Felix Stalder on Sat, 1 Nov 1997 18:52:37 +0100 (MET)

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<nettime> The Financial Markets as Pop Events

Coming Around the Full Circle - The Financial Markets as Pop Events

What we are witnessing in the current market turmoil is a truly global
pop event. A 'crash' sending shock waves through all economies wealthy
enough to experience shock as an exception. The event is staged by
dead-serious men and women asserting that the occurrences are
exceptional and dramatic "the biggest drop ever!" but that we have
nothing to worry about, =93just sit back and relax!=94 What happened?

In the last two decades the financial markets have turned from a
relatively peripheral phenomenon into a central event of mainstream
business, media and popular attention. This development is related to a
considerable extent to the increased incorporation of advanced
telecommunication and computer technology. This for three reasons, at

1. The volume of money and transactions which can be handled has
increased dramatically through the automation of the financial markets.
As the markets grew beyond any limitations more money, and influence,
became concentrated there.

2. The automation of the markets made it possible to provide ever more
customized services at an ever lower rate allowing for an increased
participation of small investors, i.e. the traditional middle class
concerned about their pensions. Not only the volume handled in the
markets increased but also the number of market participants. And, the
demographic profile of those participants changed from (young) highly
educated professional to the upper and middle segments of the general
public. An indicator of the extend of this change is the fact that
mutual funds and other previously exotic financial products have become
advertised heavily in mass media in the recent years (at least here in
North America).

3. Increased computerization and increased volume led to a simultaneous
integration and fragmentation of the markets. On the one hand, more and
more abstract, complex and entirely computer-based products, such as
derivatives (e.g. options: the right, but not the obligation, to but an
underlying asset for a predetermined price in the future), have greatly
expanded the number and types of tools available to brokers and their
customers. The markets fragmented into a plethora of submarkets. On the
other hand, the increased abstraction of those products has extended
their reach (the option to buy stock costs only a fragment of the stock
itself. i.e. one can 'control' more assets with less money). This
enlarged extension of the financial products connected everything with
everything and interrelated markets which were traditionally separated
and insulated from one another.

The transfer and expansion of the financial markets into advanced,
networked media has led to a paradox situation: While the markets have
grown and have become much more complex, the number of poorly informed
participants have risen steadily.

The network condition, characterized by Berkeley sociologist Manuel
Castells as 'spaceless space' and 'timeless time' (from the point of
view of the insider everything is here and now), have further shifted=20
the market's mode of operation from analyzing the economy to
anticipating participants own reaction. In other words, they have become
increasingly psychological, or, as McLuhan used to say, "in the electric
age rumors become news."

In the meantime, the ever larger segment of small investors has been
looking out for comprehensible coverage of those markets they have
invested in and the popular media have picked up that demand quickly.
Programs entirely devoted to financial news, such as CNN's Money Line,
have sprung up all over, adding their part to the spin. For mass media
financial markets are an ideal match, even better than sports. They
provide everything: 24-hour, global events, lots of participants eager
to appear on television as a way to promote their own businesses and,
maybe not for long, all content is free of charge. Most importantly, the
financial news produce the most interesting audience to sell to
advertisers: the wealthy middle class.=20

These different threads have reinforced one another in the last decade
with an increased participation of the public and the mass media in the
last few years. They have created a truly global pop event which feeds
upon its own hype. Thus turning expectations, dreams, and nightmares
into reality which reflects less the material reality is supposed to
represent --the physical economy-- but more the dynamic of electronic
media in which it is organized.


           Plus =E7a change, plus c'est la m=EAme chose.

|||||||||||||| http://www.fis.utoronto.ca/~stalder ||||||||||||||
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