The Lilies of the Street

May 10, 2012
Posted by Jay Livingston

Felix Salmon (here) writes about using “neutrinos to transmit information, at the speed of light, right through the center of the earth.”  He continues:

If this was successfully implemented, price information from Sydney could reach New York in just 40.2 milliseconds, compared to the 84.4 milliseconds it takes to send that information on fibers around the surface of the earth. The difference is more than enough time for traders in New York to make real money arbitraging securities listed in both cities.

I don’t know enough about neutrinos, arbitrage, or Felix Salmon to be sure, but I think he’s being ironic. 

In 2009, we learned that Goldman Sachs was making untold millions by using computerized “high frequency” trading. 

Powerful algorithms — “algos,” in industry parlance — execute millions of orders a second and scan dozens of public and private marketplaces simultaneously. They can spot trends before other investors can blink, changing orders and strategies within milliseconds. (From the New York Times)

That year, Goldman paid its 30,000 employees year-end bonuses that averaged $700,000. That’s the average; many executives and traders took away millions

Those neutrino  arbitrageurs and derivative traders make up a fair chunk of the 1% (or really the half of one percent, according to Scott Winship)  They got rich and stayed rich by moving money around.  At warp speed. The Republicans tell us it would be disastrous and unfair to raise their tax rate from 37% to 39%, even though in reality, thanks to complicated tax laws, many of them pay a rate that’s half of what their office staff pay. Why disastrous and unfair?  Because they are “job creators.” 

Behold these job creators, the lilies of the Street. They manufacture not, they service not, they heal not, teach not, entertain not . . .  yet Solomon in all his glory never had the kind of moolah they have amassed. Goldman’s profits in 2009 were about $13 billion. 

Do we have an estimate of how many jobs they created? 

HT: Dan Hirschman