This is a hard one. The stock market is not just
infrastructure like a building or something on a computer to be protected from
hackers and viruses. It can also be manipulated by manipulating the
prices of goods and services, by major buying and selling of stock, and even
fear of risk itself. So how do you protect this ultra-sensitive
institution from a crash like the one during the great depression or the crash
of 2007/8?
Protection?: I am not a stock market expert.
Then again neither is Congress as they made that horrible law called Dodd
Frank. There is evidence that the processes that traditionally go on the
market can be manipulated by just buying and selling as per normal. And
the fact is that it cannot be stopped. Everything from currencies,
natural resources, inventions and businesses are all invested in. If someone
buys a lot of stock and then sells it rapidly (and if the person, corporation
or even country is well known) it could trigger a massive sell off by all other
members trading on the market out of fear that they will lose money. We
unfortunately cannot protect from that as we may be able to control our own
citizens and how we trade, but we cannot stop individuals from other countries.
So how do we fix this situation?
Mutual assured economic destruction: We all know of the nuclear policy
called MAD (mutually assured destruction). However, they also developed a
similar strategy in case of an invasion or non-nuclear conflict.
Basically the reason why the United States market crash affected the rest
of the world is due to the ties between our stock market and the markets
overseas. This was meant to be the solution that prevented such occurrences of
economic or even conventional warfare attack as it would ruin the attacking
countries economy as well. However, a rich country can position itself to
reduce the damage while still destroying another country economically. So
what are we to do about this?
Mutually assured economic destruction is still
the answer, but it must be enhanced. I believe that the market each day
at 4 pm should actually never close (not just online but physically as well).
It is my belief that this will allow people to react immediately to any
changes in the market including another crash (whether purposeful or not).
Traders can have an alarm set if any harm over a certain value happens to
their investments which would wake them to counteract their losses. In
addition, I would allow insider trading to occur unchecked. Reason being
is that no one can really enforce the law in the first place and that as long
as everyone is told publicly within a set period of time, then it should not
matter who and when an individual reacts to that news. This allows the
damage to be reduced on the individual level by allowing faster reactions to
market changes as they occur.
Next ties between foreign nations and
their economies should be strengthened as much as possible. This will
create an interdependence that will make any country think twice about an
economic based attack. For those countries that try to insulate
themselves from economic crashes pre-attack. A mechanism must be put in
place to ensure that they suffer enough consequences for their actions that
even if they wanted to further their attack via other methods that the
suffering of their economy would prevent them. What that method is, I do
not know, but I do not advocate a financial penalty as that is too weak, as why
would they even bother paying the fine. Perhaps a more robust
blacklisting of only those involved in the incident and only if wrong doing was
confirmed (if they purposely made the crash happen). Beyond that I do not
know.
Recovery: What is more essential will be the
recovery after the fact. Right now America's economy is crawling back to its
former glory instead of racing. The reason is due to specific obstacles.
One is taxes on investments. These taxes stagnate an economy making
it harder for investors to purchase stock and for newer investors to invest in
the first place. Also, the government has even gone so far as to dictate,
in certain instances, how certain businesses and individuals should invest and
on how these businesses should perform their services which puts them at risk
of financial ruin. Government does not know how to run a business and
thus should stop trying as all they are doing is risking that business failing
which in turn negatively disrupts and harms to stock market. Finally,
licenses that hinder businesses opening should be made easier to obtain or
abolished altogether. These inhibit business growth which again harms and
potentially stagnant the stock market. Do these things and watch the
market roar back to life.
Conclusion: I apologize to anyone who knows the
market better than I do. Sure I am a novice (even as an investor) but
insuring the safety of the market against fools who would crash it on purpose
to suit their needs is something we must protect against. I know not what
to do against fiscally irresponsible governments like my own, or terrorists who
manage to gain enough influence in the market to disrupt it using legal means.
All I know though is that there must be a way, and to do it we all have
to work together (whether anyone likes it or not).
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