Have We Reached a Financial Singularity?
(September 4, 2014)
Encouraging and supporting asset bubbles is essentially the only force remaining to keep the system intact as we know it.
The Singularity is based on the idea that machine intelligence will soon exceed human intelligence, and human history is unknowable beyond that point. This concept draws from a variety of sources, but for me the foundational idea comes from the physics of black holes, in which gravity concentrates the material of a collapsing star into a point of infinite gravitation, i.e. a singularity, that is surrounded by an event horizon that marks the line beyond which observers will inevitably be pulled to their destruction in the black hole. Observers cannot go back once they cross the event horizon, but they cannot see the inside of the black hole without going beyond the event horizon.
Longtime correspondent B.C. recently proposed that the global stock markets have reached a Financial Singularity in which trading machines now control the markets. Here are excerpts of B.C.'s emails on the topic:
In some respects, "The Singularity" has occurred in the financial markets, only humans are incapable of perceiving it except by inference.
Though the fat thumb of manipulation has long been discernable in market action-- the "ramp and camp" of up days, when markets open high and stay there with virtually no change, the absurd regularity of end-of-the-day "saves" when a down day is magically reversed in the final minutes into an up day--there is a mountain of more direct evidence that central banks and states are propping up markets to serve their perception management purposes: an ever-rising market projects an image of prosperity and rewards the few who own the assets bubbling higher in value.
It's Settled: Central Banks Trade S&P500 Futures (Zero Hedge)
B.C. went on to explain why the Elites who own most of the stock market wealth have no need to sell their shares, even in a sharp decline:
With 40% of financial wealth concentrated to the top 1% and 85% in the top 10%, and the largest share of increase in net flows and income derived therefrom within the top 0.1-0.5% (increasingly circulating between the top-performing hedge funds, private equity, etc.), one can make the case that wealth and income inequality is in effect as high as it has ever been, even going back to the 19th century when most people had farms/homesteads, livestock, equipment, timber, and lived in villages and towns with little access to credit and a cash economy.
Thank you, B.C., for explaining the Financial Singularity: those programming the trading bots and high-frequency trading machines have every incentive to push equity valuations ever higher, and no meaningful incentives to sell. Meanwhile, J.Q. Citizen is delighted to see his IRA, 401K, pension fund, etc., rise in value due to the permanent levitation of stocks.
The question all this raises in my mind: could all these forces of financial gravitation lead to an unforseen implosion, a financial black hole that neither money nor wealth can escape? Those operating the machines are confident they control all the inputs and can calibrate the Financial Singularity to produce the desired output: ever-higher stock markets.
But complex systems are not entirely controllable--even with the amassed intelligence
of thousands of trading bots and HFT machines. The only way to control the markets
is to own all the assets, and perhaps that is the end-game of the Financial Singularity.
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Are you like me?
Ever since my first summer job decades ago, I've been chasing financial security. Not win-the-lottery, Bill Gates riches (although it would be nice!), but simply a feeling of financial control. I want my financial worries to if not disappear at least be manageable and comprehensible.
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You don't have to be a financial blogger to know that "having a job" and "having a career" do not mean the same thing today as they did when I first started swinging a hammer for a paycheck.
Even the basic concept "getting a job" has changed so radically that jobs--getting and keeping them, and the perceived lack of them--is the number one financial topic among friends, family and for that matter, complete strangers.
So I sat down and wrote this book: Get a Job, Build a Real Career and Defy a Bewildering Economy.
It details everything I've verified about employment and the economy, and lays out an action plan to get you employed.
I am proud of this book. It is the culmination of both my practical work experiences and my financial analysis, and it is a useful, practical, and clarifying read.
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Bewildering Economy. It is rare to find a person with a mind like yours, who can take
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agendas. Your contribution to humanity is much appreciated."
Gordon Long and I discuss The
New Nature of Work: Jobs, Occupations & Careers (25 minutes, YouTube)
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