Oct. 23, 2012 --
With just over two weeks until Election Day, the presidential candidates might feel tempted to promise the world to still-undecided voters when the two meet on the stage at Lynn University for their final debate. With so many promises made to so many constituencies over the course of a campaign, victorious candidates are bound to ignore or outright contradict pledges made in the run up to office. Voters are inclined to forgive one or two campaign pledges that were left behind after the race. But some promises are so big, that breaking them is not so easily forgotten.
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The U.S. presidential election in 1916 pitted incumbent president Woodrow Wilson against Supreme Court Justice Charles Evans Hughes. While Wilson was in office, conflict erupted in Europe to become what would be World War I. Although Americans generally supported Allied powers, voters wanted the United States to remain out of the conflict. To capitalize on public opinion on this issue, Wilson campaigned on the slogan, "He kept us out of war." Months after winning reelection, Wilson went to Congress to approve a declaration of war with Germany and its allies. Wilson have campaigned on the implicit promise American neutrality in World War I, but he never explicitly stated he would never lead the United States to join the war.
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Herbert Hoover's alleged campaign promise might seem too ambitious by today's standards, but with the phrase "a chicken in every pot and a car in every garage," Hoover gave a clear vision of the prosperity he envisioned for the country. This phrase was not issued by Hoover himself, though it certainly reflected the tenor of his campaign promises. Rather was used in a campaign advertisement published by the Republican Party. Less than a year after he took office, the stock market crash of 1929 heralded the Great Depression, the longest and deepest period of economic decline in the 20th century.
Amid a depression with no end in sight, Franklin Delano Roosevelt campaigned in 1932 on a promise of putting the nation back to work. Roosevelt criticized Hoover's inability to restore the nation to prosperity and even ridiculed the ballooning of the deficit under the Hoover administration. Upon taking office, however, Roosevelt's New Deal programs dramatically increased the federal budget deficit far beyond the levels achieved by his predecessor.
Like Wilson, Roosevelt maintained a policy of neutrality at the outbreak of World War II, and campaigned on the issue. Unlike Wilson, however, Roosevelt was unambiguous in his 1940 campaign declaration: "I have said this before, but I shall say it again and again and again: Your boys are not going to be sent into any foreign wars." One year later, Roosevelt would go back on the promise and lead the United States into war in response to the attacks on Pearl Harbor.
Following his assumption of the office of the presidency after the assassination of his predecessor, Lyndon B. Johnson was up for reelection in 1964 against Republican challenger Barry Goldwater. As his administration was making plans to escalate war in Vietnam, Johnson declared that his administration would not send ground troops into Vietnam. Months after being sworn in to another term of office, Johnson broke his promise, a move which lost him support with the public.
In 1968, Richard Nixon campaigned for the presidency with a pledge to end the war in Vietnam that had been launched and administered by previous Democratic administrations. There were even reports that Nixon had a "secret plan" to end the war without the United States being perceived as the losing side. Instead, Nixon continued to press American forces in Vietnam, resulting in an increase in combat deaths within just the first six months of Nixon assuming office.
In 1988, in his speech at the Republican National Convention to accept the Republican nomination for the presidency, George H.W. Bush made what might be the most famous broken promise in presidential history: "Read my lips: No new taxes." The phrase proved catchy and helped propel Bush to victory. Unfortunately, upon taking office, Bush inherited a national deficit from the previous administration, and with a Congress controlled by the opposition, had to raise taxes. The broken promise proved one of the major contributors for his failure to win reelection in 1992.
If the stock market takes a fast dive, it might not be because of panicked traders. It might be panicked robots.
In the last few years brokerage firms have relied more on autonomous software agents to manage trades, which do most of the routine work. A group of researchers at the University of Miami has found a dark side, though: the trading can be too fast and such programs aren’t smart enough to know when to stop following their instructions. That can cause crashes in a single stock, or market-wide swings like the 2010 “Flash Crash” which resulted in a 1,000 point drop in the Dow Jones Industrial Average, representing 9 percent of its value. Their study, which looked at trading between January 2006, through February 2011, appears in the latest issue of the journal Scientific Reports.
The study notes that competition between financial firms has driven the development of ever-faster trading programs. Some can prepare a trade in 740 nanoseconds. By comparison a human being can react to danger in about a second – more than 1,000 times slower.
The group, led by Neil Johnson, a physicist, studied what they called “ultrafast extreme events” in the markets over the past several years. “Ultrafast” means any spike or drop of more than 0.8 percent in a stock price over a period of a 1.5 seconds or less.
They found there was an explosion of such events, 18,520 in fact, after 2006 with most of the event rising rapidly between late 2006 and early 2009.
Such price movements couldn’t have been driven by the news of the day, which is what typically cause human traders to get nervous, because the trades happened much too quickly.
Johnson’s team also came up with a model of why computer programs and markets behave this way. The issue, they said, is similar to what happens in an ecosystem when a new predator is introduced. Ordinarily the predators and prey — the buyers and sellers — are in relative balance. But add a new factor, in this case, traders who can execute an order in a second, and that balance is disrupted. A tiny price movement in less than a second might sound benign, but there’s always a chance that the markets will not regain their equilibrium. The Flash Crash was only one example of what might happen.
Knowing how and why the trading ‘bots behave has applications outside of finance. The patterns for trading programs might also be applicable to analyzing cyber attacks. “Our math model is able to capture this collective behavior by modeling how these cyber mobs behave,” Johnson said in a press release.
Credit: REUTERS/Lucas Jackson/Files