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Guest DissipatedYouthIsValuable

Ideas On How To Reduce The New Money Bleed Into Markets And Avoid Inflationary Pressures Later

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Guest DissipatedYouthIsValuable

I may be incorrect but here we go.

At present it seems that new money is being injected into the markets, whether directly or via intermediaries to reduce the potentially dreadful effects of having a serious market crash, with all the massive social problems that would entail.

It seems markets will not be closed while plans are worked out, and so far it looks like there are low trigger points at which new money is injected pretty sharply.

The potential problems I see are that if the markets remain volatile like this then money can be drained away indefinitely, until the Central Bank tap is turned off, at which time we crash. Some investors will play the bounces very well and although individuals may benefit short term, the longer view suggests (assuming all money is created as debt) that everyone will feel the effects of inflation later on. This will feedback into further debt defaults and create further volatility.

Seems pretty destructive to me. We all lose.

If I were something of a God and wanted to prevent inflation later on and had the ability to fully manipulate the market systems, at the moment I'd think like this.

A steady state market would be the ideal, then no new money needs be added.

Method.

Although transactions via networked systems appear close to instantaneous they aren't.

Temporal latency occurs and therefore the order of transactions could be manipulated.

If someone is using a network to trade and they think that there are a lot of trades going on then they're not surprised if it seems the system is slower than usual.

I could make the trading database system ignore a trade which would cause significant deviation. Not subtle and would cause upset, but possible.

I could in near realtime, making use of the expected time lag, reorder stacks of trades whether they be shorts, longs, buy, sell, up, down, sideways or whatever into a stack of trades in a new order which makes a best attempt at keeping the market stable, adding new money on top (or removing it) in smaller less discernable drops, rather than what seem to be the monster drops so far. i.e Reduce amplitude granularity by changing the temporal order at which trades hit the database. Using small time chunks so traders don't really notice.

Oracle database systems, which I believe do the business of keeping market records, can have a significant degree of transaction (in the database sense) prioritization.

My question is essentially, could you reduce the amount of liquidity needed to be injected into the markets by a bit of cheating to reorder trade transactions before they hit the database?

IF it were possible then shouldn't this have an effect on reducing the expansion of the money supply by a 'reasonable' manipulation, with the effect of reducing inflation without just ******ing about with a basket of nonsense goods and telling us it's low?

Feel free to tell me I've become quite mad.

Edited by DissipatedYouthIsValuable

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I may be incorrect but here we go.

At present it seems that new money is being injected into the markets, whether directly or via intermediaries to reduce the potentially dreadful effects of having a serious market crash, with all the massive social problems that would entail.

It seems markets will not be closed while plans are worked out, and so far it looks like there are low trigger points at which new money is injected pretty sharply.

The potential problems I see are that if the markets remain volatile like this then money can be drained away indefinitely, until the Central Bank tap is turned off, at which time we crash. Some investors will play the bounces very well and although individuals may benefit short term, the longer view suggests (assuming all money is created as debt) that everyone will feel the effects of inflation later on. This will feedback into further debt defaults and create further volatility.

Seems pretty destructive to me. We all lose.

If I were something of a God and wanted to prevent inflation later on and had the ability to fully manipulate the market systems, at the moment I'd think like this.

A steady state market would be the ideal, then no new money needs be added.

Method.

Although transactions via networked systems appear close to instantaneous they aren't.

Temporal latency occurs and therefore the order of transactions could be manipulated.

If someone is using a network to trade and they think that there are a lot of trades going on then they're not surprised if it seems the system is slower than usual.

I could make the trading database system ignore a trade which would cause significant deviation. Not subtle and would cause upset, but possible.

I could in near realtime, making use of the expected time lag, reorder stacks of trades whether they be shorts, longs, buy, sell, up, down, sideways or whatever into a stack of trades in a new order which makes a best attempt at keeping the market stable, adding new money on top (or removing it) in smaller less discernable drops, rather than what seem to be the monster drops so far. i.e Reduce amplitude granularity by changing the temporal order at which trades hit the database. Using small time chunks so traders don't really notice.

Oracle database systems, which I believe do the business of keeping market records, can have a significant degree of transaction (in the database sense) prioritization.

My question is essentially, could you reduce the amount of liquidity needed to be injected into the markets by a bit of cheating to reorder trade transactions before they hit the database?

IF it were possible then shouldn't this have an effect on reducing the expansion of the money supply by a 'reasonable' manipulation, with the effect of reducing inflation without just ******ing about with a basket of nonsense goods and telling us it's low?

Feel free to tell me I've become quite mad.

This reminds me a bit of one of those early Star Trek stories where the entire order of some outer-reach planet is governed by an imperfect machine rendering its people oppressed and miserable. James Kirk usually managed to defeat the machine with pure logic and hence liberate the populace but I often wondered if he couldn't just have tweaked the machine to do a much better job, perhaps bringing in Scotty to do a bit of re-soldering or perhaps by replacing the utopian circuits with a later software revision.

Don't worry about the madness, you're in good company here. Most of us - at least those of us for whom the 'truth' is beginning to dawn - will have to be carted off cackling in straight-jackets when all this fully unfolds.

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No not mad - something like it sort of happened in the 1987 crash, which you will remember happened very quickly with large drops on any given day. The 2000 crash was much slower but much deeper.

In the 1987 crash, systems were not as good as today, market makers still had to manually pick up telephones to take orders, the stock exchange system itself could not process the orders as quickly as they were being typed in. Indeed, for fairly long periods the prices being quoted on stock exchnage screens were a long way behind the actual trading. Market makers pulled back the market size they were willing to deal in tight back to the minimum permitted, they answered calls more slowly (some say deliberately, others say form sheer exhaustion). In any case, trading could not keep up with teh pace of orders arriving.

In teh 1929 crash, even older technology, the ticker tape then was reporting trades almost 4 hours late. No one really knew for long periods at what prices trades were being struck at any given moment.

You sum up your idea as follows:

Temporal latency occurs and therefore the order of transactions could be manipulated

In practice, there is a huge amount of latency in the system and market makers have a huge amount of legitimate discretion of how they respond to orders arriving in their system and in which order. Many have internal broking desks and even direct feeds from large clients that they are obliged to quote in specific size and price to. However, external client orders may be proritised in a different way, for example, thay may quote on a best efforts only basis or they may offer to buy some at a fixed price and work the rest. All of this is perfectly legitimate to do.

If interventions were really going to be engineered by the authorities, and I am not convinced at all that they would or could, then there are plenty of opportunities for block trades to be prioritised through the system without the complex systems response and manipulation of trading databases you suggest.

What is interesting is that in 2000, with eth 1987 experience still fairly fresh in people's minds the drops were not sos sharp on any given day as in 1987 but much slower and deeper over a longer time scale. Perhaps the markets did get better at handling high trading volumes without catastrophic drops.

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My question is essentially, could you reduce the amount of liquidity needed to be injected into the markets by a bit of cheating to reorder trade transactions before they hit the database?

I'm sure it could be done but the problem is most of the people involved would like more liquidity not less!

A steady state market would be the ideal, then no new money needs be added.

That would be the ultimate solution.

At present it seems that new money is being injected into the markets, whether directly or via intermediaries to reduce the potentially dreadful effects of having a serious market crash, with all the massive social problems that would entail.

The best way to get more liquidity into the system, if absolutely necessary would be to pay off government debt with new money. It would require much less inflation to improve the economy and the tax burden would be reduced.

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Guest DissipatedYouthIsValuable
No not mad - something like it sort of happened in the 1987 crash, which you will remember happened very quickly with large drops on any given day. The 2000 crash was much slower but much deeper.

In the 1987 crash, systems were not as good as today, market makers still had to manually pick up telephones to take orders, the stock exchange system itself could not process the orders as quickly as they were being typed in. Indeed, for fairly long periods the prices being quoted on stock exchnage screens were a long way behind the actual trading. Market makers pulled back the market size they were willing to deal in tight back to the minimum permitted, they answered calls more slowly (some say deliberately, others say form sheer exhaustion). In any case, trading could not keep up with teh pace of orders arriving.

In teh 1929 crash, even older technology, the ticker tape then was reporting trades almost 4 hours late. No one really knew for long periods at what prices trades were being struck at any given moment.

You sum up your idea as follows:

Temporal latency occurs and therefore the order of transactions could be manipulated

In practice, there is a huge amount of latency in the system and market makers have a huge amount of legitimate discretion of how they respond to orders arriving in their system and in which order. Many have internal broking desks and even direct feeds from large clients that they are obliged to quote in specific size and price to. However, external client orders may be proritised in a different way, for example, thay may quote on a best efforts only basis or they may offer to buy some at a fixed price and work the rest. All of this is perfectly legitimate to do.

If interventions were really going to be engineered by the authorities, and I am not convinced at all that they would or could, then there are plenty of opportunities for block trades to be prioritised through the system without the complex systems response and manipulation of trading databases you suggest.

What is interesting is that in 2000, with eth 1987 experience still fairly fresh in people's minds the drops were not sos sharp on any given day as in 1987 but much slower and deeper over a longer time scale. Perhaps the markets did get better at handling high trading volumes without catastrophic drops.

Thanks. Very useful insight.

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