The financial markets are suffering from two related ailments: nervous twitches and systemic disease. The endgame will involve the supremacy of the radical right.
The nervous twitches are the product of high frequency trading, a brand of trading which can turn normal trading into a win-all-lose-all game.
After the brief 1,000-point plunge in the stock market that day, the growing role of high-frequency traders in the nation’s financial markets is drawing new scrutiny.
Over the last decade, these high-tech operators have become sort of a shadow Wall Street — from New Jersey to Kansas City, from Texas to Chicago. Depending on whose estimates you believe, high-frequency traders account for 40 to 70 percent of all trading on every stock market in the country. Some of the biggest players trade more than a billion shares a day. These are short-term bets. Very short. The founder of Tradebot, in Kansas City, Mo., told students in 2008 that his firm typically held stocks for 11 seconds. Tradebot, one of the biggest high-frequency traders around, had not had a losing day in four years, he said.But some in Washington wonder if ordinary investors will pay a price for this sort of lightning-quick trading. Unlike old-fashioned specialists on the New York Stock Exchange, who are obligated to stay in the market whether it is rising or falling, high-frequency traders can walk away at any time. ...NYT
One senator worries that "“whenever you have a lot of money, a lot of change, little or no transparency, and therefore, no regulation, you have the potential for a market disaster. That’s what we have in high-frequency trading.”
Systemic disease in the markets stems from the size of budget deficits world-wide. Our "prosperity" is paper-thin. We owe a growing share of what we have.
Investors fear that with many governments groaning under the weight of huge deficits, the debt of weaker nations that use the euro currency will have to be restructured, deeply lowering the value of their bonds. That would hit European financial institutions hard, and may ricochet through the global banking system...
...The world’s budget deficit as a percentage of gross domestic product now stands at 6 percent, up from just 0.3 percent before the financial crisis. If public debt is not lowered back to precrisis levels, the I.M.F. report said, growth in advanced economies could decline by half a percentage point annually....NYT
That, in turn, is affecting our political stability. Paul Krugman writes today that " it’s becoming ever more apparent that real power within the G.O.P. rests with the ranting talk-show hosts," and the grim truth of our situation is becoming clearer every day.
Republican extremism was there all along — what’s changed is the willingness of the news media to acknowledge it. Second, to the extent that the power of the party’s extremists really is on the rise, it’s the economy, stupid.
We're the frogs. The water has been getting warmer for over a decade. The water is near boiling point.
... The radicalism of Texas Republicans wasn’t a story in 2000, an election year in which George W. Bush of Texas, soon to become president, was widely portrayed as a moderate.
The economic crash is pushing us to the right, not -- as one might expect-- to the left.
When the economy plunged into crisis, many observers — myself included — expected a political shift to the left. After all, the crisis made nonsense of the right’s markets-know-best, regulation-is-always-bad dogma. In retrospect, however, this was naïve: voters tend to react with their guts, not in response to analytical arguments — and in bad times, the gut reaction of many voters is to move right.
That’s the message of a recent paper by the economists Markus Brückner and Hans Peter Grüner, who find a striking correlation between economic performance and political extremism in advanced nations: in both America and Europe, periods of low economic growth tend to be associated with a rising vote for right-wing and nationalist political parties. The rise of the Tea Party, in other words, was exactly what we should have expected in the wake of the economic crisis.
