My name is Scott Thill, and I am a pro journo, writer, code monkey and ideas guy for Wired, AlterNet, Filter, Huffington Post and more. Morphizm has served as home base for my work and more since July 4 2001. For a data dump on Morphizm or myself: 
Sure, it sounds like something out of psy-fi. But then again so does a bankster-engineered depression, executed by lightspeed supercomputers running proprietary algorithms from math and compsci PhDs. And look how that worked out. I probed deep into the econopocalypse’s wired nether regions for AlterNet to discern how a electronically initiated Flash Crash could wipe out a trillion dollars in 30 minutes.
[Scott Thill, AlterNet]
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“We have found no evidence that these events were triggered by ‘fat finger’ errors, computer hacking, or terrorist activity, although we cannot completely rule out these possibilities,” a recent Securities Exchange Commission (SEC) report on the so-called May 6 “Flash Crash” that wiped out a cool trillion in a mere half-hour weakly admitted. “Much work is needed to determine all of the causes of the market disruption.”
That’s another way of saying that it remains only the market makers that caused the largest single-day point decline in Dow Jones history who actually know where the bodies are buried. The rest of us, including the SEC, have a Sisyphean task of sifting through mountains of dense data. But regardless of who ends up on the end of possible criminal proceedings, the SEC is sure that the whole clusterstock was seriously exacerbated by the robotraders executing light-speed electronic transactions via supercomputers, while exposing our hyperreal economy as an Internetworked casino. If anything, the Flash Crash proved that market makers like Goldman Sachs and plenty more playing both sides of securities could be capable — with the high-priced help of math and computer science Ph.Ds crafting up proprietary, recursive algorithms — of wiping out any corporation’s stock, perhaps any nation’s economy, in a comparative instant with just the press of a button.
“It was actually amazing watching it all happen,” Gina Sanchez, Director of Equity and Asset Allocation Strategy for Roubini Global Economics, told AlterNet by phone. “We went from risk-aversion to risk-seeking in the matter of an hour. But it doesn’t bother me so much that the algorithms went after the bids. They were doing what they’re supposed to do, which is seek out arbitrage opportunities. What concerned me was how the bids got out there in the first place.”
That is the primary concern of the SEC as well. But it’s going to have a hell of a hard time figuring out the human brains behind the inhuman bids that remotely reduced the price of some once-reliable stocks to mere pennies. Thanks to the very technological innovations that has transformed last century’s stock market into an inscrutable hyperreality programmed and deprogrammed daily by rapacious banksters, Wall Street’s corruption cops are drowning in deeper paperwork, virtual and otherwise, than ever before.
“Although developments in the markets and in technology may help speed access to market data, they also greatly complicate our efforts to analyze the complex web of trading arrangements and market dynamics that have developed since 1987,” SEC chairman Mary Schapiro confessed in a May 20 Senate hearing on the Flash Crash. “For example, the key day in the 1987 Market Break Study involved a trading session processing a little over 600 million shares in NYSE stocks. On May 6, the markets processed 10.3 billion shares in NYSE stocks alone.”
What Schapiro and the SEC really need to crunch all that digital data are some genius math and science nerds, but they’ve all been conscripted by the market makers to game the global economy. It pays stunningly well, even when it epically fails. After engineering a global crisis that has so far swelled America’s national debt to $13 trillion, the too-big-to-fail banksters are now bigger, stronger and armed with bonuses for their predatory efforts. In fact, that success has emboldened them to continue their intrepid devaluations. Since the Flash Crash, the overall market has experienced severe devaluations marking off technical corrections that place it out of the reach of economic recovery. Even in depressed economies, market makers make out just fine.
“We don’t really have a market as such anymore,” Marshall Auerback, senior fellow at the Roosevelt Institute, explained to AlterNet. “It’s a high-tech casino. And that is actually an insult to casinos, which are probably better regulated and which observe rules that make the house pay when it loses. Unlike our Frankenstein investment banks, which get government handouts.”
For those interested in the discrete details of the Flash Crash, the SEC’s report (PDF) is a labyrinthine walk down a dark alley populated by drowsy terminology, graphs, deconstructions and worse. With unemployment still strong, industries still cratering and lending still conventionally disappeared, working people shouldn’t have to give their valuable time to it, which is, of course, how the banksters win in the end. Especially since they pay more than the SEC ever will to sift through its shifty legerdemain. But the short version is simply a high-tech, high-speed variation on the type of confidence games that have been around forever. The only difference now is that they can be gamed in eyeblinks by machines whose capacity for pattern recognition and algorithmic trading is faster than ours. The shorter version is that they have no mercy, and there’s nothing us puny humans can do about it. MORE @ ALTERNET