Your Daily Dose of Paranoia
We are left with the rather obvious notion that Computers are Stupid. It's not a new idea. In Hardwired, written all the way back in the early 80s, I showed how automated stock trading systems could be stampeded into a stock panic.
Not that all those quants on Wall Street listened to me. They failed to learn the most important lesson of all: that I am smarter than they are.
No, that's not the real lesson. (Well, yes it is.) The real lesson is that they are not as smart as they think they are. (or as I am)
Leaving aside the question of whether you'd have to have a brain made of cottage cheese to now put money into a market that can lose a trillion dollars over a glitch--- and then shrug off whatever caused the glitch in the first place--- we have to ask ourselves if whether the flash crash was what I am pleased to call The Hardwired Scenario.
Which is to say that (as in the novel) the crash wasn't an accident at all.
The market wasn't burned all the way to the ground, so if the Flash Crash was deliberate, that means it was a proof of concept. It was someone proving to themselves, to a client, or to the United States that they had the means to cost our economy trillions of dollars and wipe out the investments of everyone in the U.S., and then some.
Who would do such a thing? The Chinese hackers who created Ghost Net and Shadow Network would do it just for fun. Russian hackers are all over the place, and often coordinate with their security services. Cybercriminals bored with their 419 scams might have decided to make some money shorting S&Ps. Or someone in a big Wall Street bank might have decided to show the government who's really running the country, and what the dangers of pursuing actual regulation might be.
Your guess is as good as mine. And your paranoia might well be better.