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Johanna_Gfollowshare
9-28-2009 11:05 PM
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Johanna_G says:
The article said:

[...] When a person walks, lifting and dropping each foot in turn, he or she produces a slight sideways force. If hundreds of people are walking in a confined space, and some happen to walk in step, they can generate enough lateral momentum to move a footbridge"just a little. Once the footway starts swaying, however subtly, more and more pedestrians adjust their gait to get comfortable, stepping to and fro in synch. As a positive-feedback loop develops between the bridge’s swing and the pedestrians’ stride, the sideways forces can increase dramatically and the bridge can lurch violently. The investigating engineers termed this process “synchronous lateral excitation,” and came up with a mathematical formula to describe it.What does all this have to do with financial markets? Quite a lot [...]
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9-28-2009 11:14 PM
Johanna_G
The article said:

Most of the time, financial markets are pretty calm, trading is orderly, and participants can buy and sell in large quantities. Whenever a crisis hits, however, the biggest players—banks, investment banks, hedge funds—rush to reduce their exposure, buyers disappear, and liquidity dries up. Where previously there were diverse views, now there is unanimity: everybody’s moving in lockstep. “The pedestrians on the bridge are like banks adjusting their stance and the movements of the bridge itself are like price changes” [...] And the process is self-reinforcing: once liquidity falls below a certain threshold, “all the elements that formed a virtuous circle to promote stability...
9-29-2009 7:38 AM
Socratoad
Another great food-for-thought clip.

Thank you Johanna
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