The Market of Doctor Frankenstein

NYSE officials believe that about half of Thursday's $1 trillion market meltdown was the result of concerns over the debt crisis emanating from Europe, and that about half of it was the result of high-speed computerized trading systems gone haywire, in ways that apparently are not yet fully understood.

Both factors in the stomach-churning trading session are the result of bold innovations that have moved beyond the grasp of human control. The "high frequency" trading platforms that dominate today's financial world are too complex for their creators to curb. And the problem of many of them acting simultaneously under different rules has proven way to much for regulators to control. Government officials may try to improve stability by creating a single set of rules for all trading venues.

The best theory for explaining last week's mayhem seems to be that the NYSE put a halt to some trading in an effort to slow the decline of prices. Those trades were automatically moved to other markets where there was no price floor. The stocks were offered at lower and lower prices, and with no buyers in the market, the prices dropped close to zero in some cases. Senator Ted Kaufman has called for a government review, and the hope is that with better oversight, the villagers can capture the monster and bring him safely back to the lab.

We shall see. Horror movies usually spawn sequels, so it's a bit early to proclaim the end of The Market of Dr. Frankenstein.

The drama on Thursday was a double-feature, though. While Frankenstein played at the megaplex, the art house downtown was screening a European film, one based on the myth of Prometheus. The modern version is set in Greece, just like the classical version. In the original, Prometheus defies Zeus, the king of the universe, and gives fire to mortals. In punishment, Zeus chains Prometheus to a rock in the Caucasus, where an eagle eats out the self-regenerating liver of the immortal Prometheus every day, day after day, until Hercules rescues him years later.

In the modern version, the trouble starts as humans play with the fire of a partially transnational organization called the EU, which has a single currency and multiple governments for multiple nations with many different economic profiles. In the end, though, everyone gets burned.

This weekend, the finance ministers of the EU are trying to play Hercules. They are putting together a plan to support the euro, which has been targeted by the gods of the currency market. We won't know exactly what the plan entails until sometime before the market opens on Monday, but it is likely to involve buying the euro to provide some sort of floor for its price.

The big question is whether that will be enough. The gods wanted a greater tribute, in which the EU's central bank would buy print new money and buy up the bonds of Greece. But the EU ministers fear that will only unleash the monster of inflation.

At root, the movies are based on the same old story of bold and ambitious plans spinning beyond the control of the people who unleashed them. In the end, order is restored to the universe, but only after a long reign of terror in the countryside.