Well I certainly didn't see how it was an excellent article. The author puts forth a highly debatable hypothesis as if it were fact. Namely that increased volume in the currency markets necessarily leads to increased volatility. First of all it's not clear to me how an increase in speculative trading activity leads to a disproportionate increase in currency volatility per se. It's also not clear what exactly constitutes too much volatility in the currency markets.


Here is one statement the author uses to make the "too much trading case":


"Even the disappearance of the eurozone's national currencies has reduced foreign currency trading only a little; and other markets have continued to grow at rates much higher than gross domestic product or international trade."


Among other problems, this statement is internally inconsistent. If (and this is a big if) currency trading is directly linked with GDP or international trade (the author doesn't say which), then of course there would be little change in currency trading volume as a result of swithching to the Euro.


Here is one more quote that caught my attention:

"Why is there so much trading? The basic reason is that the participants underestimate the risk they run and overestimate the long-term rewards."


This a common refrain heard often from Liberals, anti-capitalists and non-economists. It is the people are stupid hypothesis. This may in fact be true in some cases but upon close examination is rarely the case. More often than not it was observer who failed to completely understand the story unfolding before him.


My opinion of the article was that it was basically another one of those "Chicken Little The Sky is Falling" articles that always seem to sprout up in the wake of whatever real or perceived financial disaster has just occured.