Since 1999, Congressman alternately pushes to Congress draft legislation to eliminate the Fed. The law of the Federal Reserve said that "time charter is established very valid law» (In the synopsis of the law on the Congressional Register, it says: "The term of this Charter shall be the maximum allowable by law", and the law on this is well established and plain: 99 years is the maximum legal charter available to the States or Federal Government …).
The reform of the monetary system of Alan Greenspan
Most viewed news in the American media presence affects the stock ticker, whether it's the bottom line of the screen or a TV set left side of the computer monitor. Tickers — these electrical paths on which the real-time stock quotes run. Those Americans who are directly hooked on the needle of speculation, free time is usually carried out at a computer monitor, convulsively clutched in one hand and a mouse, ready to instant "click" send request broker. How many suicides happening all over the country because of unsuccessful games and large debts in the brokerage account — stories certainly never clarified, but the money was lost it was not measured.
That is logical — the younger generation in the U.S. is up and sees himself programmers and floor traders. Indestructible friendship of new technologies with the exchange trading has a logical connection: the financial condition and well-being 99.9% of all soft-and computer companies held overnight, particularly through exchange trading. Well, the whole life of these companies was based on the great scheme of thumb: "advanced company"Is created with a single purpose — to quickly pass the function« go public »and find yourself on the exchange. In a few months the company from time to time can "bump" to the billions of dollars if not more. In the late 90's some of the action at once rose in value by 200 times! To stay within reasonable cost limits, had to constantly carry out a so-called split price.
From 1999 to the spring of 2000 was the high point of the entire U.S. "new economy". Went up in the sky thousands of nameless "dot-com» (dot.coms), companies whose business was directly related to the Web. Do not stay aside and decent "tsehoviki" like our "Emuleksa" or the famous "Sisco," which has "iron" component of the Web. The capitalization of these monsters at one time exceeded 10 billion dollars-ki. How unfortunate it did not sound, the year everything came back to normal: soap "Internet bubble" burst with a bang.
In the 2000s, it became clear that frisky introduction of information technology in the field of foreign exchange settlements accelerated the appeal of non-cash means of payment, ie reduced the overall obbem need for such means of payment. As a result, there was a large mass of available funds, but all this does not appear inflationary danger!
The main activity in the Federal Reserve during the Clinton administration capabilities generally considered a successful fight against inflation — this "Achilles' heel" of virtually all post-war Democratic administrations, the United States.
Why, with a large, growing mass of surplus funds in the U.S. in the 90s there was no inflation, and Fed chief Alan Greenspan saw overheating U.S. economy only in mid-1999? We do not have an answer. Most likely inflation occurred in the area of non-cash appeals, ie was hidden (as his time in the Soviet Union), and so it just did not consider it. More precisely does not take into account the high cost of money on the Yankees play the stock market, which was in full swing speculation in shares of IT companies.
And not only that calculate inflation on the greatest currency unit that takes into account the price of commercial paper (L), has always been very difficult. Frisky spread of information technology in the financial and banking sector, the emergence of internet banking and so on. led to the creation of new electrical means of payment, turnover of the country (the Fed) has become more difficult. Moreover, Baksova weight of such payment facilities could significantly increase regardless of the efforts of the Federal Reserve, which is heavily promoted blessed Greenspan reform of the monetary system the United States.
We are talking about the fall of 1999 the law adopted by the Gramm-Leach-Bliley Act (Gramm — Leach — Bliley Act, PL 106 — 102, 12 USC 1811.) On the modernization of the monetary system, which has become the biggest gift for the "new information economy" of the U.S.. This important economic decision Congress repealed introduced in 1932. The law states the fundamental-Steagall restrictions on holding unification banks, guarantee funds (working with securities) and other insurance companies providing financial services.
Adopted in the reform of the U.S. banking system 1932. Voice of the well-known law-Steagall Act forbade banks from engaging in speculative securities and insurance underwriting (ie, ensuring that they are in the middle of investors). In compliance with the Act, the value of securities could not arbitrarily declared by the issuer or supporting his bank and was determined on the stock exchange in the bidding process. So makarom banks were deprived of the ability to "inflate bubbles", guaranteeing a nominal liquidity and other personal responsibilities of companies (such operations first 30s were very risky). You can say what the law says-Steagall Act has provided investment real sector of the U.S. economy and has played a huge role in its exit from crisis 1929 1930gg.
In today's competitive economy enjoys great prestige not workers (salaried), not capitalist (the organizer of tradable products) are not successfully play the stock market (speculation in securities), and not even the rentier (receiving interest on bank deposits or rent with own equipment) , and the issuer of promissory notes, ie the one who was able to convince (or force) is quite a lot of market participants to use their liabilities (the issue of payment of funds). Income of the issuer itself is called "seigniorage" and its main beneficiary is the U.S. Treasury.
The Gramm-Leach-Bliley Act did not help the situation, in which the U.S. bolshennom scale began to share "seigniorage" with an IT company that has a policy of capitalization frisky, with all this, the prices of their stocks focused on the predictable (a hypothetical) synergies and supported by government spending . Receive such "seigniorage" were those monetary companies that have emitted their shares (hook-crook selling them for real money) at an inflated
The Fed chief, following his monetarist tradition curb inflation, with the Gramm-Leach-Bliley Act stimulated the translation of the set of available funds from the foreign exchange market to the stock, and thus Makar, virtually all the "inflationary overhang" has fallen on those bucks, which acquired the shares of IT companies. Impaired tremendous mass of funds invested in a very expensive capitalization of IT companies that do not show your demand in the domestic consumer market, where inflation is usually determined price dynamics.
Practically, in 1999, President Clinton lifted the ban on monetary speculation and contributed to a decrease in municipal control over the emission of shares, also continue for the shares of U.S. companies are much higher than their price. Armed with the Gramm-Leach-Bliley Act of cash received in the 21st century, the right to offer its customers not only banking, and insurance of their assets (stocks and bonds).
Grabbing these information and communication technologies, the South American investors have turned their backs on the industry (real sector), and engaged in "a bubble", large-scale operations with electric substitutes funds. This activity has undermined the development not only of American industry, and the U.S. economy.
What and why does the Fed
U.S. Federal Reserve is most famous for its impact on reducing or increasing of volume of publicly traded funds in the economy, ie facilities on offer. The content of this concept is reduced to the (real) number of circulating in the economy of the means of payment available to a certain clearance time in the monetary system of the United States.
Accordingly, if the amount of means of payment which are traded in the economy, more or less, the Fed gets a misleading picture of what is happening.
Fed based on real data holds the current analysis (monitoring) state of the public economy, which are determined based on the state of macroeconomic policy measures:
— rate on loans of federal funds;
— discount rate.
These rates are the benchmarks for interbank loans and loans provided by federal funds to commercial banks. Using these more flexible and are popular tools of monetary policy, the Fed influences the sentence means.
If the proposal falls short of funds needs of the economy (in other words, the rates at which banks lend to customers are high because little money), the Fed will turn on the heater — at a meeting of FOMC lowers the base rate and the percentage of banks buys municipal debt (U.S. Treasury bonds), so Makar vbrasyvaya appeal to additional means of payment. Of cash at banks is more, it makes the conditions under which banks can lend money, there are new capabilities for businesses and consumers. This provokes the economy as a whole.
On the contrary, if the offer is extremely funds and the economy has not time to "digest" appears overflow channels of monetary appeal that is a danger of inflation (when prices are constantly grow). In this case, the Fed acts like refrigerators — basic accounting interest rate increases in the free market are thrown municipal obligations. These measures reduce the foreign exchange reserves of the banks, the banks are tightening the conditions for obtaining commercial loans and vkladyvatelnyh, the proposal means reduced business activity slows down business, but the economy as a whole is saved from inflation.
In all this, the main follow: in modern U.S. cash is only 5-6% of a total volume of calculations. Most of the calculations (95%) carried banks cashless method through electric charges.
This implies that as a result of tightening global competition, the government can collect affect demand payment of funds only when it has the opportunity to increase their debts for which the pay is not going to. One of the more common methods such borrowing is to compensate the losses of the budget by the forcible dilution monetary mass (of unsecured funds or bonds). This method is referred to as the "method of the sovereign (lord)", and the state gets additional income from these activities is called the emission tax or "seigniorage."
Exploring the history of "seigniorage", economists have seen the following trends:
— in the 1970-2000's years — means of payment, serving the global economy, the main weight of its own cash reincarnated as a non-cash (and essentially in power). The bulk of foreign currency spending and companies in the U.S., was served by electric means of payment (here occupy an important place electrical trade, the salary on the cards, the game is on the stock market (the purchase and sale of shares));
— After 2000 the scope of settlements served by electrical means, has increased dramatically, there were non-transparent scheme of translation (here emigrants tried — sending in poor countries bln). The advanced countries are not able to restrict this traffic is money, as the tightening of control over this channel can cause great harm to their economy and cause a reversible effect. Because there were a huge number of private issuers (they were previously, but with the emergence of the web have found a "second wind"). The next paradigm shift: if a buck earlier lured to discover the competitiveness of U.S. products and services, the competitiveness in the 21st century, the system is actually quite issuer depending on the style (authority) of the issuer. In other words, the Fed and the dollar, and tools to share other personal issuers are based, first, on the financial issuer of its own style, and later to have the organizational resources of the issuer. The phenomenon of the 21st century is that in our time the dark and snow-white public relations provide increased credibility of the issuer much easier, and so the main effort is not so much to the improvement of the real component of the means of payment issuers (a strong economic base in its classical comprehension), as to the unwinding of the style of these means.
Who are the issuers? This internet banking, card issuers are anonymous and virtual electric bills, with which you can anonymously calculated in real and virtual stores. The difference between this or another card issuer, and "cash" means an electric payment system is enormous. Ordinary credit card (or debit) card issued by another bank or by providing access to those who opened an account in the bank. Payments on the card tied to a particular person. You should not ignore the fantastic abilities of the fact of having your own "holdings" of cash, which can be manipulated by different actually online. All of this contributes to the fact that at some point in your private settlement systems certainly out of the market unsecured municipal funds' sovereign-lady. "
And a personal favorite of business, hatched a plan to the upcoming liberalization of the currency appeals, guided by ousting state-controlled electric personal means of payment to the state will be even more difficult to perform the functions of macroeconomic regulation and ensure the stability of the market economy. Such criteria can not read about the stability of the state of the economy and the sustainable development of one or another company with its monetary system.
The consequences of lowering the Fed's macroeconomic management of the U.S. economy.
In an era of spread of information and banking technologies appear justified doubts about the self-sufficiency of conventional macroeconomic regulation Monetary appea
l. In truth, it is possible to focus on the characteristics of inflation in the United States, if they have completed to reflect the dynamics of the possibility of purchasing the vast majority of the earned bucks, being in personal (5%) and non-cash (95%) of the appeal.
The main macroeconomic characteristics that are tracked by the Fed:
— the number of funds in the appeal — a wide spread of electric means dramatically accelerated their turnover and led to the apparent redundancy in the appeal are the means of payment;
— inflation — the spread of competing among themselves for personal payment system makes macroeconomic assessments of inflation in the U.S. economy is very uncertain;
— and the unemployment rate — the spread of "financial robots" and similar programs it will soon lead to mass uncontrolled commercial activity, making untruthful assessment of the level of unemployment.
It turns out that almost taken the basic premise of the Fed's policy-making becomes the target intuition of its chairman, which undermines confidence in the greenback as a reserve currency.
Vebu can not say — "stop!"
Almost Fed vnastoyaschee time lost "monopoly" on the high-level analysis of the economy. Using the same computers as the Federal Reserve, a huge company by downloading these supercomputers economic "soft", the purpose of which — find initial statistical data of the state and international info and a virtually unlimited range of performance monitoring business. This company is focused on economic issues is not worse than the government.
Boat of the company that uses the computing power of a supercomputer minisuperkompyutera or cluster of computers (well, ordinary 4 yadernik what really trifles Learning to automatically find profitable (speculative) vkladyvatelnyh abilities (for example, playing on the difference between the yield of the acquired shares and the interest rate on the loan taken to buy them) can round day is completely legal to explore the global financial system in search of a cheap credit and lucrative monetary instruments (playgrounds). Being in at least some point of the Earth, opening a special bank account and using a cheap and reliable system electrical transfer to obtain loans from some of the monetary systems, immediately putting the money into the game on other platforms, millions of bots, which provide performance multi-core microprocessors Intel or AMD, produce large-scale speculation in the U.S. currency and the U.S. stock market, contribute to the destruction of the mechanism of regulation of the currency and appeal macroeconomic regulation of the market economy as a whole, undermines the trust of the international community to spare the currency further exacerbating the imbalances that have emerged in connection with the abolition of gold equivalent bucks.
As a result, widespread "financial robots," the entire global competitiveness degenerates to the level of a fight between them (virtual game between computer softinku).
It is not obvious, but what is inside gives a hint that the winner in a similar market game "pure knowledge" would be the one program that in which the interests of the people, country or society considered the least.
"Bulls make money. Bears make money. Boars go under the knife. " (Which is popular saying on Wall Street)
May 6, 2010 from a South American stock market exactly 20 minutes evaporated 862 billion dollars. The fall of the Dow Jones (990 nm) was the most dizzying during all the years of existence of the exchange. Lasted just drop … 5 minutes (14:42 for 14:47), then the market as if stung played for 90 seconds ago 543 index pt. Such performance on the U.S. stock exchange have not watched!
The tragedy comes to life only in the details: in 14 hours 47 minutes securities of approximately 200 companies have lost one hundred percent of their value in the truest sense of the word: they were in the current market price range of 1 to 3 cents! Since the market by definition — a "zero sum game", the billion earned by some members of the exchange, means the same money lost by others.
After such discussions about the unique math abilities era feral privatization in the CIS have not been impressive. At least since the performances, enacted in 2010 on U.S. exchanges, allow us to overcome the distance from nothingness to fabulous wealth in a matter of a minute!
Found the culprit in May: angry SEC pointed to the HFT (high-frequency trading) — «high frequency trading." HFT-technology allows traders to simultaneously examine large amounts of disk imaging market and sell vkladyvatelnye strategy. Frequency trading is characterized by a huge number of transactions inside the 1st trading day, opening positions only kutsee time (just a few seconds), profit-taking at the first minor configurations in the quotations of securities — computerized trading techniques that today provide more than 70% exchange turnover.
The formal binding of Frequency of Trading (HFT, High Frequency Trading) to the collapse was accomplished by mid-May. 16th "New York Times" published a nice little or marketing, or a protective article («Speedy New Traders Make Waves Far From Wall Street») on how the various towns and villages of America sits old young people from 20 to 40 years old, dressed in T-shirts, baseball caps and dzhinsiki, and are trading almost from their own bedrooms on the stock exchange, leveraging sophisticated scientific methods. According to the journalist, "New York Times" Julie Creswell, tweeter, desperate at some point in a scientific way to analyze the market well and took disconnected their supercomputers. "On the afternoon of May 6, when the stock market began to sink into immediate collapse, someone (in the company Tradeworx) came up to my computer and typed on the keyboard HF STOP: All realized and shut down. The fact that ensued, led shudder all the money the world. "
Base HFT — so called flash orders, stock-speed applications, meaning that in the future. For a price, the Exchanges provide a "chosen" customers the opportunity to create arriving at a common terminal applications bidders before all others. The gap is typically 30 milliseconds. For super computers, which are equipped high-frequency traders are still more than enough to analyze the application and arrange their own — proactive. Their effectiveness will directly depend on the applications that are in the subsequent moment will arrive on the market.
The originator of the market meltdown — HFT, its a little battered on the sidelines of the Congress and the Senate, pripugivaya nearly legislative ban, well, cheated public oblivion.
Why is thrown — it is clear: the main figures of the frequency of trading in the U.S. are Goldman Sachs, Morgan Stanley and a dozen big banks — they who provide 70% HFT daily exchange turnover.
Former senior Goldman Sachs executive Greg Smith.
Immediately after the "failure of the exchange" (such is the official title of the show from May 6) in the general public there was an overwhelming desire to see at least half an eye on the mysterious lucky ones, for which the collapse of the market turned golden rain.
Specialists Nanex demonstrate that such instances, however, in the smallest scale, have occurred on the Stock Exchange October 30, 2009 and January 28, 2010.
In the knockout in 9 seconds!
Almost two years on HFT no one remembered, and the actions of March 6, 2010 are preserved in the collective memory as insulting someone's techno error or inadvertence. And not so long ago, March 23, 2012, came an event that clearly showed a complete "technical error" quietly evolved into a weapon so destructive power, which seems to have been taken from the arsenals of the mind-blowing "Star Wars" of the future.
The event, which it is, did not have the spectacular nature invoice (instant collapse of the market for a thousand pt!) Because it saw perhaps that narrow wizard exchange trading. And nothing the public has paid him so not a lot of attention! On the far-reaching effects and nasal potential incident March 23, 2012 an order of magnitude pranks HFT two-year-old.
We are talking about the failed attempt of the American company BATS Global Markets to IPO. Trying to withdraw shares on the stock exchange lasted exactly … 9 seconds, during which the company's shares in the literal sense of the word actually depreciated to zero and trades with them were suspended, and after some time, the management company said apologetically a total refusal to go public in the near future.
The blame, as and 2 years earlier, officially put on "software failure", but failed the SEC and all involved in the drama of the structures found by chance witness, who is not only a documentary record the incident directly to the millisecond, and analyzed each of the 567 exchange transactions committed in 9 seconds with securities BATS. From the analysis it was clear that there was no "software failure" was not in sight, and the collapse of the IPO was the result of a malignant nestled computer method, which was launched in terminal unidentified company, which has direct access to the electricity stock exchange NASDAQ. Method which intentionally did set before him a clear task: to kill the IPO BATS!
The incident with the IPO BATS showed that, apart from the passive "off" methods HFT can still "turn on" and to act at the appropriate time and in an appropriate location such makarom that no matter what kind of security can be destroyed in a matter of seconds! But there is not a lot as IPO carried out in America every year unknown company? One more, one less … The fact of the matter is that BATS — not on its ordinary business for himself, and — what is modest! — The third-largest trading market in the U.S.! BATS were the main investors in Lehman Brothers, Getco, Wedbush, Lime and Deutsche Bank. All the big names — some of which are only deceased Lehman Brothers! — But also sad, and the combined stigmata: losers! In the eyes throws a lack of genuine winners — the companies that actually determine the world's financial policies.
January 27, 2006 BATS opened to the implementation of the "high-speed, high-volume, anonymous algorithmic trading" and due to the dumping of commission for several months pulled over 10% of total exchange volume of America (more than 50 million transactions per day)! Trading on BATS suffered more than 270 broker-dealer firms, thus not only from the United States, and Europe to Asia.
In 2008, BATS Global Markets, which ruled by then with 3 sites (with 2 of the shares and one for options), went to the net income. In 2012, the commercial success of the other exchange platform for trading frequency eventually ordained a decision of the founding fathers to make the company public. Zest IPO BATS was the fact that the underwriters have decided to send the company's shares in the huge swimming through it as a trading platform! Not a classic NYSE and NASDAQ …
When fading BATS shares on the stock exchange to the main underwriters joined Citibank, Credit Suisse, Morgan Stanley and JPMorgan, but even in the extended version of the list is lacking, at least 1 of the name, which in itself is completely outweighs other: Goldman Sachs.
In light of the pronounced action 23 March 2012 looked improbable most unscientific fantasy. Meanwhile, the fact remains that the placement of securities BATS began at 11 hours and 14 minutes 18 seconds and finished in 11 hours and 14 minutes 27 seconds. 9 seconds of trading — and a complete failure!
Reconstruct the dramatic action has promoted Nanex (one random witness!) — The largest U.S. supplier of ultra-precise exchange disk imaging. Nanex hunts, captures, and then sells to traders all Chronography stock of American life in hundredths, and thousandths of a little bit of a second. Analysts at the company for a few days of the incident conducted their own investigation, which also showed that there is no "software failure" was not!
In the first transaction, carried out at the site of the most BATS, took the lion's share fraction — 1 million 200 thousand shares. Further action by developed further as follows:
-in the first bit of thousandths of a second, from the second, the quotation rising to 15.75 — the exchange of 800 shares, which is already listed on NASDAQ;
-on the spectrum of a second chain of subsequent passes, one after another falls: $ 14 — $ 13 — $ 10.23 — $ 8.03 — $ 5.79 — $ 4.17 — $ 3.01. All transactions are conducted on NASDAQ;
-on second life second IPO BATS continued to fall: $ 2.17 — $ 1.15 — $ 0.76 — $ 0.0002 (two hundredths 1st cents!). There were produced 444 trades at $ 100 each, and all the transactions took place on NASDAQ;
-there is a pause for a second, then at 11 hours and 14 minutes 21 seconds passes fixing the deal to 3 cents per share BATS;
-in 11 hours and 14 minutes 27 seconds of the cost increases to 4 cents.
-in 11 hours and 14 minutes and 33 seconds on the display lights up all the inscription «Halted»: kerf stock circuit breakers, which automatically stop trading in the shares, if the quotation is changed above the permissible limit.
— Management BATS announces IPO withdrawal from the auction.
After the stunning embarrassment CEO and President Joe Ratterman, made a pu
blic appeal to investors, which apologized for the accident and one hundred percent put the blame on "a failure in software» (software glitch): «It is a terrible shame. We feel terrible. All responsibility lies with our company. We take the responsibility. Any external influences by not there. "
The last sentence looks very juicy, as if to a third party Nanex easily found warrant killer received from terminals NASDAQ, BATS engineers were able to make it even faster, by analyzing the internal traffic of transactions in shares of the company. And be sure to find. BATS but chose not to inflate the scandal.
The unprecedented situation
Weakening U.S. municipal funds being replaced by personal financial instruments in most of the payment and settlement of transactions. And, in our opinion, will not soon be reached that level of performance and storage capacity of computers, and bandwidth capabilities of communication channels, sufficient in order to personal settlement systems could ensure the collection of high-quality primary disk imaging on cash flows, transactions and other ins and outs of using them subjects of .
The Fed was powerless for those who want to earn on the web, and therefore protect the buck she just can not. If anything, at this point that the Fed is in a situation of an old master of the early twentieth century, playing with modern chess applets supergrossmeysera level. To save face, the master can only hope to change the rules of the game …