by Simon Black
Sovereign Man
At precisely 2:32pm Eastern time on May 6, 2010, the US stock market started to drop.
The decline was sudden, and vicious. Within minutes, more than $1 trillion of market capitalization had vanished, with the Dow Jones Industrial Average losing nearly 10% of its value.
This event became known as the ‘Flash Crash’. And early explanations pointed to the big investment banks and their high-tech trading algorithms, i.e. software that could buy and sell stocks without human involvement.
When the market started its decline that day, banks’ trading algorithms went haywire and started selling everything. This caused the market to decline even further, which triggered the algorithms to sell even more.