Wouldja quit with this blaming computers? People designed the computers and the software that drives them. So leave your horse at the post, brush the dust off your gaiters, and deal with it!
The old system of floor traders matching buyers and sellers has been replaced by machines that process trades automatically, speeding the flow of buy and sell orders but also sometimes facilitating the kind of unexplained volatility that roiled markets Thursday.
“We have a market that responds in milliseconds, but the humans monitoring respond in minutes, and unfortunately billions of dollars of damage can occur in the meantime,” said James Angel, a professor of finance at the McDonough School of Business at Georgetown University. ...
... Many questions were left unanswered even hours after the end of the trading day. Who or what was the culprit? Why did markets spin out of control so rapidly? What needs to be done to prevent this from happening again?...NYT
Uh, get with the program?
Then there's the matter of whether Greece is Greece's fault or whether it's the fault of a decentralized Europe with a common currency -- the euro? According to Paul Krugman:
The bad news is that Greece’s problems are deeper than Europe’s leaders are willing to acknowledge, even now — and they’re shared, to a lesser degree, by other European countries. Many observers now expect the Greek tragedy to end in default; I’m increasingly convinced that they’re too optimistic, that default will be accompanied or followed by departure from the euro.
In some ways, this is a chronicle of a crisis foretold. I remember quipping, back when the Maastricht Treaty setting Europe on the path to the euro was signed, that they chose the wrong Dutch city for the ceremony. It should have taken place in Arnhem, the site of World War II’s infamous “bridge too far,” where an overly ambitious Allied battle plan ended in disaster.
Where does this leave the US? Well, for starters, Krugman writes, avoid thinking that "we’re seeing the start of a run on all government debt. U.S. borrowing costs actually plunged on Thursday to their lowest level in months. And while worriers warned that Britain could be the next Greece, British rates also fell slightly."
That is good news, if it's true.
But if we're in basically good shape, Greece is between a rock and a hard place that may end with detaching itself from the euro. Not that this will help a whole lot. Probably Greece has an Argentina-like debacle in its future.
What remains seems unthinkable: Greece leaving the euro. But when you’ve ruled out everything else, that’s what’s left.
If it happens, it will play something like Argentina in 2001, which had a supposedly permanent, unbreakable peg to the dollar. Ending that peg was considered unthinkable for the same reasons leaving the euro seems impossible: even suggesting the possibility would risk crippling bank runs. But the bank runs happened anyway, and the Argentine government imposed emergency restrictions on withdrawals. This left the door open for devaluation, and Argentina eventually walked through that door.
If something like that happens in Greece, it will send shock waves through Europe, possibly triggering crises in other countries. But unless European leaders are able and willing to act far more boldly than anything we’ve seen so far, that’s where this is heading.
