Your argument that HFT constitutes a tax without adding value is a little shaky.

Short rebuttal:

Every trade you make will likely execute faster, because an HFT was willing to take the other side. You may miss out on price improvement, but you will be able to dispose of your position risk faster, because the HFT is accepting that risk in the hopes of turning a profit.

Elaboration:

Any serious investor who does not want to immediately lose his or her shirt should be using limit orders. For example, I might want to sell 100 shares of AAPL at $398.00. I don't care who takes the other side; I just make an open contract to sell AAPL at that given price, and some anonymous market participant accepts that contract. In this case, the value that an HFT offers me is the liquidity (yes, I said it), whereby my order to buy those shares might be crossed nearly immediately, even though it was a resting offer (i.e. it did not cross any existing buy order in the marketplace). As an investor, I am able to sell quickly at the price I want.

The HFT will then try to sell those shares they've bought from me at a higher price. So - what has the HFT done to deserve said profit? They've taken on risk. I was able to sell my shares at $398.00 like I wanted, and now the HFT is stuck managing the position that I no longer wanted to hold. They're now long 100 shares of AAPL at $398.00, and while they're betting that they can sell them to somebody else at $398.01 or $398.05, it's also quite possible that AAPL will decline to $397.50 over the next few minutes, in which case the HFT will likely have booked the loss at $397.9x and moved on to their next trade.

In this case, the HFT is acting as a market-maker, which is a function that traders at financial firms have provided since markets have existed. What's the difference between today's HFT and yesterday's phone brokers? They do it faster; and they don't typically get the huge commission breaks or shoulder the liquidity obligations of traditional market-makers.

Another typical role an HFT plays is that of an arbitrageur. Arbitrage is buying and selling a set of instruments that results in an immediate profit with little risk; the only major risk involved is execution risk - that someone would beat the arbitrageur to the prices he saw in the market. Again, this might seem a useless activity, sucking up pennies by getting information faster. But consider a simple example: two futures exchanges, one in the US (the CME) and one in Europe (the ICE), both list heating oil. I, a hotel owner, want to hedge my building's exposure to heating oil price changes, so I submit a limit order to buy 10 heating oil futures (delivering contracts at the CME at $3.0000/gallon. I can only afford to pay for access to the CME, but an arbitrageur has access to both CME and ICE. The arbitrageur sees my order to buy 10 contracts at $3.0000/gallon on CME, but also sees an order to sell 30 contracts at $2.9999/gallon on ICE. He decides to sell me 10 contracts at $3.0000 and buy 10 of the 30 available contracts on ICE at $2.9999, locking in a whopping $42 profit.

So what value did the HFT provide to the market? He created an effective liquidity channel between the two disparate exchanges. And what specific value did he provide to me, the business owner? He gave me access to liquidity on an exchange that I could not afford to access. In a sense, I paid him $42 to do this. If I could afford to do it more cheaply myself, I would have. In this sense, he actually provides this liquidity channel for cheaper than I could have achieved otherwise. And what risk did he take? He took the risk that one of his orders did not execute against the market price he saw. Imagine that he is US-based as well, and sold me those ten contracts at $3.0000, but someone in Europe happened to buy those 30 contracts at $2.9999 before he could get them. Now he's stuck with the price risk that I bought from him. What if the next resting offer above the $2.9999 is $3.0005? If he were to buy that, he would lose $210. Or what if, while he were waiting for the market to move in his favor, news came out about a major pipeline disruption and heating oil skyrocketed to $3.0100? Now he's lost $4,200! In any case, I was able to quickly get rid of my risk at the price I wanted, at a small expense whose size roughly matches the value of the market inefficiency that the arbitrageur captured (say a risk-averaged $30).

We're in huge trouble as a country because a completely different sector of the financial industry was irresponsible in the way they lent money. Making high-frequency trading the scapegoat is not going to solve our problems.

As for high-frequency trading itself, I don't see the cause for disgust. Traders of all kinds (that is, people who exchange things with willing participants) try to optimize their revenue, as do most for-profit businesses. If your argument is that for-profit activities in general are the reason our country is in trouble, then I suppose I won't convince you of anything. If your argument is instead that doing business faster than others is immoral, I'd like to see a little more of the rationale.

The fun part is virtualization. In virtualization, you buy four rooms and call them an office, but it's a magical office, where the building managers can choose to swap out the rooms, plumbing, and electricity at any time, but you can't tell because they paint it all to look exactly the same. Creepy, huh?

We use SSH tunnels all the time at work to hop from server to server on different subnets. Any clever college student could figure it out, and the teacher would be none the wiser, unless he had packet sniffers on the network.

If the companies did in fact go along with the President's orders because there was money in it, can we fight back the same way? If money trumps the rule of law, a boycott should be organized to switch, en masse, to providers that refused to perform warrantless wiretapping. Does such a boycott exist?