“And the will of Zeus was moving towards its end.” – Homer
Symbiotic Disharmony
The turbulent saga of Western civilization unfolds with alarming intensity. The trio of pandemic, economic collapse, and societal breakdown intertwines like the dissonant notes of a minor pentatonic scale.
Just last Sunday, what began as peaceful protests in our quaint town erupted into chaos, resulting in rioting, looting, and arson. Local police were unable to contain the unrest, prompting the National Guard to intervene. Some of the guardsmen even stayed behind to assist with the cleanup the following day.
This pattern of events—pandemic, economic decline, and societal breakdown—has resonated across numerous cities nationwide. Each situation is a reminder: the time is now, and the place is right here.
The transition from government-imposed pandemic lockdowns to curfews has been as seamless as the shift from day to night. The differences, akin to the subtle distinction between ketchup and catsup, manifest mainly in local authorities inundating our phones daily with alerts to stay indoors after curfew.
While the recent events have received ample attention, we’ll step back to assess the broader picture. Our goal today is to grasp what is happening around us, allowing us to better anticipate and plan for what lies ahead.
So, where should we begin?
Human Stampedes
The sudden rush of a cattle stampede can be triggered by something as harmless as a moving tumbleweed. A minor scare or perceived threat can unleash a chaotic stampede, charging in one direction and obliterating everything in its path.
The rancher’s only recourse is to fire a shot in hopes of redirecting the herd. If successful, the animals may turn back in a great circle; if not, they might plunge off a cliff.
Like cattle, humanity shares a tendency towards herd behavior. Furthermore, human reactions often escalate to extremes.
From religious pilgrimages and sporting events to concerts and political rallies, tragic human stampedes have historically occurred. For instance, in 2015, over 2,400 individuals lost their lives in the Hajj Stampede in Saudi Arabia.
Financial markets also offer a multitude of paths for such stampedes. The fear and greed associated with scarcity and abundance create ripe conditions for extreme human folly. Market manias, panics, and crashes occur with startling frequency.
When excessive speculations accumulate on one side of a trade, a reversal is inevitable. The timing and duration of such reversals remain unpredictable. Yet, those caught unprepared often suffer the consequences.
Pandemic, Economic Collapse, Full Societal Breakdown
Social moods and collective movements cycle unpredictably, often only recognizable in hindsight. However, if one listens closely, the murmurs of impending change may become apparent.
High prices, unsurprisingly, bring about high prices. Yet, the lessons learned from history can sometimes mislead future actions.
Take the lessons from the 1930s: maintaining a debt-free status and keeping cash reserves outside the banking system. Additionally, individuals were advised to grow vegetable gardens and stockpile aluminum and flour.
Those who adhered to these lessons and held cash through the 1970s faced a significant decline in purchasing power instead. Their diligence and thrift were subtly diminished by changing economic landscapes.
Conversely, the insights from the 1970s emphasized borrowing money and avoiding cash reserves, particularly for home purchases. Ultimately, this shift led to substantial increases in median house values, illustrated by the jump from $11,900 in 1960 to $79,100 in 1990. A home bought in 1960 had payments that, over a 30-year loan, the owner would find trivial by 1990.
This dynamic has led to differing attitudes towards credit across generations. Older generations often fear debt, while younger ones embrace it wholeheartedly. What lessons from the past are applicable for the future?
The experience from the Great Recession taught that the Federal Reserve could inject vast amounts of credit into financial markets from thin air without triggering consumer price inflation. This lesson, however, raises suspicions.
Indeed, the Fed’s cheap credit flooded into stock, bond, and real estate markets, benefiting primarily the affluent who hold these assets. In contrast, working-class and middle-class wage earners struggled to stay afloat.
Now, as the economy falters, the Fed is once again resorting to similar tactics. But this time, the public is demanding bailouts as well, spurred on by modern monetary theory (MMT) advocates using the past decade’s learnings as justification for expanded money printing.
Regrettably, this may prove to be an entirely misguided lesson. As economic output falters and unemployment soars, distributing free money won’t solve the issue of wealth inequality; it may, in fact, exacerbate social discord, discontent, and disharmony.
By now, you are familiar with the refrain: pandemic, economic collapse, full societal breakdown.
Celebrate it with vigor and pride!
Sincerely,
MN Gordon
for Economic Prism
Return from Pandemic, Economic Collapse, Full Societal Breakdown to Economic Prism
