Was the stock market crash a conspiracy?

Last week the NY stock market fell by 1000 points in about 30 min. only to rebound right back up. A lot of words were written into the blogosphere. Many posts are essentially saying that it is a massive conspiracy, with some powerful group (typically the US Fed. Reserve, Secret society XYZ, Bilderberg group) intentionally causing the market to crash etc. The more silly explanation is that some one mis-typed "B" for "M" causing billions of dollars worth of trades.

My position is that this was more likely caused by systemic complexity and interconnections rather than some all-seeing and all-knowing group causing the event. I think it is just a cascading ripple that just went way too far. But what triggered it? -- The best explanation so far is that the trading computers did not come to a proper halt when the NYSE gave them the "time out" instructions. A synchronisation issue that should not have taken place -- and this specific error will not happen again because they will put in a solution fairly soon.

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I also do not buy the fat-finger theory that someone typed "b" instead of "m". This explanation is the most ludicrous of all. The fact that major newspapers even bothered to report this tells you how desperate they are to create "news" and report "opinion" rather than think about the headline for a few minutes. I know a few people that work as traders. In a nut-shell, no single trader is allowed to spend billions of dollars in a single or few transactions (and certainly not in 30 min.). Billion dollar trades do take place, but certainly not by a low level trader making a mistake. They also undertake such large transactions over slightly longer time frames (days -- weeks).

Now to the conspiracy theory. This is also a bit silly. Unless some powerful group has full knowledge of all the rules (and the bugs in the systems) that different traders have setup into their trading systems there is no realistic way to predict how a trigger will play out. We are talking about people that did not foresee a massive mortgage bubble, the technology stock bubble, the banking collapse, the recession, massive fraud at all levels, inability to take over and manage a small country etc. There is no evidence that they have any ability, nor do they have good insight or sufficient information about what is actually going on.

It is also highly likely that they (central banks and or other powerful control groups) do not fully understand the network that is a modern economy. They have some abstract models that may be able to estimate the situation at a very high level. These models are pretty high-level and can certainly say -- "it will be hot in summer and cold in winter" -- but beyond that it is nothing more than luck. Personally, I am convinced that they do not really know what their actions will do -- they are guessing and hoping for the best (read Prof. Steve Keen's work for more on the silly models that are used by economists and bankers).

I also do not buy the position that many of these powerful and rich people are working closely together allied for some common goal (as in the secret society theory). There is no correlation between wealth/power and people starting to collaborate well. In fact, history suggests that wealthy and powerful people are more likely to have problems managing their ego's, they over-estimate their abilities and are tend to compete aggressively.

Reality will be of the following format -- we have a number of these wealthy groups that are loosely allied, constantly changing their alliances, making mistakes and attacking each other's empires within misguided intentions and incomplete information. In a nutshell, they are just not organised enough to prepare, plane and pull a stunt like this.

-- rv