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Research Program

Political Warfare in the Digital Age

Thomas Paterson and Lauren Hanley – two leading scholars in the Strategic Defence Studies Centre at The Australian National University – have a new, must read journal article on political warfare in the Australian Journal of International Affairs. Here’s the abstract:

The digital age has permanently changed the way states conduct political warfare—necessitating a rebalancing of security priorities in democracies. The utilisation of cyberspace by state and non-state actors to subvert democratic elections, encourage the proliferation of violence and challenge the sovereignty and values of democratic states is having a highly destabilising effect. Successful political warfare campaigns also cause voters to question the results of democratic elections and whether special interests or foreign powers have been the decisive factor in a given outcome. This is highly damaging for the political legitimacy of democracies, which depend upon voters being able to trust in electoral processes and outcomes free from malign influence—perceived or otherwise. The values of individual freedom and political expression practised within democratic states challenges their ability to respond to political warfare. The continued failure of governments to understand this has undermined their ability to combat this emerging threat. The challenges that this new digitally enabled political warfare poses to democracies is set to rise with developments in machine learning and the emergence of digital tools such as ‘deep fakes’.

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Research Program

Economic Crash Books

Some context for this week’s coronavirus panic and financial market correction:

A First-Class Catastrophe: The Road to Black Monday, the Worst Day in Wall Street History by Diana B. Henriques (New York: Henry Holt and Company, 2017). What happened on Monday, October 19, 1987, and what led to it.

A Demon of Our Own Design: Markets, Hedge Funds and the Perils of Financial Innovation (Hoboken, NJ: John Wiley & Sons, 2008). A leading quantitative portfolio manager notes two causes of the 2008-09 Great Recession or Global Financial Crisis: the use of leverage, and the rapid growth in complex financial assets (such as mortgage debt securities and collateralised debt obligations).

Manias, Panics and Crashes: A History of Financial Crises (Seventh edition) by Robert Z. Aliber and Charles P. Kindleberger (New York: Palgrave Macmillan, 2017). An influential history of why manias, panics and economic crashes occur.

Market Madness: A Century of Oil Panics, Crises, and Crashes by Blake C. Clayton (Oxford: Oxford University Press, 2015). A behavioural economics view of why oil panices, crises, and crashes occur – building on Robert J. Shiller’s pioneering framework.

The Asylum: Inside The Rise and Ruin of the Global Oil Market by Leah McGrath Goodman (New York: HarperCollins, 2011). How traders and speculators deal with the global oil market and risk-reward decision-making.

Aftermath: Seven Secrets of Wealth Preservation in the Coming Chaos by James Rickards (New York: Penguin, 2019). One of the best well-argued bear cases for a financial crisis or recession in the near future.

World Event Trading: How to Analyze and Profit from Today’s Headlines by Andrew Busch (Hoboken, NJ: John Wiley & Sons, 2009). How event arbitrage traders trade economic crises, pandemics, geopolitical conflict, and other forms of volatility events: they look for tradable catalysts.

The Rise of Carry: The Dangerous Consequences of Volatility Suppression and the Financial Order of Decaying Growth and Economic Crisis by Tim Lee, Jamie Lee, and Kevin Coldiron (New York: McGraw-Hill, 2019). How volatility suppression strategies can create the market conditions for volatility events.

Narrative Economics: How Stories Go Viral & Drive Major Economic Events by Robert J. Shiller (Princeton, NJ: Princeton University Press, 2019). A behavioural economics perspective on the role of narratives in creating and shaping volatility events.

Adaptive Markets: Financial Evolution at the Speed of Thought by Andrew W. Lo (Princeton, NJ: Princeton University Press, 2019). An influential quantitative finance researcher and quantitative hedge fund consultant outlines his Adaptive Markets Hypothesis – and how it differs from the Efficient Markets Hypothesis.

During my 2002-04 Masters studies in strategic foresight at Swinburne University, I also wrote a postmortem on the 2000 Dotcom Crash.