I'm not sure that Michael Hudson is main stream, but I think his writing is great.

I have read a lot over the last two years. The main motivation has been simply to understand what is going on. I found this posting yesterday proposing some of the ultimate causes. It is definitely food for thought. It is a shame that the author is giving up blogging, but I can understand that it must take up an enormous amount of time!

Great article. Thanks for posting it.

Sleeper,

I studies Bioanthropology and Hominid evolution at university. I started to take an interest in economics during the Uruguay round of the GATT. GATT is what did it for me.

I watched it's maturation with a rising sense of horror. When it was passed I declared my own war.

http://michael-hudson.com/2010/09/is-the-economy-as-broke-as-lehman-was/

What do you think about Max Keiser and documentaries like money masters or secrets or oz? or are they too conspiratorial for you?

The point about attacks is true of course.

But the worrying thing about this technique is that it has nothing to do with the worth of the underlying stocks. It is simply playing off different stock exchange costs to make a killing when doing enormous trades. So the various indexes look like there was a lot of activity (buying/selling but all it was doing was creaming off the transaction profits. At the end of the day the shares are probably back where they started.

I think the most important benefit will be the higher data bandwidths available near the centre.
They are also reducing the number of routers that data has to go through before it reaches its destination. Each router will typically add a few milliseconds to the transmission time of the IP packet, assuming the router is not too occupied – transmission times are much greater when 'timeout' events occur.
Each router will also add a separately maintained connection, which may fail, resulting in the data being re-routed.

Another thing to consider is protection against foreign cyber attacks. Security is more easily managed if you can create a 'ring of steel' around your most important financial centre.

There as a 'flash-crash' on the Dow-Jones index in June attributed to this technique. That is automated fast trading using the slight differences between to quote

'…since it produces a variety of trading venues each with slightly different trading systems, speeds and fee schedules. This allows traders to exploit these differences by using computer algorithms to trade back and forth from one platform to another.'

I always wondered what would happen when they automated this and now we know. Frightening stuff and it is nothing to do with the inherient viability of a stock, simply playing the system to gain a margin.

Sorry, this has all got much longer than I'd intended. Just realized I shouldn't have so glibly said that now the US has no problem selling its debt.

With Europe's prpblems they do have an easier time because the Dollar is seen as the safe haven from Euro debt worries. That said however, it is difficult to tell what problems the US is having. There is certainly pressure on the so called yield curve. The measure of willingness to buy long term versus shorter term debt. It is also the case that the Various parts of the US government now hold more US debt than ever before and are buying it at a higher rate. The Fed buys a high proportion (basically monetizing the debt QE) of some issues while another very large chunk is being taken by the primary dealers We don't know who they are selling it on to, or if, as I suspect, they are depositing it right back at the Fed as collateral. If so then this is appears to be a way of back door monetizing.

And then another chunk appears to be being bought by central banks in return, as I have been arguing, for the Fed buying theirs.

I do not think it will happen. What can happen is IF austerity measure of large cuts, low spending, low wages and pension cuts are all maintained over the long term – at least 5-10 years – then ban debts will stabilize at a point where they meet the amount of those debts taken on the public purse. The bank 'assets' will never recover all their value. But the tax payers will have taken up the difference.

As for leverage levels and global debt levels. It is a pure public consumption fiction that they have any intention of reducing leverage by anything other than a token amount and even that will be for a short time only.

I can say this with comfort for two reasons. First any reduction in leverage will lesson their ability for profits to keep pace with loses. Such is our level of debts to earning capacity that ordinary levels of earning will not keep pace. If we don't intend on writing any of the debt down (and the wealthy don't intent to) then we need steroid levels of growth. That means leverage.

The second reason is that leverage levels always tend up because the financial player with higher leverage has more muscle. Thus it only takes one bank in one jurisdiction to have higher leverage and everyone insists on following. Our government's are simply too much in the pay and service of their respective financial classes to do anything to stop leverage creeping back up.

That is not even to mention the fact that the Fed and the US government mortgage servicers Fannie and Freddie themselves have insane leverage levels. SO they are not in a position to force anyone to a level lower than the one they themselves need in order to stay breathing.

There will be no unwind until it crashes. Just as there hasn't been and won't be any 'exit' from lose money either.