THE NEWEST FLASH CRASH… THIS TIME IT WAS THE BRITISH POUNDOctober 10, 2016
Remember the flash crash of May, 2010, when suddenly certain stocks on the US market began to plunge almost straight down, while hysterical announcers were shouting like chicken little? The event caused something of a minor rumble and even became the subject of investigations. Recall, also, in this context my blog from a few days ago about how some believe that the entire internet is being "reconnoitered" as if someone was probing to learn how to take the entire thing down in a cyber-attack.
With that in mind, consider this story about the most recent flash crash, this time against the British pound sterling (shared by Mr. S.D. and many others):
Now, let's look at what the article actually said happened to British sterling on last Friday, Oct. 7:
Facts are collected, analysed and a computer-generated decision is made based on an investor's pre-set wishes.
If a price moves to a pre-determined level, the computer starts selling, driving the price down as all the other algorithms join in.
The selling continues until the price hits the preconfigured "buy" level, and the computers reverse course and send the price back up.
These algorithms mean currencies and stocks can be bought and sold at specific prices in a matter of seconds, all without human intervention.
Algorithm-based trading tends to save on labour costs and takes human emotion out of the investing equation. They can also analyse vast amounts of information far quicker than humans.
But algorithms aren't perfect and they don't always get it right. Sometimes they over- or under-react to events.
That may have been what happened with the pound during early morning Asian trading hours when New York investors were getting ready to turn in and their Tokyo colleagues were about to start a new day.
So there you have it; it was all the problem of "faulty algorithms." Nothing to see here, move along.
But... what if it wasn't? And herewith my high octane speculation of the day: What if this was a probe of financial trading and clearing systems similar to those I blogged about a few days ago in terms of internet probes? Or, alternatively, what if this was a "shot across the bow" to Great Britain in the aftermath of the Brexit referendum, which is mentioned in the article itself? Now imagine the unthinkable: imagine a flash crash not directed against specific currencies, commodities, or stocks, but rather, a general phenomenon across the board, and couple that to an internet "take out" attack: crash the markets of certain countries, corporate stocks, commodities, and thereby erase billions, and then crash the net, and perhaps even conceivably erase the transaction logs and ledgers via EMP(electromagnatic pulse) or some other method, and one has a scenario of cyber-economic warfare of devastating proportions. One could, for maximum effect, time such events to elections, and electronic voting.