Showing posts with label Financial Crash. Show all posts
Showing posts with label Financial Crash. Show all posts

Saturday, March 17, 2012

How Easily We Forget!

heroes

We read that within two months of the outbreak of World War I, as many as 640,000 young men had volunteered for service in the British army. They gathered outside recruiting offices in crowds so large that mounted police sometimes had to be called in to control them. 90 years on, Tony Blair had to lie to the nation trying to convince it of the moral and legal justification for invading Iraq. A century after “the war to end all wars” the British seemed convinced it should have been, and a million demonstrated against Blair’s fraud. But had popular opinion about warfare really been transformed from a stance of naïve patriotic fervour, to one of widespread aversion or abhorrence?

Cambridge visiting historian, J Winter, thought it was the consequence of a process of cultural evolution:

I do think that one reason Tony Blair lied about weapons of mass destruction was because he couldn’t take the nation with him in support of war. That is a consequence of the contribution artists, poets, filmmakers and others have made to our understanding of the horrors of war. Only a fool would argue that cultural history only moves in one direction at any given time. Nevertheless, there is clearly something that has brought most people to the view that war is simply not a legitimate human activity any more. Time and again culture has shown us that the best defence we have against the ravages of war is the human imagination itself.

There is a certain absence of reality here. It is true that artists and poets were in the forefront of those objecting to the mass murder justified as war, but in the intervening decade, the establishment has pushed warfare down our throats continually, and now there seems to be no substantial body of people willing to object to us acting like fascists in invading other people’s countries and killing poor people, men, women and children in their own homes. The lauding of heavily armed soldiers as heroes is nothing less than obscene, yet the BBC TV does it ad nauseum. With Wootten Bassett no longer the featured town for public displays of sickening one-sided sentimentality, it has now found a new one in the appropriately named, Warminster.

Our utter failure to comprehend the scale of our crimes is that we soak up the propaganda of intervention in the internal affairs of foreign countries, something that for decades after WWII was wrong because it was considered as openly fascist, the very thing that the fascist countries recently defeated, like Nazi Germany and Bushido Japan, had done in their attempts at power grabbing, but following the lead of Tony Blair—a Catholic Saint in the making when the miracle appears—in West Africa and Serbia, then Afghanistan and Iraq, the invasion of other people’s countries has become acceptable as the norm, and people now write to newspapers demanding it.

Yet, while condemning Assad in Syria for killing allegedly 8000 of his own people, the figures of how many people we are killing in Afghanistan are never published except as journalistic estimates, but they are not slight, and are certainly of the same order. The long term propaganda against Gaddafi ended up in another lie, a so-called no-fly zone, which even the Russians and Chinese were willing to accept, but which turned out to be a full scale air attack which destroyed the country’s main communications and fuelling centers, and killed 50,000 people, according to the government of the anti-Gaddafi victors. Everyone knows that at least a million people were killed in the Bush/Blair WMD attack on Iraq, and the Clinton/Blair sanctions on medicine and supplies that preceded it.

Collateral damage?

Do we seriously expect that we can treat people like rats and expect them not to bite back? Six British soldiers were killed in one explosion, to be accompanied by the usual BBC and Sky sentimentality, and mock shock.

“Ingrates! We try to help them and this is what we get.”

Just what would these people do if a foreign army landed in this “Sceptred Isle” and started to kill us in our homes, streets and fields? We certainly would not feel gratitude for the brave foreigners dying to “help” us.

Well, get real! Nor do the Afghans, and nor will the Syrians, if we try the same trick there, and nor will the Iranians, who are the real object of this continuous war build up, and propaganda.

Now we hear from politicians advocating the mayhem and their brain-dead supporters—including some parents of the dead, but not others—that we ought not to stop because, if we did, “our lads” will have died in vain. Does anyone seriously buy this? We have to keep sending in battalion after battalion to lose their lives until maybe we might win. It is the gambler’s insane way to recoup his gambling debts. Double up, each time. Eventually he must win. Yes indeed, if he has infinite resources to risk. In this case lives! These dolts are gambling with the lives of our own youth, and are murdering mostly innocent peasants abroad, assuming that we must win before our resources run out—before we run out of young men.

Well, at present we have plenty of young unemployed. They had better be ready to lose their lives as well as their incomes, if the present insane strategy is to work. Major economic crises, like the one between the world wars, ended up in mass brutality. The west is building up to a mass attack on Iran which could be nuclear, and will lead to many deaths and possibly a new World War with Russia and China.

It really is time for us all to begin objecting on a serious scale, to follow the lead of the sensitive souls who wrote moving verse, sang sad songs, made troubling images, and produced films exposing war for what it is—mass cull of human life—in the hopes that it really would end all war. Jay Winter thinks they succeeded, but we are fighting one long continuous war, and have lots of heroes, many dead and more horribly injured.

How can a mass cull of our own children be of value to us? We are not facing any serious external threat like Hitler. Our threat is right here at home. It is our warmongering rulers.

Whose War?

Thursday, December 22, 2011

Market Manipulation “Bear Raid” Contributed to the 2007 Financial Crisis

Professor Yaneer Bar-Yam, President of New England Complex Systems Institute (NECSI), and his team of analysts support suspicions that a type of market manipulation called bear raids played a role in the market crash at the beginning of the financial crisis in November 2007. Any bear raid would have been prevented by a regulation that was repealed by the Securities and Exchange Commission (SEC) in July 2007. The regulation, known as the price test or the “uptick rule”, meant to prevent manipulation and promote stability was in force from 1938 as part of the government response to the 1928 market crash and its consequences.

At a critical point in the financial crisis, the stock of Citigroup was attacked by the bear raid—traders sold stock they did not own (so called “borrowed shares”) with the expectation of buying the stock cheaper when the price fell (“short-selling”) thereby getting a profit from trading in a falling market. If enough rich do this in cahoots, the glut of lower priced stock actually causes the price to fall, inducing panic selling by other price watching traders—or their price watching robots! Thus the risk can be totally eliminated by coordinated trading like this. Of course, if a single trader is wealthy enough, it might be that no co-ordination is needed!

Through its analysis of stock market data not generally available to the public, namely the “borrowing” of shares, NECSI reconstructs the chain of events. On November 1, 2007, Citigroup experienced an unusual increase in trading volume and decrease in price. This decline coincided with an anomalous increase in “borrowed shares” by 100 million shares, valued at almost $6 billion, the selling of which was a large fraction of the total trading volume. The trading on November 1 was almost four times the usual volume. The newly borrowed shares represented over three-quarters of the volume on that day, driving prices down by almost 7 percent. The selling of borrowed shares cannot be explained by news events as there is no corresponding increase in selling by share owners. A similar number of shares were returned on a single day six days later. By the time the shares were returned, it had dropped nearly 20 percent. The magnitude and coincidence of borrowing and returning of shares is evidence of a concerted effort to drive down Citigroup’s stock price and achieve a profit, ie, a bear raid.

This was no coincidence. Professor Yaneer Bar-Yam maintains:

When 100 million shares are borrowed on a single day and then returned on a single day, the evidence that this is a concerted action is hard to refute. The likelihood of such an event happening by coincidence is one in a trillion.

The NECSI scholars are concerned that the incident was allowed to happen. Selling shares to deliberately cause a price drop, to induce others to buy or sell is illegal. Interpretations and analyses of financial markets should consider the possibility that the intentional actions of individual actors or coordinated groups can impact market behavior. Markets are not sufficiently transparent to reveal even major market manipulation events. Regulations are needed to prevent intentional actions that cause markets to deviate from equilibrium and contribute to crashes. Bar-Yam said:

There used to be a rule that prevented it from happening by forbidding borrowed shares from being sold in large blocks that drive the price down. Last year, the authors of the report sent preliminary results of their study to the financial services committee of Congress, and Congressmen Barney Frank and Ed Perlmutter sent it to the SEC.

Unfortunately, the SEC has not acted to identify or prosecute those responsible or to prevent its occurring in the future. Enforcing the law after it is violated is much less effective than preventing it from happening in the first place. Enforcement actions cannot reverse severe damage to the economic system. Prevention may be achieved through improved availability of market data and the original uptick rule or other transaction limitations.

After the market crash, the SEC received thousands of requests from the public to reinstate the price test rule. Hedge funds that invest the money of wealthy individuals opposed its reinstatement. Eventually, the SEC put into place an “alternative” rule that only applies a price test when the price of a share drops more than 10 percent, but that is insufficient. Professor Bar-Yam points out:

This watered-down rule would not have stopped the bear raid on Citigroup on November 1, 2007. This is only one example of the deleterious effects of the weakened rule. The overall effect of unregulated selling of borrowed shares is surely much larger and continues today.