The hungry, hungry herd
"Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one."
-Charles Mackay, 1852
A central hypothesis of Socionomics (www.socionomics.com), 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 stock market can be seen as being a thermometer of that social mood. When optimism prevails, it rises; when pessimism rules, it falls.
Socionomics also asserts that our unconscious herding behavior drives social mood trends and stems from an emotional desire to conform to others, which may have been originally developed in order to ensure survival.
In the October 10, 2003 issue of the magazine Science, there is a research paper by Naomi I. Eisenberger, Mathew D. Lieberman, and Kipling D. Williams, entitled "Does Rejection Hurt?" Their results demonstrate that social exclusion from the "group" registers shock and distress in the same part of the brain that responds to physical pain. They believe that this physiological reaction may induce people to conform to social groups and serve as a defense mechanism by reinforcing the perception that social-group acceptance is necessary for self-preservation. They see the need for social connection to be "deeply rooted," implying a perception that social inclusion is just as important to our survival as avoiding physical harm.
Act now, think later
Throughout our history the primordial desire to prolong life and to reduce toil and labor by creating instant wealth in unlimited quantities have been our major goals.
After WWII, during the times of uncertainty and shortages, of living day to day, of doings one's best, saving one's grosz and hoping for a better tomorrow, politicians promised to eradicate poverty and inequality, to eradicate crime, to increase government spending, to provide full employment, better pensions and an efficient health service free to all who needed it.
For the citizens of many nations conditions did improve, for it was a time of production, of the creation of value. Things were made to be sold and the strength of the economy was based upon what it actually produced.
Now, half a century later, the same promises are made, for poverty still exists, inequality is rampant, and crime is now organized. But the expectations of the people have grown. The herd now expects wealth without saving, free drugs for every ailment under the sun, abundant energy at low prices, food that doesn't make you fat, rising stock prices, rising property prices, full employment and a free social security umbrella until they contract senile dementia and float off into the sunset.
It is also the time of consumption, of the purchase of things that one wants but does not need. The economy is lauded for the amounts that its citizens consume rather than produce, for it appears that it is the time of abundance and endless supplies of credit. In this mad, late-bubble world, debt in the USA rose 131 percent faster than income and is now growing at a rate three times faster than income.
And this debt burden is not confined to the young. The Consumer Credit Counseling Service in the UK analyzed the records of 21,000 clients to produce a debt profile of the nation. It found that those in their 50s owed an average of L19,845, much higher than the average of L14,701 owed by its younger clients. The study claims that fifty-somethings who expect to have new cars, gadgets and exotic holidays are struggling to pay for them.
For those born into an optimistic post-war world when inflation was rampant and incomes increased on a yearly basis, credit cards and debt have become a way of life. They have also become dependent upon the State to provide for basic necessities. This is the same throughout Europe.
But trouble is brewing. According to the 2004 World Population Data Sheet of the Population Reference Bureau (PRB) published in Washington (USA), in nearly all of Europe, couples have fewer than two children. Too few to replace themselves when they die. Such low fertility leads to population aging and population decline. Both of these phenomena have profound economic, social, and political consequences.
In Europe women have on average only 1.4 births compared to six or more children per woman in the countries of the Middle East-in the land of the Muslim. Too few workers to support the growing number of retirees in the population implies huge strains on a nation's social security system and pension plans, and puts pressure on health budgets because of higher healthcare costs for the elderly. Too many unemployed teenagers implies a strain on the whole political and economic system, as their aspirations, gained from watching the global media, remain unfulfilled.
Denial: The first step
Despite the burdens of debt (individual, municipal, corporate and national) and the undeniable demographic changes which are about to destabilize many economies, politicians who wish to be re-elected still promise to eradicate poverty and inequality, to curtail crime, to increase government spending, to provide full employment, better pensions and an efficient health service free to all who needed it. And the voters still believe them. The optimism that has powered the longest bull market in history (20 years) is still exerting its influence. It would appear that the herd is still in denial and quite happy to keep on deferring the liabilities to succeeding generations.
However, recall the words of Professor Alexander Tyler from his book entitled The Cycle of Democracy written in 1778:
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasury. From that moment on, the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy, [which is] always followed by a dictatorship."
Once the herd realizes that their high expectations are not about to be fulfilled, the present hysterical optimism will turn to unbridled bitterness. Cycles repeat.
-Charles Mackay, 1852
A central hypothesis of Socionomics (www.socionomics.com), 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 stock market can be seen as being a thermometer of that social mood. When optimism prevails, it rises; when pessimism rules, it falls.
Socionomics also asserts that our unconscious herding behavior drives social mood trends and stems from an emotional desire to conform to others, which may have been originally developed in order to ensure survival.
In the October 10, 2003 issue of the magazine Science, there is a research paper by Naomi I. Eisenberger, Mathew D. Lieberman, and Kipling D. Williams, entitled "Does Rejection Hurt?" Their results demonstrate that social exclusion from the "group" registers shock and distress in the same part of the brain that responds to physical pain. They believe that this physiological reaction may induce people to conform to social groups and serve as a defense mechanism by reinforcing the perception that social-group acceptance is necessary for self-preservation. They see the need for social connection to be "deeply rooted," implying a perception that social inclusion is just as important to our survival as avoiding physical harm.
Act now, think later
Throughout our history the primordial desire to prolong life and to reduce toil and labor by creating instant wealth in unlimited quantities have been our major goals.
After WWII, during the times of uncertainty and shortages, of living day to day, of doings one's best, saving one's grosz and hoping for a better tomorrow, politicians promised to eradicate poverty and inequality, to eradicate crime, to increase government spending, to provide full employment, better pensions and an efficient health service free to all who needed it.
For the citizens of many nations conditions did improve, for it was a time of production, of the creation of value. Things were made to be sold and the strength of the economy was based upon what it actually produced.
Now, half a century later, the same promises are made, for poverty still exists, inequality is rampant, and crime is now organized. But the expectations of the people have grown. The herd now expects wealth without saving, free drugs for every ailment under the sun, abundant energy at low prices, food that doesn't make you fat, rising stock prices, rising property prices, full employment and a free social security umbrella until they contract senile dementia and float off into the sunset.
It is also the time of consumption, of the purchase of things that one wants but does not need. The economy is lauded for the amounts that its citizens consume rather than produce, for it appears that it is the time of abundance and endless supplies of credit. In this mad, late-bubble world, debt in the USA rose 131 percent faster than income and is now growing at a rate three times faster than income.
And this debt burden is not confined to the young. The Consumer Credit Counseling Service in the UK analyzed the records of 21,000 clients to produce a debt profile of the nation. It found that those in their 50s owed an average of L19,845, much higher than the average of L14,701 owed by its younger clients. The study claims that fifty-somethings who expect to have new cars, gadgets and exotic holidays are struggling to pay for them.
For those born into an optimistic post-war world when inflation was rampant and incomes increased on a yearly basis, credit cards and debt have become a way of life. They have also become dependent upon the State to provide for basic necessities. This is the same throughout Europe.
But trouble is brewing. According to the 2004 World Population Data Sheet of the Population Reference Bureau (PRB) published in Washington (USA), in nearly all of Europe, couples have fewer than two children. Too few to replace themselves when they die. Such low fertility leads to population aging and population decline. Both of these phenomena have profound economic, social, and political consequences.
In Europe women have on average only 1.4 births compared to six or more children per woman in the countries of the Middle East-in the land of the Muslim. Too few workers to support the growing number of retirees in the population implies huge strains on a nation's social security system and pension plans, and puts pressure on health budgets because of higher healthcare costs for the elderly. Too many unemployed teenagers implies a strain on the whole political and economic system, as their aspirations, gained from watching the global media, remain unfulfilled.
Denial: The first step
Despite the burdens of debt (individual, municipal, corporate and national) and the undeniable demographic changes which are about to destabilize many economies, politicians who wish to be re-elected still promise to eradicate poverty and inequality, to curtail crime, to increase government spending, to provide full employment, better pensions and an efficient health service free to all who needed it. And the voters still believe them. The optimism that has powered the longest bull market in history (20 years) is still exerting its influence. It would appear that the herd is still in denial and quite happy to keep on deferring the liabilities to succeeding generations.
However, recall the words of Professor Alexander Tyler from his book entitled The Cycle of Democracy written in 1778:
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves money from the public treasury. From that moment on, the majority always votes for the candidates promising the most money from the public treasury, with the result that a democracy always collapses over loose fiscal policy, [which is] always followed by a dictatorship."
Once the herd realizes that their high expectations are not about to be fulfilled, the present hysterical optimism will turn to unbridled bitterness. Cycles repeat.
