36. Flash Crash

Last week the pound dropped 6% in a Flash Crash.
Apparently it might have been algorithmic trading. This is a system where computers automatically pick up information which
Flash Crashcan influence currency fluctuations. For instance a European politician saying they have to be tough on Brexit.  Or a financial analyst mistakenly putting an extra nought on the end of a trade.
 
What is surprising (is it?) is that something of a small mistake can have such a large impact. Not just on traders, and financial institutions but on ordinary people. Some UK companies employing thousands of people, value dropped, presumably in the long term threatening their jobs.  

In the past we were subject to the unpredictability of weather destroying crops, plagues killing us, or being eaten by the local man eating beast. Life is unpredictable. The smallest thing has the biggest impact. Living in a hurricane zone, catching a nasty disease, or taking the wrong path through the forest. Little actions have big impact. 

Today we assume we are safer and more in control. To some extent this is true. We live longer, and depending on where we live we have the luxury of the rule of law. But we can make a mistake in the car, or cross the street at a dangerous place. We still cannot escape random diseases.
But there is a reality disconnect between action and impact. Pressing a button remotely can initiate anything. Walking through the forest is an action based in a reality. The environment carries the risk of being eaten. Pressing a button is a mundane act separated from reality of the potential impact. Having computers track news to measure confidence creates a Flash Crash. The disconnect between action and impact is part of 21st Century living. It carries the all the risk of an unpredictable impact but with no reality of action.
Perhaps this is even more unpredictable and risky than the past?
Flash Crash
 

Copyright Adrian Scott North London Counsellor Blog 2016
All rights reserved
Disclaimer:This weblog is the view of the writer and for general information only.
This article is designed to provoke argument and critique
 


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