A technology expert from De Montfort University Leicester (DMU) has warned that the current global financial crash could be the first of many – due to automated stock markets.
Professor Mark Coeckelbergh argues that the growing reliance on computer algorithms to control the movement of money across financial sectors is lessening people’s ability to control and stabilise the markets.
And, in new book Money Machines, Professor Coeckelbergh warns that unless fundamental economic changes are made, financial crashes like those in 2007-08, the 2010 Flash Crash and the current Chinese stock market crash will continue to happen with greater frequency and wider, more severe impacts.
Professor Coeckelbergh said: “Most people have no real idea what is going on with their money. They are able to check their balance online and draw money out a cash point but they have no conception of how things work in a wider sense.
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“This is because the financial sector is now a huge, highly computerised global platform and as such, there is a growing distance between people and the economy.
“This distance will simply grow and grow as more of the system is automated until there is a breaking point where humans are no longer responsible and can no longer control things.
“Up to this point we will see a proliferation of these crashes and we will not really understand them. But while the role of machines in global finance could make economics seem virtual, the effects remain material and real.”
But, Professor Coeckelbergh said, while the book is a warning it is not without hope.
“The first point is that while there are certainly unethical people working in finance, this is not a book about evil people creating a cynical market. It is about how the automation of the stock markets has created a distance where both experts and lay people have lost control and lack sufficient knowledge of what they are doing.
“But these developments can be resisted and changes can be made from the bottom up. Diverse, local currencies should be reintroduced because while the global nature of the financial worlds has given us global solutions, it has introduced rapid global problems when these shifts occur in localised markets – as we’re seeing in the effects of this Chinese market crash.
“There are ways forward but it involves taking control of what many people assume are economic forces beyond our understanding.”
Posted on Friday 28 August 2015