A computer can never truly make a qualitative, pragmatic or ethical judgment, it has no basis upon which to make such decisions, for instance to consider the long term stability of bond prices that maintain nations. They works on rapid, incremental profit making and has no concept of what numbers represent on the ground, this man's wheat, that woman's steel, your pension fund, for instance.
BBC Radio 4 had a fantastic programme on this very subject some weeks ago, entitled Dark Magic, I thought it might be a good subject to raise here. Trillions of dollars are being traded at very high frequency on the big markets, on an hourly basis, using nothing but algorithms. The brokers and traders have left the buildings, to 'robots'. The question the BBC programme posed was, is this going to lead to an inevitable global catastrophe on the money markets?
I'm trying to think of a way to illustrate this. If one could imagine Zeno's paradox, but where both Achilles and the tortoise are on base amphetamine, I think that could be quite a good analogy. Two (actually, countless) algorithms in a face off of ever faster, yet ever diminishing gains, trading off one another's weaknesses thousands of times a second until bang! - The market crashes, if you can picture it?
There are many examples of this happening, already, on "smaller" billion dollar scales, it is a genuine problem. Are we really to entrust our global markets and therefore our economies to algorithmic formulae? Is this ethical? No! - And hardly anyone even realises it is happening. Is it profitable? Yes!
So, for the purposes of this site I would state that many report algorithmic high volume trading could and probably will eventually bring about a cataclysmic total meltdown to the global market place - unlike anything experienced before. Is this a genuine claim, something to be genuinely concerned about, or is it complete nonsense?
BBC Radio 4 had a fantastic programme on this very subject some weeks ago, entitled Dark Magic, I thought it might be a good subject to raise here. Trillions of dollars are being traded at very high frequency on the big markets, on an hourly basis, using nothing but algorithms. The brokers and traders have left the buildings, to 'robots'. The question the BBC programme posed was, is this going to lead to an inevitable global catastrophe on the money markets?
I'm trying to think of a way to illustrate this. If one could imagine Zeno's paradox, but where both Achilles and the tortoise are on base amphetamine, I think that could be quite a good analogy. Two (actually, countless) algorithms in a face off of ever faster, yet ever diminishing gains, trading off one another's weaknesses thousands of times a second until bang! - The market crashes, if you can picture it?
There are many examples of this happening, already, on "smaller" billion dollar scales, it is a genuine problem. Are we really to entrust our global markets and therefore our economies to algorithmic formulae? Is this ethical? No! - And hardly anyone even realises it is happening. Is it profitable? Yes!
So, for the purposes of this site I would state that many report algorithmic high volume trading could and probably will eventually bring about a cataclysmic total meltdown to the global market place - unlike anything experienced before. Is this a genuine claim, something to be genuinely concerned about, or is it complete nonsense?
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