High-Speed Trading, The legal replacement for derivatives in stealing the wealth of a nation.
As simply put as possible, your friendly hedge fund manager Mr. Friendly, leases space for his computer in the same building that the NYSE has its computers.
Your computer is on your desk hooked up by modem to one in Des Moines Iowa (or Dhaka Bangladesh) which is then hooked up to the NYSE via a complex route that takes time..
You and others like you see a trend for Acme Products and offer to buy. Your friendly hedge fund manager sees this also. Mr. Friendly buys, his exchange is an nanoseconds, yours take one second. In that second minus a nano-second Mr. Friendly has driven up the price of Acme Products and your profits are diminished (or losses increased).
Every time you trade you lose. The more you trade the more you lose and the more Mr. Friendly wins. Eventually you are tapped out, because Mr. Friendly has deep pockets. and you are in Ocean Park, Washington.
If the mavens of Wall Street and our government agents in Washington want the consumer boom to re-ignite, they need to make sure more money flows down to Main Street, and so far I see the money going one way. Straight into the hands of the 1% enters.
Henry Ford knew that to have sustainable consumer growth, employees must be able to afford the products they made, and the time to use what they bought. Hence, Ford's paid better wages than others and made sure his workers had time to use the product up. (enough wages to buy a model T, and the forty hour week to drive it into uselessness). Ford also sensed that more than 40 hours per week diminished productivity and also decreased the number of potential buyers for his product. Once you bought your Model T he didn't have anything else to sell you with your overtime pay, so that money went to hire more workers. (of which there was a steadily increased supply).
That's as simple as it gets. Wall Street wants and has all our disposable income and if you let them have your meager savings, they will eat the rest and leave you nothing.
The inevitable outcome of unregulated capitalism, is the transfer of all wealth to a few.
For the Wall Street investment bankers and politicians, read some history of the French revolution and the Bolshevik revolution and you might see why it could be a good thing to let a little wealth trickle down.
I'm betting that I am right, and in future postings, I will be musing about paradigm shifts and trends rather than causes. I will keep my eyes open for new ways that the system will re-allocate your wealth.
When we get through this mess, we will not be worrying about fashions and ipod upgrades but more fundamentally useful things like friends and family and a shared common wealth (good).