Cocaine To Blame for Stock Market Volatility, Says Italy
There’s an old economics joke that since “the market” is made up of 25-year-old traders, all it really wants is sex and cocaine. It turns out, though, that this may not be too far off from the truth: Italian officials are currently considering mandatory drug tests for all stock market traders.
According to Carlo Giovanardi, an undersecretary to Silvio Berlusconi, one of the reasons why the stockmarket has so many inexplicable ups and downs is because those who are running the thing are “not capable of making decisions” because they’re high on cocaine. This is the first step in implementing drug testing policies for anyone who takes responsibility for the lives or money of others.
Though some might think that this is simply a ploy to take attention off of Italy’s weak market, it does point to an interesting question: why do markets fluctuate so much? One reason that makes a lot of sense (or at least as much as cocaine) is that, well, there is no reason why the market moves inexplicably. It just sort of does, and the best we can do is shake it off and move on to the next counterintuitive drop or gain.
At the same time, though, there certainly are cases in which excessive drug use influences market outcomes. Last year, a British trader bought so many oil futures while in a drunken stupor that he managed to move the global price of oil. There’s no question that regulations should address this reckless and dangerous behavior, especially since traders are working with other peoples’ money. And given how much power stock traders have over the rest of the world, the 99% if you will, any kind of regulation reining in market excess is certainly necessary.
Photo credit: Giuseppe Bognanni's Flickr stream.