When Machines Ruled
If you were ever in doubt that we have to protect ourselves against the extreme financial toxicity of the banking industry, algorithm guru Kevin Slavin will put you right.
Online trading algorithms are increasingly controlling Wall Street. “We are writing these things that we can no longer read,” warns Slavin, “we’ve rendered something illegible. And we’ve lost the sense of what’s actually happening in this world we’ve made.”
Now that code is smart enough to operate without human intervention, the machines can ruin us.
Up to 70% of Wall Street trading is now run by machines.
A consequence of machine malfunction was the 2010 Flash Crash when an algorithm sold 75,000 stocks worth £2.6 billion in 20 minutes, causing other trading algorithms to follow suit.
Interdependent systems fed on each other to exaggerate the effect of a fault.
If machines only ruin banks, that’s fine. It would do the bankers much good to be bankrupted.
But, under the present system, we’re all on the hook for the debts of the banks.
This is what has to be changed. This is what was changed after the Great Depression in the US with the Glass-Steigall Act separating the investment banks from the High Street banks and only giving tax-payer protection to the High Street banks.
George Osborne in the UK and Tim Geithner in the US shilly-shally about protecting the tax-payer from another tranche of massive debt run up by out-of-control banking systems.
If the investment banks are not taken out of the implicit government guarantee of tax-payer protection then we can all be ruined.
And the Western world may end not with a bang, nor a whimper, but a wonky algorithm.Tags: algorithm, george osborne, tim geithner, toxicity, tranche