"The Global (Computer) Crash"

This is a great article on how computers played a part in the global financial mess we find ourselves in. Essentially, "garbage in / garbage out". The forecasts and models that are widely used in the financial industry are only as good as the information input to the computers.

Our entire concept of trading and banking is really based on an antiquated model that is not adapted to the huge amount of information that is available 24/7, real-time, by everyone via computer. Last summer's huge increase in commodities speculation is a great example of how the system can be manipulated.

Business models are run so tightly, there is no room for error. It seems that too much information really is a bad thing.

arstechnica.com...

Taleb also has another major problem with computers that has nothing to do with their uses and abuses in banking. From Taleb's perspective, computers have made the whole of the modern economy too complex and too efficient. From inventory management systems that ensure that retail outlets hold the optimal amount of inventory (no less and no more) for a given day and location, to the massive options pricing machines that time trades with millisecond precision, the entirety of the computer-driven global economy is like one massive model that was assembled—most of it over the course of the past decade—on the governing assumption that the future would look pretty much like the past. And when that widely shared assumption breaks down, then the system ceases to behave in a predictable way, because it has been too finely tuned to operate under a set of parameters that no longer pertain. (Or so the argument goes.)