Its mostly to do with the psychology of trade. Since the overriding
interest of your average person is self interest, the more agressive one
engages in trade, the more likely one is to be motivated by greed (but
in a good way! ;) ). The smell of money tends to make people less
cautious and more optimistic. "I'm going to make it THIS time." is what
the little voice inside says.
Given this behavior, in a market where parties are less free with
information, more secretive, those without information either have to
pass on a trade opportunity, pull out early, or make a leap, a gamble.
So they either accept lower gains with lower risk, or with secrecy,
accept greater risk for debatably greater gains. Markets fed on
speculation tend to inflate in value beyond true market value if
sufficient information is withheld from the negotiation. Witness the
recent market performance that has accompanied a behavior by major
corporations and trades to generate two sets of data: one for favored
clients, and one for release to the masses. This sort of disinformation
obviously biases the market. The market balloon swells to a point beyond
the confidence of the investor on the street, which can either cause
stagnation, or in a crisis of confidence, cause the balloon to burst,
like the Japanese markets of the early 90's. The market then plunges far
below prices that an informed investor would sell on, but a panicked
uninformed speculator accepts just to escape from the trauma. This is
the sort of positive feedback I speak of. Speculation cycles can occur
in any market, and if enough cycles coincide so as to reinforce each
other, a normally stable economy can be ruined.
-- TANSTAAFL!!! Michael Lorrey ------------------------------------------------------------ mailto:retroman@together.net Inventor of the Lorrey Drive MikeySoft: Graphic Design/Animation/Publishing/Engineering ------------------------------------------------------------ How many fnords did you see before breakfast today?