To be less snarky, it's probably because she takes unemployment seriously. Summers would fit the traditional technocrat mold, but Yellen is more likely to try to use inflation to force the corporations off their money piles.
That is a view that seems frankly distant from their academic writing on policy. Yellen is stridently pro-inflation-targeting; she built her career on it. Summers is more flexible - he was talking up a higher target to avoid the ZLB.... in 1991. In a situation where the inflation rate has already returned to the long-term path of 2%, but a substantial period of underperformance has forced the price level path to undershoot, you would very much prefer more flexibility to less. Insofar as the question "should the FOMC seek to not only stabilize the current inflation rate, but also 'make up' for past misses of the target", Yellen's academic answer has been consistently "no".
I don't doubt that all that matters remarkably little once they lead the FOMC - viz., Bernanke - but I have no clue where you are getting "Yellen is more likely to try to use inflation to force the corporations off their money piles" from.
Because shes a women. Therefor it is desirable to appoint her, so she obviously must align with other progressive goals. Otherwise appointing her would just be some symbolic gesture unlikely to effect real change...
That is a view that seems frankly distant from their academic writing on policy. Yellen is stridently pro-inflation-targeting; she built her career on it. Summers is more flexible - he was talking up a higher target to avoid the ZLB.... in 1991. In a situation where the inflation rate has already returned to the long-term path of 2%, but a substantial period of underperformance has forced the price level path to undershoot, you would very much prefer more flexibility to less. Insofar as the question "should the FOMC seek to not only stabilize the current inflation rate, but also 'make up' for past misses of the target", Yellen's academic answer has been consistently "no".
I don't doubt that all that matters remarkably little once they lead the FOMC - viz., Bernanke - but I have no clue where you are getting "Yellen is more likely to try to use inflation to force the corporations off their money piles" from.
The conception among the lefty types I read is that they think (and by that I mean they read Krugman and listen to Warren who think) that Yellen is more likely to focus on the dual mandate and not just the inflation targets. She's talked about that in the past, I gather?
Also the left haaaaaaates Summers. Mostly for his history as Treasury Secretary and pushing for Glass-Steagall's repeal, but also for his outrageous sexism as President of Harvard. For an extremely well qualified woman to be passed over for him in particular would be galling.
enlightenedbum on
Self-righteousness is incompatible with coalition building.
It is important to keep stuffing the FOMC with hard academics, because financial people are highly prone to odd beliefs regarding monetary policy. And Yellen is about as academic as they come.
The curiosity is why Summers is not as appropriately academic. He's right up there with the rest of the New Keynesian writers - same era as Yellen, in fact.
It is important to keep stuffing the FOMC with hard academics, because financial people are highly prone to odd beliefs regarding monetary policy. And Yellen is about as academic as they come.
The curiosity is why Summers is not as appropriately academic. He's right up there with the rest of the New Keynesian writers - same era as Yellen, in fact.
Because his conduct as the president of Harvard showed that he's not as academic as he plays himself off as.
It is important to keep stuffing the FOMC with hard academics, because financial people are highly prone to odd beliefs regarding monetary policy. And Yellen is about as academic as they come.
The curiosity is why Summers is not as appropriately academic. He's right up there with the rest of the New Keynesian writers - same era as Yellen, in fact.
Because his conduct as the president of Harvard showed that he's not as academic as he plays himself off as.
he also wrote the pollution memo, which suggests that he's, if anything, quite prone to being academic regardless of the political sense of the idea
The Rubinites included people as far right as Brad Delong. You'll forgive me if I do not regard mere support for bank deregulation in the 1990s as the hallmark of original sin.
Krugman et all seem to think the problem with Summers is that he's more likely to tighten monetary policy too quickly.
I was gonna mention what I remembered reading before in Bloomberg said that Summers would've resulted in a bear market on stocks, and a strengthening on bonds. He also has a lot of baggage. Obama putting a talented, amiable and malleable woman in charge of the Fed was also seen to be a good thing, and her in favor of a slower taper.
That is a view that seems frankly distant from their academic writing on policy. Yellen is stridently pro-inflation-targeting; she built her career on it. Summers is more flexible - he was talking up a higher target to avoid the ZLB.... in 1991. In a situation where the inflation rate has already returned to the long-term path of 2%, but a substantial period of underperformance has forced the price level path to undershoot, you would very much prefer more flexibility to less. Insofar as the question "should the FOMC seek to not only stabilize the current inflation rate, but also 'make up' for past misses of the target", Yellen's academic answer has been consistently "no".
I don't doubt that all that matters remarkably little once they lead the FOMC - viz., Bernanke - but I have no clue where you are getting "Yellen is more likely to try to use inflation to force the corporations off their money piles" from.
being pro-inflation targeting doesn't particularly tell us where she will stand on the inflation target which is the important metric with regards to whether or not policy will be more or less inflationary.
No. 5% might be a bit high tough. I mean, a 2% inflation target as insurance against the zero lower bound is just fine, so long as you actually hit 2%.
Granted i haven't been paying attention to this type of data for a while but its my understanding that we have been consistently failing to hit our target about 1% under.
My second proposition is that the optimal inflation rate is surely positive, perhaps as high as 2 or 3 percent. On one hand,the losses from low positive rates of inflation are likely to be small. The Harberger triangle is negligibly small. At a 3 percent inflation rate, very few people are going to rush to deposit their checks in order to accumulate a little more interest. I don't see evidence that instability results at low rates of inflation.
On the other hand, the benefit of a positive rate of inflation comes in three places. The first is the avoidance of the zero interest rate trap. The real interest rate in the United States has been negative in about a third of the years since World War II. The real after-tax interest rate, the rate at which corporations, for example, can borrow, has been negative in about three-quarters of the years since World War II. That couldn't happen if we had a zero rate of inflation. The nominal interest rate cannot be negative. Negative interest rates may be a bad thing and our historical experience may be just an aberration, but perhaps negative real rates are a consequence of the risk associated with risky assets and the return on safe assets. If so, then an option would be lost to the economy if the rate of inflation were zero. I don't need to argue that the real after-tax rate of interest should always, or even most of the time, be negative. But if the real rate of interest should be negative only at certain times, we forgo that opportunity under a zero inflation rate. Potentially, rationing is much more serious than the triangles that are associated with a small tax distortion. If the equilibrium real rate of interest should be negative 1 percent and instead is 0 percent, the demand for capital would be significantly smaller than the supply.The potential consequences for economic stability would be severe at least enough of a risk that one would not want zero inflation.
you can tell it's 1991 because people were still defending why the rate had to be positive at all
That is a view that seems frankly distant from their academic writing on policy. Yellen is stridently pro-inflation-targeting; she built her career on it. Summers is more flexible - he was talking up a higher target to avoid the ZLB.... in 1991. In a situation where the inflation rate has already returned to the long-term path of 2%, but a substantial period of underperformance has forced the price level path to undershoot, you would very much prefer more flexibility to less. Insofar as the question "should the FOMC seek to not only stabilize the current inflation rate, but also 'make up' for past misses of the target", Yellen's academic answer has been consistently "no".
I don't doubt that all that matters remarkably little once they lead the FOMC - viz., Bernanke - but I have no clue where you are getting "Yellen is more likely to try to use inflation to force the corporations off their money piles" from.
being pro-inflation targeting doesn't particularly tell us where she will stand on the inflation target which is the important metric with regards to whether or not policy will be more or less inflationary.
this is the problem you are in: the long-term target is 2%. So every time the rate bumps up to 2%, the hawks start screaming. Then the bank misses the target, but the error goes uncorrected by policy, so the actual long-term rate becomes lower than 2%
obviously, even if you reject nominal GDP or whatever, price level path targeting would be more appealing here
My second proposition is that the optimal inflation rate is surely positive, perhaps as high as 2 or 3 percent. On one hand,the losses from low positive rates of inflation are likely to be small. The Harberger triangle is negligibly small. At a 3 percent inflation rate, very few people are going to rush to deposit their checks in order to accumulate a little more interest. I don't see evidence that instability results at low rates of inflation.
On the other hand, the benefit of a positive rate of inflation comes in three places. The first is the avoidance of the zero interest rate trap. The real interest rate in the United States has been negative in about a third of the years since World War II. The real after-tax interest rate, the rate at which corporations, for example, can borrow, has been negative in about three-quarters of the years since World War II. That couldn't happen if we had a zero rate of inflation. The nominal interest rate cannot be negative. Negative interest rates may be a bad thing and our historical experience may be just an aberration, but perhaps negative real rates are a consequence of the risk associated with risky assets and the return on safe assets. If so, then an option would be lost to the economy if the rate of inflation were zero. I don't need to argue that the real after-tax rate of interest should always, or even most of the time, be negative. But if the real rate of interest should be negative only at certain times, we forgo that opportunity under a zero inflation rate. Potentially, rationing is much more serious than the triangles that are associated with a small tax distortion. If the equilibrium real rate of interest should be negative 1 percent and instead is 0 percent, the demand for capital would be significantly smaller than the supply.The potential consequences for economic stability would be severe at least enough of a risk that one would not want zero inflation.
you can tell it's 1991 because people were still defending why the rate had to be positive at all
Krugman pointed out that Summers had written dovish stuff when he was in academia, but the fear was that he was more likely to be assimilated by the hawks once it came around to him actually being the Fed chief. This was based on his tendency to promote more unconventional policies when out of position to do anything about them, but fit in more with the conventional wisdom once he has power.
Also, there was his bad history about being wrong about things, and he was one of the ones that cut off discussion about making the stimulus any bigger, which the lefties remember better than most everyone else.
My second proposition is that the optimal inflation rate is surely positive, perhaps as high as 2 or 3 percent. On one hand,the losses from low positive rates of inflation are likely to be small. The Harberger triangle is negligibly small. At a 3 percent inflation rate, very few people are going to rush to deposit their checks in order to accumulate a little more interest. I don't see evidence that instability results at low rates of inflation.
On the other hand, the benefit of a positive rate of inflation comes in three places. The first is the avoidance of the zero interest rate trap. The real interest rate in the United States has been negative in about a third of the years since World War II. The real after-tax interest rate, the rate at which corporations, for example, can borrow, has been negative in about three-quarters of the years since World War II. That couldn't happen if we had a zero rate of inflation. The nominal interest rate cannot be negative. Negative interest rates may be a bad thing and our historical experience may be just an aberration, but perhaps negative real rates are a consequence of the risk associated with risky assets and the return on safe assets. If so, then an option would be lost to the economy if the rate of inflation were zero. I don't need to argue that the real after-tax rate of interest should always, or even most of the time, be negative. But if the real rate of interest should be negative only at certain times, we forgo that opportunity under a zero inflation rate. Potentially, rationing is much more serious than the triangles that are associated with a small tax distortion. If the equilibrium real rate of interest should be negative 1 percent and instead is 0 percent, the demand for capital would be significantly smaller than the supply.The potential consequences for economic stability would be severe at least enough of a risk that one would not want zero inflation.
you can tell it's 1991 because people were still defending why the rate had to be positive at all
Krugman pointed out that Summers had written dovish stuff like this when he was in academia, but the fear was that he was more likely to be assimilated by the hawks once it came around to him actually being the Fed chief. This was based on his tendency to promote more unconventional policies when out of position to do anything about them, but fit in more with the conventional wisdom once he has power.
Also, there was his bad history about being wrong about things, and he was one of the ones that cut off discussion about making the stimulus any bigger, which the lefties remember better than most everyone else.
true
you do have to dig quite hard to find mainstream-left-wing economists offering a straightforward support for a larger ARRA, on business-cycle terms, without handwaving quite a bit about credibility and commitment
The exact implementation of that tax would be a huge pain in the ass. Programmers are great at packaging one thing inside another. Its not all that hard to parse the microtransactions through some larger object and call that "one".
I do agree the unregulated algorithmic trading needs reigning in, but I'm not sure how to nail the tax down properly to actually catch the behaviors we want and not just shift it into a different camouflage.
Right now there is no tax on transactions, so I think starting with one would be best, then you can audit any suspicious accounts / software that you think are trying to hide transactions to avoid the tax. And any software that is trying to hide transactions would have to be used and supported by the buyer, the seller, and the programmer, which is three different levels of people assuming risk of being caught in an audit for trying to save the buyer a few cents on a transaction.
Yea, the penny transaction tax sounds like a good idea until the nitty gritty of implementing it gets discussed, and there never really being a guarantee of a loophole. It's much easier to just implement the small time limit auction method that ends every 5 seconds or what have you, or implementing another equal latency exchange.
There was a good article that analyzed the claims the one prof out of Berkely about making a fortune just by having a direct line and trading AAPL that I'll have to dig up.
If you're grouping transactions to hide them then you're not operating swiftly enough to take advantage of an arbitrage opportunity. By the time you've bundled the guy who paid the penny won.
The exact implementation of that tax would be a huge pain in the ass. Programmers are great at packaging one thing inside another. Its not all that hard to parse the microtransactions through some larger object and call that "one".
I do agree the unregulated algorithmic trading needs reigning in, but I'm not sure how to nail the tax down properly to actually catch the behaviors we want and not just shift it into a different camouflage.
But each trade must still proceed separately for microtransactions to work, so I don't see the issue.
It's hard for me to believe high frequency microtransaction trading is adding any value to the economy at all. If a penny tax is too hard to implement, I think a delay on transactions going through might make sense. It might be superior, because all a penny tax will do is change the thresholds needed to make money off of these transactions. A properly tuned time delay would eliminate them entirely, I would think.
It's hard for me to believe high frequency microtransaction trading is adding any value to the economy at all. If a penny tax is too hard to implement, I think a delay on transactions going through might make sense. It might be superior, because all a penny tax will do is change the thresholds needed to make money off of these transactions. A properly tuned time delay would eliminate them entirely, I would think.
It doesn't add value - it actually skims value from the system.
It's hard for me to believe high frequency microtransaction trading is adding any value to the economy at all. If a penny tax is too hard to implement, I think a delay on transactions going through might make sense. It might be superior, because all a penny tax will do is change the thresholds needed to make money off of these transactions. A properly tuned time delay would eliminate them entirely, I would think.
Is there really anything inherently wrong with the transactions themselves, though... barring, like, every algorithm going shitzoid at the same moment or something?
The point of the transaction tax is to reappropriate wealth (which I am fine with, for the record), not to stop the trading.
the tobin tax is usually built on a percentage tax on transactions - a sales tax, more or less - not as a penny tax, for exactly the reasons so described. No, you cannot solve the issue of bundling by adding pauses. People will just trade the derivatives instead (i.e., sell a massively complicated instrument packaging "if the price of Foo drops to X, then I agree to buy. if the price of Foo drops to X+0.001, then I agree to buy...." etc. - the results of their entire algo across the relevant space0.
It's hard for me to believe high frequency microtransaction trading is adding any value to the economy at all. If a penny tax is too hard to implement, I think a delay on transactions going through might make sense. It might be superior, because all a penny tax will do is change the thresholds needed to make money off of these transactions. A properly tuned time delay would eliminate them entirely, I would think.
Is there really anything inherently wrong with the transactions themselves, though... barring, like, every algorithm going shitzoid at the same moment or something?
The point of the transaction tax is to reappropriate wealth (which I am fine with, for the record), not to stop the trading.
I'd assume that whilst it might not really function like it, the stock market is supposed to bear some resemblance to business as a whole, with what the share represents being the primary reason for buying/selling them. The rapid microtransactions care very little about what might be happening in reality and are far more focused on the share as a product in itself entirely separate from what it supposedly represents.
If the bots can outperform analysts (or even analytical bots), then the whole system is pushed towards one that rewards 'meaningless' microtransactions rather than one that is focused around investing in ownership of a business. It's just some money used by robots and you'd need to set up another system to sell shares in ownership in your company.
+1
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gavindelThe reason all your softwareis brokenRegistered Userregular
Microtransactions represent real business conditions in the same way that gambling represents your salary.
ChanusHarbinger of the Spicy Rooster ApocalypseThe Flames of a Thousand Collapsed StarsRegistered Userregular
Blaming microtransactions for the stock market no longer being about investing in business is like blaming a robot for doing something humans already did.
Blaming microtransactions for the stock market no longer being about investing in business is like blaming a robot for doing something humans already did.
Actually it's blaming the people for making robots to do the stupid things they were already doing but bigger and stronger and faster and more.
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ChanusHarbinger of the Spicy Rooster ApocalypseThe Flames of a Thousand Collapsed StarsRegistered Userregular
Blaming microtransactions for the stock market no longer being about investing in business is like blaming a robot for doing something humans already did.
Actually it's blaming the people for making robots to do the stupid things they were already doing but bigger and stronger and faster and more.
It's hard for me to believe high frequency microtransaction trading is adding any value to the economy at all. If a penny tax is too hard to implement, I think a delay on transactions going through might make sense. It might be superior, because all a penny tax will do is change the thresholds needed to make money off of these transactions. A properly tuned time delay would eliminate them entirely, I would think.
Is there really anything inherently wrong with the transactions themselves, though... barring, like, every algorithm going shitzoid at the same moment or something?
The point of the transaction tax is to reappropriate wealth (which I am fine with, for the record), not to stop the trading.
I'd assume that whilst it might not really function like it, the stock market is supposed to bear some resemblance to business as a whole, with what the share represents being the primary reason for buying/selling them. The rapid microtransactions care very little about what might be happening in reality and are far more focused on the share as a product in itself entirely separate from what it supposedly represents.
If the bots can outperform analysts (or even analytical bots), then the whole system is pushed towards one that rewards 'meaningless' microtransactions rather than one that is focused around investing in ownership of a business. It's just some money used by robots and you'd need to set up another system to sell shares in ownership in your company.
I don't know if high frequency bots outperform analysts or buy-and-hold investors over long periods of time. Maybe they do and maybe they don't. But if they do, then maybe I should buy stock in some of them and hold it!
Stock ownership still represents business ownership. Always has, always will. Personally, If I hold stock in a successful business, I don't really care too much what other people do with their ownership stakes in the business. If they want to trade them back and forth to each other every few milliseconds, that's fine with me. That doesn't change the intrinsic value of the business. Businesses that are undervalued or overvalued on the market tend to stay that way for years, even with all the high frequency trading going on. I find the idea of high frequency trading sucking all the "value" out of the market to be preposterous, especially since that's explicitly not what it is designed to do.
Blaming microtransactions for the stock market no longer being about investing in business is like blaming a robot for doing something humans already did.
Actually it's blaming the people for making robots to do the stupid things they were already doing but bigger and stronger and faster and more.
Well, I mean yeah. Robots don't make robots.
Yet.
Oh shit.
Turning the stock market over to analytic algorithms will essentially turn this thing into a Roshambo contest, which we have in CS by the way, because the algorithms can't process "news" or "product quality" or "international markets". What they'll be doing is analyzing past performance and trying to predict future performance, which in and of itself will exacerbate bubbles, as the same analytic methods are likely to come up with the same prediction. There are really only so many quantitative markers to use. Eventually, it turns into a task of not just predicting future performance, but trying to predict the behaviour of other bots in the system, as they too drive prices, and eventually it just becomes insane algorithms operating against one another in a domain entirely divorced of reality.
That's the fear anyways.
Also, to say that the algorithms won't be doing anything humans don't already do, I don't think that's true. A human isn't allowed to, say, lie about a penny stock they own to other humans, and then dump their own shares when it bubbles up. But an algorithm could totally do that to another algorithm, and it'd be nigh impossible to figure out that that's what it did. In fact, that's probably the first thing I'd do if I was designing these trading algorithms in a market dominated by them, figure out how to give (false) signals to other trading bots that lure them into buying or selling a particular stock, and then exploiting the shit out of that trait until they close it or go broke. Actually, I'm not entirely sure that hasn't already happened.
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It's a plumbing issue, methinks.
What does that have to do with inflationary commitment?
Because the Very Serious People are sexist morons.
I don't doubt that all that matters remarkably little once they lead the FOMC - viz., Bernanke - but I have no clue where you are getting "Yellen is more likely to try to use inflation to force the corporations off their money piles" from.
The conception among the lefty types I read is that they think (and by that I mean they read Krugman and listen to Warren who think) that Yellen is more likely to focus on the dual mandate and not just the inflation targets. She's talked about that in the past, I gather?
Also the left haaaaaaates Summers. Mostly for his history as Treasury Secretary and pushing for Glass-Steagall's repeal, but also for his outrageous sexism as President of Harvard. For an extremely well qualified woman to be passed over for him in particular would be galling.
The curiosity is why Summers is not as appropriately academic. He's right up there with the rest of the New Keynesian writers - same era as Yellen, in fact.
Because his conduct as the president of Harvard showed that he's not as academic as he plays himself off as.
he also wrote the pollution memo, which suggests that he's, if anything, quite prone to being academic regardless of the political sense of the idea
I was gonna mention what I remembered reading before in Bloomberg said that Summers would've resulted in a bear market on stocks, and a strengthening on bonds. He also has a lot of baggage. Obama putting a talented, amiable and malleable woman in charge of the Fed was also seen to be a good thing, and her in favor of a slower taper.
being pro-inflation targeting doesn't particularly tell us where she will stand on the inflation target which is the important metric with regards to whether or not policy will be more or less inflationary.
Have I gone mad?
Granted i haven't been paying attention to this type of data for a while but its my understanding that we have been consistently failing to hit our target about 1% under.
no, that's summers 1991, kinda
http://www.jstor.org/stable/1992697
you can tell it's 1991 because people were still defending why the rate had to be positive at all
this is the problem you are in: the long-term target is 2%. So every time the rate bumps up to 2%, the hawks start screaming. Then the bank misses the target, but the error goes uncorrected by policy, so the actual long-term rate becomes lower than 2%
obviously, even if you reject nominal GDP or whatever, price level path targeting would be more appealing here
Krugman pointed out that Summers had written dovish stuff when he was in academia, but the fear was that he was more likely to be assimilated by the hawks once it came around to him actually being the Fed chief. This was based on his tendency to promote more unconventional policies when out of position to do anything about them, but fit in more with the conventional wisdom once he has power.
Also, there was his bad history about being wrong about things, and he was one of the ones that cut off discussion about making the stimulus any bigger, which the lefties remember better than most everyone else.
true
you do have to dig quite hard to find mainstream-left-wing economists offering a straightforward support for a larger ARRA, on business-cycle terms, without handwaving quite a bit about credibility and commitment
We really need that penny transaction tax.
The exact implementation of that tax would be a huge pain in the ass. Programmers are great at packaging one thing inside another. Its not all that hard to parse the microtransactions through some larger object and call that "one".
I do agree the unregulated algorithmic trading needs reigning in, but I'm not sure how to nail the tax down properly to actually catch the behaviors we want and not just shift it into a different camouflage.
MWO: Adamski
There was a good article that analyzed the claims the one prof out of Berkely about making a fortune just by having a direct line and trading AAPL that I'll have to dig up.
But each trade must still proceed separately for microtransactions to work, so I don't see the issue.
PSN: Vorpallion Twitch: Vorpallion
It doesn't add value - it actually skims value from the system.
Is there really anything inherently wrong with the transactions themselves, though... barring, like, every algorithm going shitzoid at the same moment or something?
The point of the transaction tax is to reappropriate wealth (which I am fine with, for the record), not to stop the trading.
I'd assume that whilst it might not really function like it, the stock market is supposed to bear some resemblance to business as a whole, with what the share represents being the primary reason for buying/selling them. The rapid microtransactions care very little about what might be happening in reality and are far more focused on the share as a product in itself entirely separate from what it supposedly represents.
If the bots can outperform analysts (or even analytical bots), then the whole system is pushed towards one that rewards 'meaningless' microtransactions rather than one that is focused around investing in ownership of a business. It's just some money used by robots and you'd need to set up another system to sell shares in ownership in your company.
Actually it's blaming the people for making robots to do the stupid things they were already doing but bigger and stronger and faster and more.
Well, I mean yeah. Robots don't make robots.
Yet.
Oh shit.
Actually, trading bots pay commissions too.
I don't know if high frequency bots outperform analysts or buy-and-hold investors over long periods of time. Maybe they do and maybe they don't. But if they do, then maybe I should buy stock in some of them and hold it!
Stock ownership still represents business ownership. Always has, always will. Personally, If I hold stock in a successful business, I don't really care too much what other people do with their ownership stakes in the business. If they want to trade them back and forth to each other every few milliseconds, that's fine with me. That doesn't change the intrinsic value of the business. Businesses that are undervalued or overvalued on the market tend to stay that way for years, even with all the high frequency trading going on. I find the idea of high frequency trading sucking all the "value" out of the market to be preposterous, especially since that's explicitly not what it is designed to do.
Turning the stock market over to analytic algorithms will essentially turn this thing into a Roshambo contest, which we have in CS by the way, because the algorithms can't process "news" or "product quality" or "international markets". What they'll be doing is analyzing past performance and trying to predict future performance, which in and of itself will exacerbate bubbles, as the same analytic methods are likely to come up with the same prediction. There are really only so many quantitative markers to use. Eventually, it turns into a task of not just predicting future performance, but trying to predict the behaviour of other bots in the system, as they too drive prices, and eventually it just becomes insane algorithms operating against one another in a domain entirely divorced of reality.
That's the fear anyways.
Also, to say that the algorithms won't be doing anything humans don't already do, I don't think that's true. A human isn't allowed to, say, lie about a penny stock they own to other humans, and then dump their own shares when it bubbles up. But an algorithm could totally do that to another algorithm, and it'd be nigh impossible to figure out that that's what it did. In fact, that's probably the first thing I'd do if I was designing these trading algorithms in a market dominated by them, figure out how to give (false) signals to other trading bots that lure them into buying or selling a particular stock, and then exploiting the shit out of that trait until they close it or go broke. Actually, I'm not entirely sure that hasn't already happened.