Mood swings
"In Italy, for thirty years under the Borgias, they had warfare, terror, murder, bloodshed - they produced Michelangelo, Leonardo da Vinci and the Renaissance. In Switzerland, they had brotherly love, five hundred years of democracy and peace, and what did that produce? The Cuckoo Clock."
Harry Lime in 'The Third Man' (1949)
In fact Harry Lime got it wrong. The Cuckoo Clock was a German invention.
A central hypothesis of socionomics postulates that changes in social mood power economic, social and historical events. Economic activity, the types of laws that we have and even outbreaks of war are not the causes of social mood change, but the result of changes within it. The effects then feed back into the social mood and produce even more heightened emotions, which then demand even more extreme measures. The stock market can be seen as being a barometer of that social mood. When optimism prevails, it rises; when pessimism rules, it falls.
Mercury falling
Throughout history the largest stock-market collapses appeared quite suddenly after long periods of rising stock prices and economic expansion - particularly when over-optimism reigns supreme and 'manias' or 'bubbles' form. A 'bubble' exists when the ballooning asset prices are used as collateral in order to spend or to speculate. Once the bubble is pricked an abrupt change in psychology from optimism to pessimism fuels economic contractions. Throughout history each mania has ended at a level that is lower than the point from which it started.
The capitalist economies of the West have enjoyed 200 years of sustained economic growth with a couple of corrections which were followed by World Wars. Bubbles in the past have had a very similar sequence. A mania in equities has invariably been followed by a mania in property and all, without exception, were based on easy credit. At present according to David Miles, chief economist with Morgan Stanley, long-term interest rates (when adjusted for inflation) are at their lowest for 300 years.
From 1982 to the year 2000 the stock markets of the West advanced without seeing a single year where the low of the year dropped below that of the previous year. This optimism permeated throughout the World and resulted in an unprecedented growth of 'democracies' and the extension of the state into private lives in order to help everyone share in the false prosperity.
The American engine
Stephen S. Roach, chief economist and director of global economics at Morgan Stanley, has estimated that over the period of 1995 to 2002, the USA accounted for an astonishing 98 percent of the cumulative increase in world GDP. In other words, all but two percent of global growth came from the American consumer.
Yet in the year 2002, the typical American man earned six percent less than he earned in 1977. He has made ends meet by resorting to two desperate measures: he sent his wife to work and he went into debt. The debt levels of individual consumers and of most of the advanced economies are the highest they have ever been. And debt implies dependency and results in servitude.
The level of fiscal engineering that presently exists has been made possible by fiat currencies and 'fractional lending'.
Once the Bretton Woods agreement was abandoned on August 15, 1971, the value of the dollar in relation to gold was severed. This relationship provided a restraining hand on the ambitions of central bankers. From that time on all currencies became based on faith and promises alone. In other words the independent store of value by which to judge the worth of paper money was destroyed and now paper money is judged in relation to other paper money. It has no intrinsic worth above its cost of production.
The age of change
This process has gone on despite the fact that in the whole of our history experiments with fiat currencies have ended with failure 100 percent of the time. Without exception! So what makes this generation different to all of the others?
It is true to say that we have developed technology that has empowered us to do things that no generation has done before. But many generations have felt the same way. Canals, railways, the telegraph, the automobile, computers - all have provided an explanation as to why this time it is different and why this time we have found the Holy Grail of infinite prosperity.
Yet the universe is run by a single principle - the Tao or Great Ultimate. It is divided into two opposites, the yin and the yang. Change is the natural order of things.
Professor Joseph Olson of Hamline University of Law, St. Paul, demonstrated that the average age of the world's greatest civilizations has been two hundred years and these civilizations have progressed through a specific sequence: from bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to complacency; from complacency to apathy; from apathy to dependency; from dependency back into bondage.
Most of the citizens within advanced economies are facing a level of dependency that has never existed before in recorded history.
As the social mood changes into pessimism and then panic, the masses will come to question the viability of existing institutions, few of which will survive in their present form.
Unrest ahead
My contention is that the only historical parallels to indicate what we, and the generations to follow, are about to experience are the years of the 18th and 19th centuries when the collapse of a massive stock-market mania was followed by a series of depressions and social unrest which culminated in the overthrow of the established order.
Once again men and women will be forced to be free and this will be yet another age when the resourcefulness and inventiveness of the individual will be of paramount importance. Only those who are prepared will survive and prosper. Cycles repeat.
Harry Lime in 'The Third Man' (1949)
In fact Harry Lime got it wrong. The Cuckoo Clock was a German invention.
A central hypothesis of socionomics postulates that changes in social mood power economic, social and historical events. Economic activity, the types of laws that we have and even outbreaks of war are not the causes of social mood change, but the result of changes within it. The effects then feed back into the social mood and produce even more heightened emotions, which then demand even more extreme measures. The stock market can be seen as being a barometer of that social mood. When optimism prevails, it rises; when pessimism rules, it falls.
Mercury falling
Throughout history the largest stock-market collapses appeared quite suddenly after long periods of rising stock prices and economic expansion - particularly when over-optimism reigns supreme and 'manias' or 'bubbles' form. A 'bubble' exists when the ballooning asset prices are used as collateral in order to spend or to speculate. Once the bubble is pricked an abrupt change in psychology from optimism to pessimism fuels economic contractions. Throughout history each mania has ended at a level that is lower than the point from which it started.
The capitalist economies of the West have enjoyed 200 years of sustained economic growth with a couple of corrections which were followed by World Wars. Bubbles in the past have had a very similar sequence. A mania in equities has invariably been followed by a mania in property and all, without exception, were based on easy credit. At present according to David Miles, chief economist with Morgan Stanley, long-term interest rates (when adjusted for inflation) are at their lowest for 300 years.
From 1982 to the year 2000 the stock markets of the West advanced without seeing a single year where the low of the year dropped below that of the previous year. This optimism permeated throughout the World and resulted in an unprecedented growth of 'democracies' and the extension of the state into private lives in order to help everyone share in the false prosperity.
The American engine
Stephen S. Roach, chief economist and director of global economics at Morgan Stanley, has estimated that over the period of 1995 to 2002, the USA accounted for an astonishing 98 percent of the cumulative increase in world GDP. In other words, all but two percent of global growth came from the American consumer.
Yet in the year 2002, the typical American man earned six percent less than he earned in 1977. He has made ends meet by resorting to two desperate measures: he sent his wife to work and he went into debt. The debt levels of individual consumers and of most of the advanced economies are the highest they have ever been. And debt implies dependency and results in servitude.
The level of fiscal engineering that presently exists has been made possible by fiat currencies and 'fractional lending'.
Once the Bretton Woods agreement was abandoned on August 15, 1971, the value of the dollar in relation to gold was severed. This relationship provided a restraining hand on the ambitions of central bankers. From that time on all currencies became based on faith and promises alone. In other words the independent store of value by which to judge the worth of paper money was destroyed and now paper money is judged in relation to other paper money. It has no intrinsic worth above its cost of production.
The age of change
This process has gone on despite the fact that in the whole of our history experiments with fiat currencies have ended with failure 100 percent of the time. Without exception! So what makes this generation different to all of the others?
It is true to say that we have developed technology that has empowered us to do things that no generation has done before. But many generations have felt the same way. Canals, railways, the telegraph, the automobile, computers - all have provided an explanation as to why this time it is different and why this time we have found the Holy Grail of infinite prosperity.
Yet the universe is run by a single principle - the Tao or Great Ultimate. It is divided into two opposites, the yin and the yang. Change is the natural order of things.
Professor Joseph Olson of Hamline University of Law, St. Paul, demonstrated that the average age of the world's greatest civilizations has been two hundred years and these civilizations have progressed through a specific sequence: from bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to complacency; from complacency to apathy; from apathy to dependency; from dependency back into bondage.
Most of the citizens within advanced economies are facing a level of dependency that has never existed before in recorded history.
As the social mood changes into pessimism and then panic, the masses will come to question the viability of existing institutions, few of which will survive in their present form.
Unrest ahead
My contention is that the only historical parallels to indicate what we, and the generations to follow, are about to experience are the years of the 18th and 19th centuries when the collapse of a massive stock-market mania was followed by a series of depressions and social unrest which culminated in the overthrow of the established order.
Once again men and women will be forced to be free and this will be yet another age when the resourcefulness and inventiveness of the individual will be of paramount importance. Only those who are prepared will survive and prosper. Cycles repeat.
