Joe,
Regarding your essay Somewhere a Banker Smiles: The latest thing to hit the stock market are these "dark pools of liquidity", high powered investment groups who are seeking to buy some regional exchanges where they can trade stocks away from the noisy floor of the public exchanges. Well, they have always had their block trades. A block trade crosses on the exchange, but is negotiately privately. A company insider, let's say, calls his broker, who calls another to negotiate a sale of his XYZ stock, because XYZ maybe only trades 10K a day, and if he dumps the whole thing on the market by the time it all gets cleaned up they will have dropped the price considerably.
Block trades usually come with a quid pro quo, the new buyers wants some assurances that there is nothing wrong at the company, and that the seller is not trying to foist faulty goods on anyone. And if you buy my stock today, maybe I (the broker) will do something for you tomorrow. Private exchanges challenge something even more fundamental than the cloudy ethics of the block trade, they raise the possibility of the end of publicly traded markets, in everything.
The first instance we heard of this was the Iranian Oil Bourse, which has never come on line, and was supposed to trade oil in euros. Since the US dollar is the reserve currency of the world, that bothers American central bankers, and some say the reason we invaded Iraq.
Even without an alternate exchange, oil trades outside the market. Recently the Chinese opened an SPR (strategic petroleum reserve), a modest 300 million barrels. The Chinese went to Russia (outside OPEC) to buy the oil, and they are spending part of their trillion dollars of US reserves. When Hank Paulson / Goldman Sachs, rejiggered the commodity index one of his goals was to see that the Chinese didn't pay too much for that oil, because they are buying it with our dollars. No figures on how much was paid, or how the Chinese paid the Russians, (since it was done outside OPEC we obviously won some concession from China) but don't count on Putin to play nice with our money.
There is a real possibilty that at some point the public exchanges, which can set the price, no matter what the circumstances, will not be able to meet the delivery requirements. At that point the exchange become irrelevant. If stock XYZ trades 10K shares today on the NYSE, but 100K shares away from the public exchange, what is the real value? Since the off exchange sites do not reveal their trading information, confidence in the public market flies out the window.
We can wax all day about Lord Gates and his castle in Redmond, Washington. How much of a feudal lord he really is, how as the caretaker of an important technology he abdicated responsiblity, and went for power, money, and paranoia, and now he has to give it all back through charity, or the queen won't give him a royal shagging every so often. While the world is becoming a more open, transparent place, (look at the information they gather on the serfs who live outside the wall) the leadership is becoming more secretive and conspiratorial in every aspect of their lives.
At the moment the tipping point is reached, the economy may very well be chugging ahead on all cylinders, but it won't matter.
Dave
