Zbigniew Piekarski examines how human bahaviour and the economy are undeniably linked.
A thousand things advance; nine hundred and ninety-nine retreat: That is progress."
- Henri Frederic Amiel
Things are getting back to normal. After Bush declared peace in Iraq, the American casualties were supposed to stop and there would be peace. On Friday September 12, however, the American military returned to their normal "war" status and recorded eight friendly fire kills. You know that there is something not quite right when it takes over 200 highly trained troops six hours and more than a dozen missiles to subdue two men and a teenager. An inebriated Pole could have completed that task in a matter of seconds, particularly if he was a coal miner.
Over the next few months the Jabberwockies from all state-connected institutions, in particular the Academe, will spout a lot of pseudo-scientific mythology to explain away the antics of our coal mining cousins from Silesia. But most of them will totally ignore the obvious truth and the law of causality affecting human behaviour.
Human behaviour is at the root of economic activity and by studying that behaviour directly, not just the statistics that result from that behaviour, we can identify the proper causal relationship. The prevailing social mood determines the patterns that human behaviour takes and one of the clearest reflections of this mood is provided by the stock market. What else can explain the differences in crowd behaviour during the three New York City blackouts?
The most recent blackout, on Thursday August 14, was only one of three major blackouts that New York has experienced. The first one occurred on Tuesday, November 9, 1965 and the second on Wednesday, July 13, 1977.
In both 1965 and 2003, the mood of the people was benevolent and there was a lot of bonhomie. In 1977, however, it was a very different story. Looters destroyed sections of Brooklyn, Harlem and the South Bronx - in the process of which more than 2,000 stores were emptied. Buildings were set ablaze, with over 1000 fires raging through the city and the police arrested 3,776 people.
Naturally, the pseudo-scientists gave the standard myths and rational-sounding explanations for the crowd behaviour of 1977. Poverty, unemployment, illiteracy, illegitimacy, a high proportion of single-parent families, poor housing, drugs, alcoholism, racial tensions and a mistrust of the system were all to blame. These, apparently, were not around to the same degree in 1965 and were sublimated by the ignorant masses in 2003.
These same Jabberwockies attribute the good behaviour of New Yorkers in 2003 to the aftermath of 9/11. It would appear that New Yorkers feel threatened and are, consequently, more friendly towards one another, making all the negative factors that caused the riots in 1977 not so important.
This explanation sounds plausible, until you remember that the "Cold War" was still raging in 1977 and that geo-political uncertainty was widespread. Besides, can you name me a time since the Second World War when the Americans haven't felt threatened?
This chart offers an explanation of why the crowds behaved sociably in 1965, aggressively in 1977 and lovingly in 2003:
Social Mood determines human behaviour and this is reflected in the direction of the financial markets. The Dow Jones Industrial Average, in constant dollar terms, is an ideal index to show these changes. Notice that the years of 1965 and 2003 are positioned near the peaks of positive social-mood trends while 1977 is near the bottom of a negative social mood trend. Shared good feelings manifest themselves in good behaviour, while shared bad feelings lead to destructive behaviour.
This bear market is still relatively young and optimism continues to prevail. However, the markets have peaked and the next downturn will usher in a new phase of tension and "geo-political uncertainty". Consequently, social unrest will also increase.
I do hope that the more prudent amongst you are taking precautions. Stock up on essentials and keep at least a month's living expenses in cash. You know it makes sense, for Argentina has shown the way and it won't be long before Poland takes over the baton.
On the WSE: Up then down again, or down then up then down again.
I understand that certain elements of the Flower Power generation respect and admire Mrs. Thatcher and even hope that she can assist the government in its dispute with the miners - the same miners whose cheap coal was held responsible for closing the pits of Britain.
It will therefore be a surprise for them to learn that the dispute, which Mrs Thatcher instigated, had little to do with coal but was an undercover war against Wales. She wanted to weaken the Welsh Rugby team and to turn the valleys into retirement areas for English geriatrics who can't sing. She succeeded on both counts.
