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Paradigm's Lost: The Global Financial Markets Collapse

Paradise Lost, John Milton's epic books of poems, concerns the biblical story of the Fall of Man: the temptation of Adam and Eve by the fallen angel Satan and their expulsion from the Garden of Eden. Take your pick as to which world financial market players align most with Milton's characters…

Historical Financial Markets Collapse

The spread of news about historical financial market collapses in the last century suffered from high latency, even with early telecommunications technology in general worldwide use. The build up to the Wall Street Crash of 1929, saw a massive increase in the Dow Jones Industrial Average, reaching a peak rise in early September. Later that month, when the LSE crashed, the ripples were felt across the Atlantic, kick starting a period of instability. Newspapers across the US covered the heavy trading that took place in the last week of October as people scrambled to liquidate their stocks. The Black Monday crash of 1987 originated in Hong Kong, where stock values had declined by over 45% by the end of the month. The sudden ebb in stock values spread to Oceania, Europe, and eventually hit the United States.

Lehman Brothers and the Near Collapse of the World’s Financial System

Not a stock market crash as such, the Lehman Brothers collapse of 2008, saw the rapid spread of contagion in credit markets, fuelled by financial and communications technology and their unintended vulnerability of both speed and connectivity, which led to a near collapse in the world's financial system, prevented only by massive government intervention, and was followed by a slowdown in the world economy, with repercussions felt in the international trade sector for many years. Even a decade ago, social media accelerated the dissemination of this collapse around world markets. The shock of the financial crisis making its way into the real world economy was a paradigm destroyer overnight. The queues at Northern Rock on the UK high street prompted a visceral but tempered panic that questioned how this throwback to bygone analogue days could be happening in a new millennium. The public perception was that world stability was at risk, not from war or natural disaster, but as a result of wayward bankers, often criticised in mob responses, but often misunderstood in how critical their role is to maintain free markets.

Trading Instability in the Market Communities

In the last decade, fat finger trade requests triggered immediate automated trading responses, which moved markets within minutes, due either to in extremis trades actually being executed, or kill controls kicking in, sending shock waves through trading desks and market communities. The low latency and immediate global scale of market information broadcasting and the continual shift in reality, benchmarks and standards, are rendering our paradigms so transient that they are a misnomer; the cycle of paradigm shift is now effectively real time and with technology advancements focusing on and delivering yet more speed, like it or not, we cannot escape being exposed to this constant pressure of change. We are being conditioned, somewhat subliminally, to expect smarter, faster, stronger, and, of course, the unexpected, to evolve a new enduring paradigm of there being no paradigms, when anything can happen and it will; look no further than Brexit and Trump.

Come back Sigmund, we need you now more than ever…

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