on a lot of these markets? HFT. Believe me, the institutional brokers would like nothing better than to make very wide markets and charge you for the privilege. The vast majority of investors who are taking long term positions in the markets are not effected by intraday moves. If you got burned because you were trying to make a profit intraday then you got what was coming to you, because not only are you not as fast as most of the firms out there, but also not as smart. (sorry) Frankly if NYSE's attempt to "restore order" wasn't so entirely broken the price discrepency would have been even shorter lived. However, because of the steps their market took to restore order most savvy shops immediately routed around them in order to complete and start new transactions (as they should). Attempts to regulate the markets in this way will not work as expected, because they are introducing arbitrary rules which will largely be ignored by the really big players (dark pools anyone?). So far there has been no indication that the recent price drop was the result of an HFT strategy gone awry, but rather a temporary blip made worse because of an outdated mode of operation. I think an interesting experiment would be if all of the HFT shops pulled their liquidity (this would never happen), the results would be fairly disastrous for short term investors, unless you like getting worse prices.
Anyway, I don't want to rant any more. It is unfortunate that people aren't really looking at this from all angles. Competition is a good thing for everyone. It applies to Microsoft and Linux, but not the markets right? ...
I initially read about this in a news story where the SEC employee was bemoaning the fact that they had cases they wanted to pursue, but couldn't due to interference from above. He was screaming that they had caught all the major players pulling exactly this scam, but the best he could get his bosses to sign off on were minor fines that didn't even qualify as "a cost of doing business."
I don't think anyone of note on Wall Street has been afraid of the SEC for quite some time...
He put his boots up on the table and made a face. "The sig," he smirked. "You can waste your life in search of the sig."
"You can't fix stupid."
+++OK ATH
It's a shame you never learned how to spell "lose".
Sure total quantity of gold (or silver or uranium or whatever other natural resource) is not related to anything in any economy on the globle, but all of these materials are divisible in any arbitrary manner. You can get a "gold dollar" that weighs 1 gram and you can have a "gold micro-cent" that weights 1 milligram. These designations are arbitrary, but once a reference point is set, they simply operate on a simple decimal scale. So as economies grow, prices of items in them simply change (and usually go down) to ever smaller measures of the "reference" resource, be it gold or silver or whatever.
Sure it causes the dreaded "deflation", i.e. things actually getting cheaper due to advancement of economies and increase of supply of material goods, a scary thought that would imply that increased workers' productivity would end up benefiting the workers concerned as opposed to Wall Street speculators and therefore it must never come to pass...
Natural resources are however not ideal currencies only because their total quantities can be increased by mining. An ideal currency would be one that is material based (so it is divisible) and can be owned by simply storing it physically (so the banksters do not get to run the whole show) but total amount of which could not be arbitrarily increased at all by any government or private individual. This would remove the control of "value" of a currency from the hands of people who can simply spew more of "money" at their whim, thus essentially manipulating (and in effect enslaving) the rest of the idiot worker ants who labour under the delusion of receiving something of "value" for their labours, while in fact that "value" is entirely under control of governments and their attendant banksters.
Case in point, the US government could declare that as an "emergency measure" they are going to pay every last penny of their debt with newly minted money. And there is nothing that could stop them from doing so if the politicos were hysterical enough about it. There are multiple historical precedents in other nations for this, just look up the term "hyperinflation".
I won't bother addressing any of your other points, given that you are prone to whoopers such as this one.
The price of gold is set by the quantity of gold available and the demand for it, as is everything else. Since the total quantity of available gold isn't related at all to the production in any other industry, that's a really poor measure of the economic status of any one nation.
Actually it's an industrial commodity that is used in the manufacture of a number of things like integrated circuits.
"Little does he know, but there is no 'I' in 'Idiot'!"
They should prohibit trading more than once per week instead.
Paper currency is easily manufactured, but the guy who makes it isn't guaranteed to win anymore than everybody else is guaranteed to lose.
Really? Perhaps in a perfect world where the government prints money and circulates it to small businesses via noble banks, you might be correct.
Except you probably wouldn't be. The government does whatever it can to maximise unofficial inflation at the expense of official inflation. This allows them to pay off their debts while so-called "inflation-indexed" social security obligations are reduced. It's a zero-sum game, where the rich stock-invested people gain at the benefit of the poorer fixed-income people, such as the elderly.
So, no, inflation doesn't "lose" value...it transfers it from the poor to the rich.
And that's still in the "perfect world" scenario of printing money. In reality, what's happening today is that the Federal Reserve is printing large sums of money, loaning it to banks at 0% interest, who turn around and buy Treasuries with a 3% risk, and pocket the profits from the difference. They're not investing in "businesses" - that would be (gasp!) risky! This is why Goldman Sachs just had three whole months without a single day of trading losses. So this money is explicitly going into investment bankers' bonuses, Warren Buffett's 10% yield bonds, and other Goldman investors. This isn't a conspiracy theory - it's in the press releases!
So, yes, those of us who see the value of the gold standard don't necessarily do so to reduce volatility - we do so to reduce the bias towards the transfer of wealth to the rich and the well-connected.
It's exactly equivalent and no actual value was lost anywhere.
True, but value was transferred from the possession of those with net credits to those with net debits. If the guy who prints the money is heavily in debt, then it's a very tempting option for him to print a whole lot of it, and let inflation decrease the real value of those debts.
The nice thing about gold is that no one has the ability to do this. Anyone can mine a bit more gold, but there's no one who can arbitrarily devalue the existing gold by producing as much of it as they like. The bad thing about gold, of course, is all the effort (real, wasted wealth) that goes into digging up and hoarding a bunch of useless, shiny rocks.
employees will demand more money to compensate for the increased price of goods, ...but it's ok.... .
Good luck with that.
Anonymous Cowardly Employee.
impotent nerds raging at people smarter and richer than them.
pretentious techy niggers.
Have a 1 day lapse before you can sell. No need to mush up all the trades in the same second or day, just have a timestamp on the purchase that means you can't sell within a day of purchase.
Yes, he does realise. Do you? The market as it currently is is INHERENTLY unstable. Information doesn't pass that quickly therefore information is NOT what is causing the variations. With a 1-day delay to sell the fluctuations CANNOT get out of hand.
Here's how it goes (and this is SO SIMPLE, it's obvious that you haven't thought of this except as a way to say "it's bad, yah"):
Someone needs 1.5Mil. Sells all of one stock to make it because that's easier than selling 1/10th of the 10 stocks.
Someone notices the big sell. No other information is available, therefore they ASSUME there's a reason for this and that reason is that the stock market for that company is going down. So they sell their shares in it.
Someone notices that two people have done this. They sell.
Now several people are selling stock and people panic sell so that they aren't left with poor stock (they'll buy on the uptick after it's reached rock bottom).
The only information that moved quickly was stock was sold.
That led to panic selling.
If the trading was delayed, it would have been seen that only the one person sold and therefore nothing wrong with the company future and no need to panic.
So if you were in on an automated buy at 59.99% lower than any of the stocks that day, you made a lot if you then turned around and sold that same stock as soon as you could (4 days later.)
But that is likely to never happen again. In fact no stock can become worthless in a reasonable amount of time if only 10% down is all that is allowed, regardless of the time period. Its math. a repetitive 10% reduction in value ever five minutes will take how long before a stock worth a dollar at start, becomes worthless?
If you think 50 minutes you are wrong cause 10% of 90 cents is not 10 cents but 9 cents and 10% of 81 cents is 8.1 cents and 10% of even 1 cent is not 1 cent.
Rules are what we ultimately figure out how to abuse and break the intent of.
The stock market was originally intended to allow you to make in investment in a company you believed in and share in the profits or losses for doing so.
But today the stock market does not work that way. Instead you probably don't know where you money is and you move it, or someone else does in order to do nothing more than transfer value without creating any product or service wealth.
Honestly, remove the identity of the companies providing stock and what else do you see but such a transfer of value on a high level of abstraction.
And the unidentified companies in their view of fluctuating value of their stock have what to rely on as investment?
In other words, above the original intent of the stock market there is a value transfer game going on that produces no new value in product or service.
If you are in the markets deep enough you can see enough to know how to manipulate teh markets and rule set for always winning.
And this is probably what happen in this one time deal and done so to help get Greece out of the danger zone. And that is probably also why the shut off limit was set at 60%. If you know the details of the Greece debt information, there is a 60% limit.
Knowing this was most likely what really happened (motivated to do so to save the market - Greece failure effecting the European and world markets??) you'd also know that the markets will continue to drop as the low buy needs to be sold off at a profit and that's a lot to sell off, but obviously not all at once as that would again crash the market....
But then that can't happen now, with the new rule. What the new rule does is allow the automated system to insure a profitable sell off for Greece.
But what side of this are you on? The looser side?
First thought: If there is a stop at 10 minutes, then all the automated trader systems will get an extra rule to do their trading within those 10 minutes? And after that go to to other markets?
That's right, inflation has no effect on subsistence farmers and wage-slaves, who spend all their money pretty much as soon as they get it - assuming that pay rates keep step with the cost of living, which is not always the case.
But inflation has a very negative effect on people with savings and investments, because the real value of these is diluted over time. It strongly exaggerates the "time value of money" concept, and indeed amplifies it.
Historically, when Britain and other major countries used a precious-metal standard, mild and controlled deflation resulted, because population growth exceeded that of stocks of metals. Deflation is usually cited as a Bad Thing because capital owners can just let their money sit around instead of investing it, and it's value will go up anyway. But this ignores the fact that investment is always a sound rational choice if the expected return is higher than unity, regardless of inflation or deflation, and that most people now save using banks, which are in a position to invest those deposits wholesale.
Because people are irrational, people with significant amounts of capital are now tempted to speculate on the market by the possibility of greater-than-inflation returns. These people feel that they are losing out if they get anything less than the inflation rate, and would often be quite happy to leave it in a bank if deflation existed. But speculators are what cause bubbles, and bubbles always burst and crash.
There is one advantage of a fiat currency: governments can borrow money from the people, without asking, in a time of emergency (such as war), simply by having the Treasury print more money. It will be paid for automatically in the medium term, by inflation. But this only works, as we see from Greece's sorry example, if that government directly controls the issue of currency.
It is not possible to just "produce a load of extra gold". You'd better believe that gold mines are already working at or near capacity, and that gold is one of the most thoroughly recycled metals on the planet. That is why it is such a good store of value - even if an unusually large nugget were to be found unexpectedly, it would only have a small and temporary effect on the price. Silver also makes a good store of value (mind you, it is currently undervalued), though it takes up a lot more space for that purpose than gold does. Even copper has been used as an effective store of small amounts of value - if pennies were still made of solid copper, the metal would be inherently worth considerably more than face value - and still has a high enough scrap price that thieves often steal both live and abandoned electric cables.
--- The key to knowledge is not to rely on people to teach you it ---
Except that you cannot actually store money in your account and expect it to have the same value next year. Buying a house by first saving for it becomes impossible and you have to play the lenders game with the evil banks.
"There's never a good technical solution for a behavioral problem."
Well can you blame them? If you have a simplistic, fundamentalist view of the world then of course your simple truisms seem obvious and everyone else sounds like some kind of elitist, telling you to read books and go to school and shit. Everything you need to know you read on Lew Rockwell's blog, so these elitists are obviously persecuting you for your beliefs.
Ron Paul free marketeers favor their interpretations of the constitution in exactly the same way that fundamentalist christian sects think they have the true interpretation of the bible. Except instead of "faith" they rely on "smug" to insulate their egos from information that does not fit with their world view.
Parent post is definitely flamebait. Parent post is arguably offtopic. Parent post is, however, painfully correct.
They're nerfing rouges flash crash ability! It's obvious that the SEC all play rangers and paladins.
That's it. I'm quitting the game, and taking all eighteen thousand members of my guild with me. And then we're going to start a class action lawsuit, complain to the BBB and start up our own stock exchange. With blackjack, and hookers.
That'll show those lame devs at the SEC that we won't put up with any more of their crap.
(Unless, you know, they come out with an expansion or something.)
I firmly believe anytime wealth is removed from a system with no corresponding value provided in exchange that it is only a matter of time before the systems fails. In my opinion, anybody saying otherwise is playing a con game. I consider any form of speculative investing, especially flash-trading, to be completely parasitic and in appropriate (ie. not within the best interest of a society).
Could you point good introductory books/sites/articles for a programmer interested in this stuff (futures/short selling/derivatives)? No "for-dummies" crap please. Thanks :)
I think you need an economics lesson.
If you inflate the currency - savers are crushed. If you have $1M in the bank and prices go up 10X, you've just lost 10X your savings.
Similar sorts of things happen to lenders and borrowers - borrowers love inflation since their fixed debts inflate away . Inflation creates a distortion in true supply/demand.
Guess why heavily indebted governments like inflation?
Pretty much everyone agrees that the CPI over states inflation, not under. Beyond the fact that it considers goods equivalent, when they have greatly improved, it also has significant technical problems. For example, if gas prices go from $1 to $1.25 and back to $1, that counts as 25% up and 20% down, so it's 5% inflation. Really. They're using arithmetic mean when they should be using geometric. Attempts have been made to fix this problem, but have been blocked by people getting CPI based benefits, like the AARP. After 6 decades of being screwed over by AARP, I really hope they don't expect me to join them when I retire.
There is an imediate stop, that spans 10 minutes. Then the trading is restored. The automated trader can't do its trading during the time the exchange is closed, and everybody can trade after it opens again.
It is a pretty common arangement. Most exchanges have used circuit breakers for a wile, it smooted a few crisis already. That said, I don't think it is enough anymore.
Rethinking email
You're a moron.
There is a reason we value heavy metals.
The amount of them on the planet is constant.
You can't make more.
There's no need to tie the raw amount of gold a person or nation has to any industry. If any industry becomes more productive, it will simply control a larger percentage of the gold supply.
That's right. Percentage.
No one who wants a gold standard wants to stabilize the prices of different things. There's no logic reason to ensure that product X stays at about the same cost as product Y.
With a baseless economy (like what we have now), governments and corporations can arbitrarily pretend that their productivity has gone up and thus claim a bigger share of the pie. To which the government responds by printing more pie to parcel out. Yet actual production has NOT gone up. All that has happened is that the government or corporation has lied and taken a larger share than their actual worth.
With a gold based economy, all money at any point is guaranteed to be worth X amount of gold. You can't pull the same crap as above because people can and will reject your paper (and now digital) money, and have a guaranteed economy because of the fixed, known amount of gold in play.
Today, people are buying gold up like mad because they do NOT trust the government, they do NOT like how he economy is nothing but made up numbers in a database that do not represent any actual production or worth, they do NOT like seeing the government print more money and hand it out to only themselves and major corporations.
The problem is that these people have no idea how much their gold is worth, and they don't know how much is on the market.
If the market was based on gold, the government could triple the amount of money in the world, and people who held gold would INSTANTANEOUSLY have their equivalent amount of money tripled. People who only used paper currency would have to hope and pray and way for that money to trickle down from up top. (Hint: It'll take forever, and it'll trickle down to a tune far less than 300%.)
So, all in all, you're a moron.
The stock market has no basis in reality. They like to pretend it does, but it doesn't. There are all sorts of excuses and 'reasons' why it does, but it has no more basis in reality than paper currency.
Spread over weeks, months, and especially years, the stock market has a very solid basis in reality. You can usually get a good idea of how successful a company was the previous year just by comparing stock prices at the start and finish of the year. If it was lower than it started, they probably weren't doing so hot. If higher, they probably did great.
Take the housing crash - it took about a year for most companies stocks to come back to their pre-crash levels, and the strongest companies either didn't fall at all or actually gained. This very much reflected how well their company was doing in the overall market.
What is only tenuously based in reality are the day to day and intra-day market prices. If you are buying and selling stocks over the course of days, hours, minutes, seconds, or milliseconds, you are speculating - not investing.
Investing is sound, speculation is gambling. That's the way it works.
Security is mostly a superstition... Avoiding danger is no safer in the long run than outright exposure. - Helen Keller
Replace the federal income tax with a gross receipts tax. 3-4% should cover it. Anything you receive has a 3-4% tax on it. Heck, that's less than you pay some bored housewife with a high school diploma to take out a 2 line ad in the local paper to sell the largest asset you own*.
For most of us, it would mean squat. For people who try to "game the system" and take advantage of the "spread", adding practically nothing of value, it would cost them dearly. It would also reward short, efficient supply chains (local farmers selling wares would be 3-4 transactions better than major chains buying through distribution companies). It would punish shell corporations, requiring the tax be paid at each level of separation.
I have a newsletter, if you'd be interested in subscribing ;-)
Is it just my observation, or are there way too many stupid people in the world?
"Paper currency is easily manufactured, but the guy who makes it isn't guaranteed to win anymore than everybody else is guaranteed to lose. It's called supply and demand. If you print too much of it, you have inflation, and the paper will soon be worth nothing. If you take money out of circulation, you have deflation, and the paper is worth more." - by Anonymous Coward on Wednesday May 19, @08:48PM (#32272766)
UNTRUE, especially the first part... because WHO MAKES MONEY ON THE ENTIRE SCENARIO? The banks!
(Specifically, the so-called "FEDERAL" (anything but, it's really a consortium of banks only, not an actual part of the United States Government at all) RESERVE).
They're the BIGGEST CROOKS ON THE PLANET, period!
I state that simply because when the gov't. gets monies from them, they do so by taking a loan (which instantly attaches interest to the money 'borrowed' from said banks) from them, which in turn, devalues that money right off the bat, AND also forces the printing of YET MORE FIAT PAPER MONEY TO COVER THE INTEREST ON SAID LOANS NEXT ROUND OF BORROWING!
The list of the BIGGEST CROOKS ON THE PLANET (the fed) ARE RIGHT HERE:
Goldman Sachs Bank of New York.
Rothschild Banks of London and Berlin
Israel Moses Sieff Banks of Italy
Warburg Bank of Hamburg and Amsterdam
Lehman Brothers Bank of New York
Kuhn Loeb Bank of New York
Lazard Brothers Bank of Paris
Chase Manhattan Bank of New York
It's really, Really, REALLY easy for them to control things too, because they are an organized group (rather than business entities competing with one another), so if you are "not on THEIR TEAM/SIDE"? Guess you won't get that low interest loan... you'll get the highest interest possible. Now, on the OTHER hand?? If you're "part of their team/clique"?? Hell, you get the lowest rates!
(It's too, Too, TOO EASY - & this is the problem with letting men get into organized groups - they always use it to f everyone else over!)
APK
P.S.=> As old Amschel Rothschild so pithily said, "Permit me to issue a nation's currency, and I care not who makes its laws" & who owns the FED in part? See the list above... they've been doing this for ages, and it's the same game that's been played before (so much for "those who do not know history are bound to repeat it", because we always, Always, ALWAYS repeat the same damned mistakes over & over again - centralized banking (organized crime is more like it, because it allows them centrally organized planning & control) is one of those mistakes!)... apk
where exactly IS this circuit breaker?
like some kind of UEBER network-card that where
all the stock-relevant data goes in, gets processed and
then gets executed, or not?
i hope it's open-sourced : D
i'm playing on the "SEC-01-to-fast-to-see" server. ; )
"It's exactly equivalent and no actual value was lost anywhere."
Except people's savings.
Make it impossible to sell for less than the stock was bought, have a circuit breaker that kicks in anytime a stock drops by even a penny. Everybody wins, yay money is fiction!
You don't think they actually work for you, do you? :-)
As far as I can tell, and as much as I hate to say it, the purpose of men with uniforms and guns these days is to facilitate the transfer of money from your pocket to the pocket of someone richer and more deserving.
He put his boots up on the table and made a face. "The sig," he smirked. "You can waste your life in search of the sig."