Financial Phrases to Beware Of, Part LXXII

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Here is Mike Konczal reading my mind today:

Like “providing liquidity,” whenever I hear “competitive disadvantage” as the main reason to not do a sensible financial regulatory related thing I think that there’s some real shenanigans going on.

Obviously he’s right about the “competitive disadvantage” shibboleth, but it’s the other one I really have in mind. It’s everyone’s go-to excuse for why some arcane bit of financial rocket science is really a good thing: because it “provides liquidity” to the market. Whenever I hear that I reach for my wallet.

Example: if you ask Goldman Sachs about the value of high-frequency trading, in which they co-locate their servers near a stock exchange’s servers so they can complete trades in 3 milliseconds instead of the pokier 10 milliseconds required by the dinosaur brokers that you and I have to use, they’ll tell you that HFT provides needed liquidity. There are, at a minimum, two problems with that. First: does anyone really think that U.S. stock markets have historically suffered from a lack of liquidity? Stop laughing back there. But you’re right: the answer isn’t just no, it’s hell no. In fact, U.S. equity markets are generally used as textbook examples of the most open, liquid markets ever created on planet Earth.

Second: financial rocket science does often provide additional liquidity. Unfortunately, it doesn’t always provide additional liquidity. Typically, it provides liquidity when you don’t need it and then scurries away and hides in a corner precisely when you do. Unless there’s some underlying reason — or, better yet, some regulation — that gives you a reason to believe that a financial innovation will provide liquidity all the time, even when the market panics, it’s useless.

End of rant. You may now go back about your business.

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We just wrapped up a shorter-than-normal, urgent-as-ever fundraising drive and we came up about $45,000 short of our $300,000 goal.

That means we're going to have upwards of $350,000, maybe more, to raise in online donations between now and June 30, when our fiscal year ends and we have to get to break-even. And even though there's zero cushion to miss the mark, we won't be all that in your face about our fundraising again until June.

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Because the bottom line: Corporations and powerful people with deep pockets will never sustain the type of journalism Mother Jones exists to do. The only investors who won’t let independent, investigative journalism down are the people who actually care about its future—you.

And we hope you might consider pitching in before moving on to whatever it is you're about to do next. We really need to see if we'll be able to raise more with this real estate on a daily basis than we have been, so we're hoping to see a promising start.

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