Financial El Nino caused by Global Warming in Finance

Global finance has been "warmed up" by many factors. We should expect to see bigger and more financial crises (which I call "Financial El Nino").

Factors that have "warmed up" global finance

The following factors all have significant impact to global finance:

The use of algorithmic trading amplifies the effect of errors. (The flash crash showed that a computer error can almost wipe out the orders in the market.)

The use of leverage amplifies the effect of errors.

Electronic payment has reduced transaction time and therefore sped up transactions.

The internet has sped up information flow.

Globalisation has increased the absolute number of big funds in the market.

Increase in economical inequality has increased the absolute number of big funds in the market.

All these together increased the speed and scale of crises.

Analogy to "global warming" and "El Nino"

Some believe that the higher frequency of El Nino in the last several decades was a result of global warming. If one describes the above factors as “Global Warming in Finance”, one can say that they are leading to higher frequency and bigger scales of “Financial El Nino”.

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