Here is an interest piece of news about a certain Sergey Aleynikov, a Russian working in the US caught for stealing secret computer codes from Goldman Sachs, his employer. [Link].
"At a court appearance July 4 in Manhattan, Assistant U.S. Attorney Joseph Facciponti told a federal judge that Aleynikov’s alleged theft poses a risk to U.S. markets. Aleynikov transferred the code, which is worth millions of dollars, to a computer server in Germany" - Bloomberg [Link]
I wonder what is in the proprietary trading system owned by Goldman Sachs that can cause a danger to the US markets.
Anyone observing the market, will begin to notice how inter-linked they have become. For example, a fall in US$ causes the price of oil to rise and generally cause the emerging market equities and commodities to rise. Not only that intraday fluctuations in today's market is very high much higher than in the past. The US$/Yen rate can actually move by 1% or more in a single day....and nowadays this occurs once every few days. The price of oil collapsed from $140 to $20+ then surge up to $74. It is hard to believe that such movements are due to demand and supply. If you have a good memory, it was a Goldman Sachs analyst who forecast oil reaching $200 when it crossed $100 [Link]. One barrel of oil is actually traded 24 times on the market before it is sold to the final buyer.
Next piece of news here [Link] is about US regulators considering regulation of the oil and gas market to prevent rampant speculation.
Why am I writing all this? In 1998, Dr. Mahathir made a statement about currency speculation being 'evil'. When he said that in 1998, he was ridiculed as the backward leader of a nation who did not understand the markets and was trying to pin his own incompetence running the economy on speculators. As I was watching the Asian crisis unfold, I thought there might be some truth in what Dr. M said although the (western) media was dismissive of his accusations.
I bring your attention to another article in Rolling Stone magazine called The Great Bubble Machine by Matt Taibbi [Link]. His claim which is quite incredible is that Goldman Sachs engineered every major bubble in the markets in the past few decades. You might ask yourself how is this possible? Isn't it too far fetched? Just to get an idea of how influential Goldman Sachs is watch this video:
If you recall in late 2008, when Lehman Bros collapsed, the next day AIG need $85B (the figure was $20B prior to Lehman's collapse but the figure ballooned to overnight $85B due to the Credit Default Swaps(CDS) AIG had sold). Goldman received $13B from AIG [Link] as the largest beneficiary of payouts made by AIG.
I'm not here to promote conspiracy theories and it is not possible for me to prove and show how Goldman Sachs or any investment bank is involved in the markets. But what is very clear is that the level of speculative activities in the markets is so high one wonders it distorts the economy. Driving oil prices to $140 per barrel caused many companies to over-invest in oil rigs and exploration. What about those proprietary trading systems that move billions around? The thing is the regulators don't know what these investment banks do and after what has happened in the past 12 months, isn't it is time to look into limiting their activities?