The Future: six drivers of global change Part 24

41 ability to complete a transaction in 124 microseconds

Donald MacKenzie, "How to Make Money in Microseconds," London Review of Books, May 19, 2011.

42 according to some experts will further increase

Ibid.

43 "financial market of which we have virtually no sound theoretical understanding"

Brandon Keim, "Nanosecond Trading Could Make Markets Go Haywire," Wired, February 16, 2012.

44 "mystery algorithm"

John Melloy, "Mysterious Algorithm Was 4% of Trading Activity Last Week," CNBC, October 8, 2012, http://www.cnbc.com/id/49333454/Mysterious_Algorithm_Was_4_of_Trading_Activity_Last_Week.

45 enabling them to make a fortune by shorting French bonds

Christopher Steiner, "Wall Street's Speed War," Forbes, September 27, 2010.

46 make a similar fortune by shorting bonds from the Confederacy

Ibid.

47 to transmit information over the 825 miles

Ibid.

48 what many economists call the financialization of the economy

Ibid.

49 1980 to more than 8 percent at present

Thomas Philippon, "The Future of the Financial Industry," Stern on Finance blog, October 16, 2008, http://sternfinance.blogspot.com/2008/10/future-of-financial-industry-thomas.html.

50 6 percent are based on credit derivatives

"America's Big Bank $244 Trillion Derivatives Market Exposed," Seeking Alpha, September 15, 2011, http://seekingalpha.com/article/293830-america-s-big-bank-244-trillion-derivatives-market-exposed.

51 value of actual commodities

Ibid.

52 fourteen times the value of all the actual barrels of oil traded on that same day

Roderick Bruce, "Making Markets: Oil Derivatives: In the Beginning," Energyrisk.com, p. 31, July 2009, http://db.riskwaters.com/data/energyrisk/EnergyRisk/Energyrisk_0709/markets.pdf.

53 because banks hold collateral equal to a large percentage

But see Mazen Labban, "Oil in Parallax: Scarcity, Markets, and the Financialization of Acc.u.mulation," Geoforum 41 (2010): 546 ("Although financial derivatives allowed investors and traders to manage risk and hedge against the volatility of financial markets, the 'aggregate impact' of trading in derivatives was to increase risk and contribute to the volatility of the market"), citing Adam Tickell, "Unstable Futures: Controlling and Creating Risks in International Money," Global Capitalism Versus Democracy, edited by Leo Panitch and Colin Leys (New York: Monthly Review Press, 1999), pp. 24877; Adam Tickell, "Dangerous Derivatives: Controlling and Creating Risks in International Money," Geoforum 31 (2000): 8799.

54 implicitly reflected in the collective behavior found in the market (it isn't)

Peter J. Boettke, "Where Did Economics Go Wrong? Modern Economics as a Flight from Reality," Critical Review 11, no. 1 (1997): 1164; Al Gore and David Blood, "A Manifesto for Sustainable Capitalism," Wall Street Journal, December 14, 2011.

55 Joseph Stiglitz says that high-speed trading produces only "fake liquidity"

Personal conversation with Joseph Stiglitz.

56 combined total of all of the reserves in the central banks

Morris Miller, "Global Governance to Address the Crises of Debt, Poverty and Environment," background paper prepared for the 42nd Pugwash Conference, Berlin, Germany, September 1992, http://www.management.uottawa.ca/miller/governa.htm.

57 one another's simultaneous operations rather than underlying market realities

Donald MacKenzie, "How to Make Money in Microseconds," London Review of Books, May 19, 2011.