Another Nightmare on Wall Street

As if Wall Street hasn't had us all running for cover enough recently:

First, the bailout and too big to fail.

Then, we learn about derivatives trading where companies make billions by instantaneously buying and selling currency. Live by the sword die by the sword.

And today, the stock market plunges 1000 points within minutes. In fact, T-shirts have already been printed that say, "I survived the collapse of 2:45 pm." Fortunately, the stock market mostly rebounded within minutes as well. The whole crisis was sparked because of some errors in typing and computing, apparently.

My interest in this story is related to digital media. Computers sparked today's crisis. Auto-trading systems kicked into overdrive when a circuit-breaker was tripped. An erroneous price reported by Citi Bank triggered this circuit breaker. When Citi mistakenly reported that the P&G stock dropped 10% suddenly, all the computer auto-trading programs started selling.

That's right, today computers panicked in mass!The programs freaked out because they were programmed to freak out. So, one typo can trigger a major run.

The scary thing is that humans interpreted this crisis as based in reality, not error. When I was working out this afternoon, the cable news opinionaters predicted another similar collapse tomorrow. They pontificated that some serious flaws in the economy caused a run on stocks.

No, guess again ya'll, an accounting error fed by panicking computers caused the crisis. Tomorrow might be crazy, but the fundamentals of the economy did not change over the course of minutes. Did you forget that the trend has been stock market growth?

In fact, computers remain major culprits in the whole derivatives trading scam, too. Before the Internet and computers, the ability to instantaneously track, buy, and sell did not exist. Only after the speed of computers could investors make billions by simultaneously buying yen (for instance) valued at 1.554 to the dollar in Tokyo and selling them at 1.559 in New York City. That's right, fractions of a penny turn into billions of dollars IN SECONDS when the speed of computers and the vast resources of capital are marshaled.

So, today should issue another cautionary tale about the radical transformation of everything from relationships to politics, entertainment to economics due to the digital revolution. The sheer speed and massive analytic power of computers exceeds all previously known and easily understandable human scales. In comparison, we humans remain slow and meager intellectual beings. And when, as happened today, we turn emotional functions (like panic circuit-breakers) over to these machines, do not be surprised at the terrible speed and magnitude of the e-wake.

Perhaps more incidents like today can help slow our horses, to use an old media-metaphor. Maybe we can learn to set limits on the ways computers run, control, and program human functions. Of course, with the neoliberalist, techno-utopic ideology so prevalent in our culture, where any advance in technology is greeted as panacea and with a new Steve Jobs' speech on our amazing digital future, such cautionary rhetoric and such necessary limitations seem an unlikely outcome.