are computers taking in charge politics?

[michel123456]

An important part of stock markets exchanges are made by computers. They execute orders based on algorithms in milliseconds, even microseconds, while humans need at least a few seconds to act.

Take a look at this Wiki article about algorithm trading.

 

Some excerpts

In electronic financial markets, algorithmic trading or automated trading, also known as algo trading, black-box trading or robo trading, is the use of electronic platforms for entering trading orders with an algorithm deciding on aspects of the order such as the timing, price, or quantity of the order, or in many cases initiating the order without human intervention.

 

Algorithmic trading is widely used by pension funds, mutual funds, and other buy side (investor driven) institutional traders, to divide large trades into several smaller trades in order to manage market impact, and risk.[1][2] Sell side traders, such as market makers and some hedge funds, provide liquidity to the market, generating and executing orders automatically.

 

In 2006 at the London Stock Exchange, over 40% of all orders were entered by algo traders, with 60% predicted for 2007. American markets and European markets generally have a higher proportion of algo trades than other markets, and estimates for 2008 range as high as an 80% proportion in some markets. Foreign exchange markets also have active algo trading (about 25% of orders in 2006).[6] Futures and options markets are considered to be fairly easily integrated into algorithmic trading,[7] with about 20% of options volume expected to be computer generated by 2010.[8] Bond markets are moving toward more access to algorithmic traders.[9]

 

A July, 2011 report by the International Organization of Securities Commissions (IOSCO), an international body of securities regulators, concluded that while "algorithms and HFT technology have been used by market participants to manage their trading and risk, their usage was also clearly a contributing factor in the flash crash event of May 6, 2010."

 

Maybe all this economical crisis we actually live in Europe & U.S. is the result of powerful thinking machines against slow human political power?

 

 

 

"Computers are now being used to generate news stories about company earnings results or economic statistics as they are released. And this almost instantaneous information forms a direct feed into other computers which trade on the news."[47]

 

The algorithms do not simply trade on simple news stories but also interpret more difficult to understand news. Some firms are also attempting to automatically assign sentiment (deciding if the news is good or bad) to news stories so that automated trading can work directly on the news story.[48]

 

All quotes from the same Wiki page.

 

And since politics lately are completely submitted to economics.

Are the computers taking in charge politics ?

Edited December 4, 2011 by michel123456

[Daedalus]

I wouldn't attribute the economic situation that most of the world is facing on algorithms that buy / sell stocks. The algorithms that these computers execute are based on a predetermined set of rules that are, none the less, created by us humans. As I understand the situation, the crisis is due to people living beyond their means by taking out loans they cannot repay, etc... Of course, I am no financial expert and there are probably many more factors that come into play.

 

However, there may be some unforseen consequences that these computers are creating that may have or will impact the economy, as you seem to suggest. The stock market is more of a psychological entity where people buy and sell based on current trends and rumors instead of the actual state of particular businesses. These computers may misinterpret the input aquired and could disrupt the balance creating panic throughout global markets, but that is highly unlikely. I would speculate that these alogorithms are created with conservative trading methods in mind and are highly regulated.

[michel123456]

(...)As I understand the situation, the crisis is due to people living beyond their means by taking out loans they cannot repay, etc... Of course, I am no financial expert and there are probably many more factors that come into play.

(...)

 

A computer would have not accepted the loan, a human banker accepted for reasons that are not described in any algorithm, IMHO.

Now that the computers are taking in charge, they see (it was obvious) that the loan was a mistake. And we are living the result.

At this time a bunch of old school politicians are struggling finding solutions against numbers. Till now, the numbers are stronger and win. I wonder if the solution is not to stop using algorithms for a while.

[Daedalus]

I wonder if the solution is not to stop using algorithms for a while.

 

The algorithms could ensure that the money would be loaned out correctly, but we are still faced with the problems associated with greed. Also, if we give 100% control over to these computer systems, what would prevent an organization from developing methods that intentionally do harm to the global economy? Perhaps we need laws which prevent such activities and provide harsh penalties instead of relying on computers to help clean up and prevent our messes.

 

Even though this is wishful thinking and there are a tremendous number of problems associated with such idea, I often ponder what would happen if we replaced our currency with handshakes. The economy could theoretically work no different than how it does with money. The only difference is that we use a handshake instead. This would cure a lot of the problems we face by coveting paper and gold. However, it is greed and our competitive nature which makes this solution impossible.

[michel123456]

Ha. You would have to measure your fingers after some handshake.

Edited December 4, 2011 by michel123456