Can we stop pretending these scammers have any value to society?
by David Atkins
Behold, ladies and gentlemen, your masters of the universe so productive that the American economic engine would cease to operate without them:
Reporting from CNBC and Quartz points to strong circumstantial evidence that one or more traders received an early leak of the Federal Reserve's surprise decision last week not to slow down its bond purchases.
Markets swung rapidly on the 2 p.m. announcement last Wednesday, with stocks, bonds, and the price of gold all skyrocketing. Somebody placed massive orders for gold futures contracts betting on exactly that outcome within a millisecond or two of 2 p.m. that day -- before the seven milliseconds had passed that would allow the transmission of the information from the Fed's "lock-up" of media organizations who get an early look at the data and the arrival of that information at Chicago's futures markets (that's the time it takes the data to travel at the speed of light. A millisecond is a thousandth of a second). CNBC's Eamon Javers, citing market analysis firm Nanex, estimates that $600 million in assets could have changed hands in that fleeting moment.
There would seem to be three possibilities: 1) Some trader was extraordinarily lucky, placing a massive bet just before a major announcement that would make that bet highly profitable. 2) There was a leak, either by a media organization with early access to the data or even someone at the Fed. Or 3) The laws of physics have been violated as the information traveled from Washington to Chicago faster than the speed of light.
You can see why Option 2 looks the most plausible.
What you are looking at here is very similar to this scene from the fantastic film Trading Places:
Except that the modern scam involves writing computer programs to trade insider information a few milliseconds faster than the other guy. Keep in mind also that there is unproven speculation that a few key trading firms, including and especially Goldman Sachs, have direct access to the stock exchange servers themselves thereby allowing them to get a few milliseconds jump on their competition.
None of which, of course, has any productive value for society whatsoever. None, nada, zip. If all of this activity were made illegal and every one of these "traders" jailed, the only people who would miss them are their chauffeurs, nannies and housekeepers.
These people aren't the "productive class." They're the scammer class. America just hasn't figured out yet that what they do should be either illegal or very highly taxed.
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