RE: <nettime> Flash: Currency Speculators Own Planet

[pam@infonomics.co.za (Pam Sykes)]

A couple of weeks ago (October 8) Bruce Sterling forwarded Gwynne Dyer
writing:

> Lula and the Markets

>George Soros, the world's leading currency speculator, told a
>Brazilian newspaper in August that the 170 million Brazilians simply
>wouldn't be allowed to have Labour Party leader Luiz Inacio 'Lula' da
>Silva as their president.  The higher his standing rose in the
opinion
>polls, the fiercer would be the speculative attacks on Brazil's
currency,
>the real. If he actually won the presidency, the markets' reaction
would
>be so negative that the country would have to declare a moratorium on
its
>huge $260 billion foreign debt.

<snip>
> Most of the market traders know nothing of Lula and little about
> Brazil; he just seems to match their Identikit stereotype
> of a left-wing extremist, so they flee screaming.  Even those
> who do their research cannot afford to act on their superior
> knowledge of the situation, because they know that the majority
> of their colleagues will react differently,and a successful trader
> is one who guesses which way the herd will run and gets there first.

If this is true (and it seems reasonable) then there is this alarming
consequence: the moment the number of stupid people in a market passes a
certain threshold, the market cannot act more intelligently than its
stupidest member.  I guess this is self-evident when one considers the
historical behaviour of stock markets, but seeing it put so starkly gives
one pause for thought. Has any economist anywhere ever done some work
towards determining what the stupidity threshold level is?

pam





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