Oct. 10 #YomKippur73: Israel Air Force bombards airports in Syria to prevent Soviet weapons reaching the Syrian Army http://t.co/tKnMzYjgFF
— IDF (@IDFSpokesperson) October 10, 2013
Full story here at the Washington Post.
Monday, October 14, 2013
Conflict, economic interdependence, and the price of oil
... in which "the price of oil just went up because traders misread a tweet", namely this one:
Full story here at the Washington Post.
Full story here at the Washington Post.
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I find this miscommunication situation to be very disconcerting. It is a frightening thought to know that we live in such a reactionary world that one misread tweet could lead to a jump in oil prices by over a dollar a gallon.
ReplyDeleteThis is related to the 10/9 lecture on capitalism and the fact that economic actors should want to keep peace for the easy flow of goods across boarders. It is very difficult to generate economic growth when at war with other countries. This is because where there are economic ties and supply chains, there is a monetary incentive to continue the relations.
Furthermore, this is related to open markets and the fact that they are costly price signals. An example that was used in class was when stock markets are worried about war, they reflect that in performance, which is bad for the market. As a micro-example, we can see that the oil prices were briefly shifted upwards as a reaction to the (albeit, accidental) costly signal sent by the Israeli Defense Forces.
This situation relates to markets responding to crisis signaling. We can see that due to a interconnected world, that networking can be very costly and messages can be misconstrued. A simple tweet, which isn't necessarily a reliable source can significantly change the market such as oil prices. We should see markets as a gaging informative system and how they move around and act when there are postive or negative statements. Clearly due to a simple tweet statement, the market reacted negatively thus hurting everyone just because information was taken to seriously from a social network site. How the old saying goes, "think before you speak." Maybe we have to "think before we tweet."
ReplyDeleteIt never ceases to amaze me how something so simple as reading something thoroughly can make such a massive difference in the world. This is definitely related to our readings and discussions on economic interdependence and globalization as a whole. Typically I am one who believes in the stability and rationality of the market. Apparently the market is not immune to panic, even from something as silly as a tweet.
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