the SEC can raise the min. to 50K if they want cause it's their game. or ban prop trading altogether cause they contol the market. or the FED can raise interest rates to 7% I feel that inflation can reach Germany's post 1929 levels if it's not under control. there was lots of commodities inflation after the stock market crash of 1929.. keeping the market under control is more important than making banks rich or hedge funds money.. speculators and daytraders don't matter in the big picture of the 'market' or 'REAL ECONOMY'
deflation isn't as bad as hyperinflation where people's savings or wealth is destroyed due to too much fiat money being literally printed by the FED. deflation is always temporary as prices always have support but inflation can have no resistance.
The US markets are an arbitrage market to the global paradigm now led by the emerging nations such as China and the resource commodities markets. The US won't lead the global market except down when the time comes. Lately, you will often hear from traders how market is only good when the dow is down big. This is because that is the only time real trading is going on. Most other times the machines are merely pricing arb to some other exchange. Notice volume on up days is pathetically low.
Deflation is a rare phenomenon, so many historians are fascinated by the Great Depression (like Bernanke) and the Japanese style deflation that they forget that there is rampant examples of inflation throughout history and currently in many emerging markets but very rarely examples of deflation. In a fiat currency situation, the government has all the incentive to inflate and no incentive to deflate, thats why prices always rise. The fear of deflation is total BS. Inflation is the enemy at all times.
Inflation isn't the enemy when your books are levered to high hell with debt (ie US, Japan, etc). Deflation is the enemy because it threatens credit quality of the US govt. Imagine the US dollar AND US credit falling apart simultaneously. Thats what deflation does.
In a deflationary environment, the US dollar would be worth MORE, not less. It is the opposite of inflation. And US credit falling apart happens in both deflation and inflation, what's the difference in paying back loans with dollars that are like confetti(inflation) or not paying them back at all (deflation)?
I have to agree here but its not just the US markets. Most of the trading on slow days is part of arbs around the globe. You're right in that up to 70% of the NYSE volume on a boring day is program trading. The same thing goes on in the options markets where the huge majority of trades are dispersion trades, around the globe. Since the advent of the fantastic real time communications and electronic access to all markets the big firms now have globalized central risk management, as opposed to the old "passing the book" around the time zones. This has allowed the collateralization of all kinds of risk and whats become the game of dispersion where firms buy and sell fractional risk in huge volume for small bits of statistical edge.
Its the internet every market is always profitable to every person who wants to claim they made a fortune trading anything from baseball cards to popcorn futures in "boring markets"