29 Jan Stock market crisis: run for the hills!
The FTSE 100 has lost about 18% of its value in the last 8 months. Troubling stuff for those of us with pensions (although mine was in cash – so basically up yours to those of you who lost their shirts). These dramatic falls have been blamed on a variety of things, quite justifiably, but the issue of investor panic hasn’t really been mentioned at all in the press.
One popular reason for the decline includes deliberate over production of oil by Saudi Arabia, in an attempt to drive the world crude price down and push frackers (yes ‘frackers’) out of business. Not an effect likely to be felt in the Sussex and Gatwick oilfields, of course.
Another major reason is the downturn of growth in the Chinese economy, though this will pick up when China starts building us our generously subsidised nuclear reactors. Meanwhile, when the Chinese economy sneezes the world catches a cold.
Yes China’s growth has fallen (fallen!) to only 7.0% and this has had all sorts of knock-on effects, like demand for steel plummeting, which ultimately lead to Port Talbot steel works being threatened with closure. Thankfully, the taxpayer avoided yet another bailout because it didn’t meet the qualifying criteria of being an incompetent financial institution.
This leads us to ‘the circuit breaker’
In this context, the circuit breaker is not a device that stops your house wiring catching fire when you cut through your hedge trimmer cable (again, in my case). No, here it is a fail-safe system, such that when the Chinese stock market falls by 5% (in one day I assume) all trading is stopped, to prevent a crash. Although, personally, I see this as interfering with the free market.
On the face of it, this is a good idea, but one has to consider how people react when the market starts to fall and the 5% threshold looms. Well, the average Communist Neo Capitalist (what?) in Shanghai snatches up the phone and screams ‘SELL’ at his broker who runs to the stock market floor to wave his arms about and shout numbers at his similarly gesticulating colleagues.
The upshot is that when the market fall hits, say 2.5-3%, panic sets in, investors sell like mad and the problem becomes wildly more acute. What is more, courageous investors on this side of the world take one look at what’s gone on in China several hours before (the sun rises in the East dear readers) and they panic and sell.
Needless to say, the stock market circuit breaker was suspended on the 8th of January – the equivalent of replacing a fuse with a nail. What seemed like a sensible idea at the time became redundant as soon as the real-world vagaries of human behaviour were involved.
Have you considered the human-effect on your systems?
The point I’m trying to make is that when you put a system in place, you have to account for how people will actually interact with it. In fact, I would be so bold as to suggest that before you put any system in place you involve your users intimately in its design, especially ones as crucial as those which monitor safety.
- Can your operator actually user an unreliable machine with the new guard in place or will he try to bypass it?
- Can the operator actually wear a full protective suit and breathing apparatus in a hot environment without passing out?
- Can operators carry out confined space atmosphere checks if all of the samplers have flat batteries?
- Can a supervisor really inspect each job site personally (as required by the permit procedure) when he’s faced with 30 permits to do that morning?
- How much slower is the new sack handler than manually lifting the sacks?
- When the production line has to be sped up, can an operator really work that fast or will they let sub-standard products slip past to meet targets?
New system planned? Think it through first and always involve your users. Expect dangerous short-cuts and unintended consequences, then engineer for them before they have far-reaching effects.