How often do you encounter something important and find yourself thinking “how is it that I didn’t know about this already?”. It happened to me last week when reading an FT piece (£) by Gillian Tett on the flash crash experienced by the US equities market in May 2010. On the afternoon of 6th May the market lost nearly a $1tr in value in half an hour, only to recover most of that value by the close of the day’s trading. An enquiry followed, but no one has yet established precisely what happened.
Tett’s article draws on a Foresight report by Dave Cliff and Linda Northrop for the Government Office for Science that looks at the global financial markets from a perspective rooted in ICT and systems engineering. Cliff and Northrop argue that the world economy had a lucky escape in May 2010. Had the flash crash happened a couple of hours later the market would not have recovered before closing. As a consequence East Asian markets would have plummeted and worldwide financial meltdown could have been triggered.
Given that all this was news to me, and is clearly highly significant, I spent some of my New Years Day reading the report. [Read more...]