Wow. PM prices decreasing dramatically.

The part I really was referring to was the statement about derivatives taking the wealth out of the heart of the economy.

Derivatives are a zero sum game.

 

Log in or Sign up to hide this ad.

Actually, derivatives are not a zero-sum game, because the same asset can be (fraudulently) used to hypothecate a number of financial instruments and/or contracts.

When there are over a quadrillion dollars' worth of derivatives outstanding (CBO) and the total "value" of everything on earth is measured only in the multiple trillions, you know you have a problem.

 

No. The flash crash was a canary in the coal mine. It was a result of HFT, but not the only one. HFT does have an effect. You can actually see it in the daily silver charts. It goes all buzzerish except during the regular trading day where it's more like a moving line than a fuzz.

 

I think QE and ZIRP have the most impact on current day prices. That is the firepower, HFT is the weapon, and the flash crash was collateral damage.

 

Well the bottom line is you answered No. Long term effect =0.
Your example about silver may or may not be true, but you are talking short term, which there is no argument. For the long term, all that stuff is just noise...

 

It depends on what is being examined. There is HFT skimming, as in quote stuffing, taking money out of the economy without providing an actual good or service, and then there are situations like the flash crash, Knight Capital, etc. where something goes haywire in the code and they have to shut down markets to keep things in check.

There are countless other mechanisms used to control the price such as derivatives, SLV, money printing, and so on. HFT is not so much used for that end as much as funding the others, but when desired it can inject a potent amount of "liquidity" into the market.

Derivatives are financial weapons of mass destruction. - Warren Buffet