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This idea that things should be slowed down doesn't make much sense. What would be an acceptable time tic for the stock market? And why not half of that, or double that?

That's essentially a political decision. Liquidity contains an inherent tradeoff between the ability of investors to monetise their investment (lack of which ability acts as a disincentive to investing) on the one hand, and black-hat speculation on the other hand.

It seems reasonably obvious that nobody needs day-to-day liquidity in his investments, or even week-to-week, so the tradeoff here is fairly one-sided. When you get into several months, it becomes more iffy, because you get a larger downside (and possibly also a smaller upside).

Such tradeoffs are inherently political. And the fact that this decision is currently made by programmers and traders professional gamblers at Goldman rather than in democratically accountable parliaments does not make it any less political.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 29th, 2009 at 10:49:00 AM EST
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