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Blogs by David A. Schwinghammer
Super Computer 10/19/2010 10:18:57 AM
Wall Street is gambling with our futures again.
Apparently the derivatives mess wasn’t enough. Wall Street is at it again, this time employing a super computer that makes bets rather than basing buys on the viability of the company. It works like this: If a stock has been down for ten days, the computer buys that stock, hoping for a quick upturn where it can make a few cents, then sell. It buys hundreds of these stocks at a time. If a stock has been gaining for ten days, it sells and buys it back when it‘s cheaper.
All of this is based on a mathematical algorithm, and so far the companies that use this computer have been making lots of money using it. Except for the time, the computer screwed up and caused a 600 point drop in the Dow.
People and pensions lost hundreds of thousands of dollars.
Another algorithm predicted that if you would chop up bad mortgages and mix them with fractions of good mortgages, they would serve as a hedge against a downtown in the market. They call those derivatives, and we all know what happened to those. It is also possible to place a bet against a stock you don’t own or to gamble in favor of one you don’t own. That’s called a bucket shop, or it used to be when it was illegal. President Clinton and Congress legalized them in 1998. It was illegal for a reason. If you bet heavily against a stock you can influence its price on the exchange. Commodities brokers affected the price of oil and wheat by betting heavily that these prices would keep on going up. And to hell with poor countries like Haiti, whose people couldn’t afford to buy bread.
This is why we need to regulate Wall Street. The government should kick them in the pants every time they pull one of these algorithm stunts, gambling with other people’s futures. You will note that campaign contributions are running seven to one in favor of Republican candidates. Obama managed to push through a financial reform package, trying to make sure another mortgage bubble doesn’t happen, but the GOP opposes any regulation at all. They are also willing to gamble with other people’s money.
What they’re doing is comparing 2010 with 1870 when capitalism was humming. Railroads were being built, Carnegie built US Steel, the meat packing companies were making millions on the backs of the poor (see Upton Sinclair’s THE JUNGLE), Rockefeller was forming Standard Oil.
What they choose to ignore are all the recessions and depressions that kept popping up when big business overextended itself.
The GOP maintains we need to give these people tax breaks so they will expand and hire more people. But there’s no assurance that they will. Business is jumping right now but the bankers and the corporations are sitting on the money, hoping that Republicans will gain control of Congress and they’ll be able to resume their reckless ways. Republicans say they will provide jobs by cutting taxes and big government, but what happens in the mean time? You’ll remember that they did this during the Iraq War. Bush cut taxes while at the same time borrowing money from the Chinese to finance his aggression. Cutting taxes adds to the deficit and there are not that many places to cut government as Obama found out when he tried to do it. You know for sure the GOP won’t cut defense spending which is at close to a trillion dollars a year. The GOP claims entitlement programs eat up most of the budget, but Social Security pays for itself or it would if the government kept its meat hooks off that money. The government currently owes Social Security two trillion dollars. When Obama tried to cut Medicare, the GOP was against it, despite the fact that they opposed Medicare in the first place.
And here’s the real rub. Medicare spends billions of dollars on terminal patients, billions on people in the last two months of their lives. Republicans called that “kicking Grandma under the bus.” But we do this all the time. People who drink aren’t eligible for liver transplants; people with certain diseases don’t qualify for heart transplants. The government needs to say no when a treatment won’t do any good. It would also help to pass some sort of tort reform so that doctors don’t have to pay huge insurance premiums. Republicans could have gotten tort reform if they’d negotiated at all with Obama. But they preferred to be the “Just say no” party.
