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The Trouble With Mass Delusions
Excerpted from Paul Singer's Elliott Management letter to investors,
MASS DELUSIONS
The trouble with mass delusions is that they are recognized as such only when they are over – when the dazzling absurdity of certain widely held beliefs is unmasked by subsequent events. Interestingly, many delusions relate to war. At the beginning of World War I, there was a widespread misconception that the war would be over in months. In hindsight, this delusion was fueled by a deep misunderstanding, among citizens and military experts alike, of the impact that evolving technology would have on modern warfare. Parenthetically, we would argue that the current drawdown of military capability throughout the developed world is based on a delusion that ignores thousands of years of immutable, or at least always repeating, human history of almost continuous (in the grand scheme of things) warfare.
Economics also provides its share of delusions, including the debt-fueled bubbles of both the 1920s stock market and the first dotcom boom. The real estate boom of the 2000s was another one, as excess demand was fueled by the combination of near-free money, the most marginal financial products ever invented, and the frenetic selling of houses to people who could not afford them and did not actually own them in any meaningful sense of the word.
These examples are easy, because they were mass beliefs that were unreasonable in the extreme at the time they were held. Of course, at the time not everyone held the same deluded views, but the disbelievers were (and always are) discredited, demoralized and ignored while the delusions were alive. The problem is that while the delusions remain intact there is no proof available to convince the believers of their folly. Simply repeating that a mass belief is crazy does not make it so (nor convince anyone else that it is nuts). Furthermore, the amount of time necessary to reveal the truth is sometimes too long for nonbelievers to bear, so they just stop trying.
There is a current set of delusions that is powerful and dangerous:
that monetary debasement can be infinitely pursued without negative consequences; that the financial system is now solid and sound; that the low volatility and high prices of stocks, high-end real estate and bonds are real; that bonds are a safe haven; and that large financial institutions which get into trouble in the future can be unwound in a much safer way than they could be in 2008.
We have discussed each of these elements in the pages of this report and previous ones in an attempt to reveal the fallacy and unsustainability of such beliefs. But, as stated above, they will only enter the history books as mass delusions if they are unmasked in the future as unjustifiable and erroneous beliefs at the time they were held.
We think that test will be met, perhaps soon.
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i believe that nyse margin debt will hit $500B and it will be VERY GOOD for the economy.
sociobiologist EO Wilson calls homo sapiens the ant-like primate.
We are the ape species that adopted the ant/termite/bee way of doing things.
Our survival advantage was the Big Brain, and we used it to conceive and implement complex survival plans (make a brush pen, drive the prey into the pen, and then shut the gate!).
But this strategy required that all members of the tribe be on the same page, idea-wise. This meant that homo sapiens had to evolve to be able to ingest ideology handed down to them from the leaders.
This ability to swallow and internalize ideas has now been exploited by our leaders. The elite have separated from the tribe and are using propaganda to domesticate the culture, and thus exploit the tribe.
We are the prey and they are the parasite-predator. Propaganda is the tool of predation/parasitization.
And we are evolved to willingly ingest and internalize and accept those ideas.
We are evolved to live under a mass delusion. That is how we survived on the savannah 200K years ago. But now in this huge modern society those evolved characteristics are being used against us.
Game over, man...
More sociologists pontificating while getting govt. funded grants is not a big value add in my book.
Besides that, we need more Lesbian Afro-centric viewpoints on how white patriarchal dominance is crushing the souls and opportunities of womyn around the world. (Except in the ME.)
I did not come from the evolution of anything so I must assume that you are talking about yourself. You might survive by being a social animal, I survive by my wits and hard work. Even though I must do so in the midst of others that have adopted a social context, I am myself and always will be. I do not swallow the ideas of other as you say that you do. I think, learn and develope my own skills, ideas and successful methods. Be an ant if you want to but I am much more than that.
yer tha queen bee, hon
Wilson is always an interesting read and he is usually very un-PC and takes heat from other PC academics. Obviously those responding to your post have never read one of his books, but they think they know what they are talking about.
.
It's not a new thing. The US founding, and repudiation of the King (parasite), was based on the exact same problem. The next step is probably a dissolution of the union due to the shear incompetence, and uselessness, of the state-raised welfare herd located in blue states.
It's like Reinhart and Rogoff argue in This Time is Different: "The essence of the this-time-is-different syndrome is simple. It is rooted in the firmly held belief that financial crises are things that happen to other people in other countries at other times; crises do not happen to us, here and now. We are doing things better, we are smarter, we have learned from past mistakes. The old rules of valuation no longer apply. Unfortunately, a highly leveraged economy can unwittingly be sitting with its back at the edge of a financial cliff for many years before chance and circumstance provoke a crisis of confidence that pushes it off. "
http://olduvai.ca
The belief that you can't fight the FED is a fine one because the corollary belief that you will always be smart enough to be first out the door when the REAL correction comes is part of the first.
The higher the leverage, the firmer the belief.
The tail can only wag the dog for so long. In this analogy, the fake world of paper (paper assets, paper currency, paper leverage, paper derivatives) does support asset prices - - for a fixed period of time, to a limited extent. We're seeing commodity prices deflate. Non-government, non-financial services wages never didi inflate. This deflation 'fire' will burn upward to housing, then equities. We're going to have that great reset, either through a massive wave of defaults or through a coordinated debt repudiation. It's good to have a big military during such times.
Meh..... BTFD. With the new and improved red team ushered in we are entering the golden age of free market capitalism where businesses will succeed or fail based on their own merit. Fuck, I need a drink after that line of crap.
LOL.
You're just upset because Obama lost.
Bhahaha. So true. Republicans did give the USA its worst inflation since the 70's though.
THESE Republicans actually. They have returned and they are in power no doubt. But this was no landslide.
I'll be watching to see if they start going after the dollar again.
Decentralise issuance of Money i.e. anyone and everyone can print money and most of the problems will be solved.
Will help the honest players survive and prosper and corrupt wiped out in short order rather than perpetuating the can kickery for decades by the help of bought out poiticians and intellectuals.
actually, your wish has been already granted, at least in it's most important part
then fractional reserve banking needs you for it's magic to work. that is, you if you are the holder of an asset
you bring your asset to your priest, sorry, your banker, and he will create... credit. which is simply the other side of... debt
fresh new credit for you to do whatever you want. and this asset can be... you. and you for the next twenty years or moar, in the case of student debt
your proposal is not as radical as you think or as what we already have. I can print my "money" as much as I want. It's called an IOU. All currency is an IOU. The only trick is about people accepting/preferring this IOU or the other
all the rest is just... delusion
you bring your asset to your priest, sorry, your banker
Well, the idea was to cut out the priest as well as the banker.
Do you include Goodwill as an asset to take to my bank or is it only my hard asstes and labour?
Do I also get bailed out like the banks?
Why was this guy not allowed to issue money then?
http://en.wikipedia.org/wiki/Giacinto_Auriti
LULZ, seigneurage is a privilege. that sovereigns arrogate themselves. Auriti was not a sovereign all for himself, and for sure not recognized as such
you know that Goodwill is an asset... if a bank recognizes it as such
I've noticed "moar" appearing frequently as substitute for "more". It seems "moar" should be reserved for its sarcastic usage. Otherwise, the writer appears to believe that "moar" is the correct way of spelling "more".
Of course, if you belive that "moar" is the correct spelling of "more", than you can skip the previous comment.
Atticus, I thought I was using the term in an appropriate sarcastic context. point taken
moar spelling and grammar Nazis...(I confess to being one)...
Good point Gordo.
Every sting needs a mark to make it work.
Just because a scam is legal doesn't mean you HAVE to line up for it.
If banks fuctioned as mere brokers for credit by using 100% deposits for loans, then people would have to pay a true market price for credit and be far less cavailer about overextending because they assume artificially induced low rates would remain constant while their incomes increased.
Rates would wax and wane as a natural cycle of demand/supply takes place and eliminate the wild gyrations of boom /bust that to which we have grown accustomed.
A less dynamic economy perhaps, but a far more sustainable one than that is created by a certain few manipulating rates for their own ends.
Ebay is a perfect example of a true functioning marketplace. We can suppose that a natural advantage would accrue to those with the most capital to spend and to an extent, that is true, but it runs full faced into coincidence of wants and the millionaire may not think that a Capt. Kirk StarTrek action figure is worth $150 compared to the Trekky fan who makes $400 /wk and thinks it's a steal.
The cost of money should work in the same manner. Everyone is in the same marketplace with no favor awarded to those nearest those who run the printing press because one doesn't exist.
Just because banks won't willingly rescind their advantage doesn't mean it's an impossible proposition.
Now, back to the real world.
......." Hans Redeker, from Morgan Stanley, said Japan is exporting its deflationary pressures to the rest of Asia. “It is not clear whether other countries can cope with this. There have been a lot of profit warnings in Korea. The entire region is already in difficulties with overcapacity and a serious debt overhang. Dollar-denominated debt has risen exponentially to $2.5 trillion from $300bn in 2005, and credit efficiency is declining. " .............
Strong Dollar x BoJ = Blowtorched China • paying back dollar denominated debt. Chickens come home to roost bitchez' on asian currency traders bad long term bet of mass delusions of falling said dollar' ........
but, but, but ...... china loves her currency peg with said rising dollar.
how will she battle the deflation monster with a rising yuan .... ? riddle me this as the consumer has stopped buying in china ? unilever, bmw all pointing toward the consumer on her back. so how will these consumers drive the new china away from exports and a cheap yuan dependent manufacturing overcapacity laden complex ...... ?
.... gulp .....
Easy
The Chinese Govt. imports Black Friday and Christmas.
Cheap plastic shit floods Chinese trash cans and all is well.
"deep misunderstanding, among citizens and military experts alike, of the impact that evolving technology would have on modern warfare"
A deep misunderstanding of the impact of JP Morgan's wartime liabilities more like. Alas, many delusions persist.
Uh, oh....
'as excess demand was fueled by the combination of near-free money'
Now might not be the time to go long Detroit.
Off-topic I know, but I'll mention the elephant in the room here - Religion!
One only has to read Joseph Tainter's book, "The Collapse of Complex Societies" and put the pin in where we are on the curve. Since there is no reference in history of a society saving itself, even with the awareness of what is going wrong, we can pretty much count on the outcome of this whole exercise. https://en.wikipedia.org/wiki/Joseph_Tainter
Thats cool.
I'll bet is similar to Kubler-Ross's 'Stages of Death'.
Same outcome.
Neat article. Thanks!!
How about the delusion that the US can survive after it launches a first strike nuclear war on Russia.
If the US is only a document in a vaut, then yes the US could survive a nuclear war.
How come no one is talking about what these election results Really mean - the fast track to (MOAR) War...?
Delusions are opiates.
Elections are delusions.
read the fascinating bio on Edward Bernays
I love mass delusions. Nobody ever gets my jokes when I'm wearing my Anti-Delusional Goggles.
It's the Goldilock's Economy. Because the gold is all locked up.
Goldilocks meet the three bears.
Yes, but not where it's supposed to be. Was in Fort Knox; is now someplace in Far East.
"that monetary debasement can be infinitely pursued without negative consequences; that the financial system is now solid and sound; that the low volatility and high prices of stocks, high-end real estate and bonds are real; that bonds are a safe haven; and that large financial institutions which get into trouble in the future can be unwound in a much safer way than they could be in 2008."...
Because if you can pull a hat trick like this one with financial markets, Why not tell the World that the 25 things that happened on this day that initiated what Leon Panetta informed us "will last another 30 years" didn't really happen or that the information contained in this report by these expert(s) are irrelevant because we at the Federal Government know better even though "mistakes were made" ...
You'll just have to keep trusting us with your money! Because even though we keep making the worst kinds of mistakes we're in charge until we say otherwise!!!
Even Isaac Newton got taken in by the mass delusion of his time.....
Religion as mass delusion.
The discussion of political matters is always positioned as a choice between a Democratic view and a Republican view. When reality doesn’t fit either of the offered choices; it is a conspiracy or a rogue lone wolf fantasy.
For the most part Democratic views and Republican views are held more closely than most religious views. They are most vigorously defended and fervently held as religious beliefs. Discussion based on facts alter opinions: not attitudes. Whatever is wrong is “their” fault and the reason we are ineffective is because of “them”.
The first nail in the American Coffin was the seventeenth amendment. It provided the “special interest candidate” and encapsulated the outside view susceptible to reelection pressures if “they don’t play along” with the gang.
America has been killed as a “melting pot”, and reincarnated as a “salad bowl”: each vegetable representing a special interest; while the bowl itself rejects any views not in keeping with TPTB. The atomization of the American population by political correctness and multiculturalism was by design, thus creating powerful “group think” organizations whose memberships are based upon race, religion, ethnicity, sexual orientation, feminism, abortion and/or belief in current events explanation such as 911 or Middle Eastern conflicts rational and the definition of who is and who is not a terrorist. Just to name a few.
Discussion about these matters cannot be held due to so many views being held together with “talking head-talking points” that the discussion dissolves into dueling metaphors in no time and the “religious fervor” with which they are held comes to the fore and shouting matches ensue.
As Aldous Huxley said, He believes it is controlled by an “impersonal force”, a ruling elite, which manipulates the population using various methods. Mass communication is a necessary tool to insure the functionality of a large democracy; it is also a necessary tool for a dictatorship. It all depends on its usage.(1958)
If you consider that ethnocentricity is more important than societal welfare; the American political system has a candidate for you. If you believe in the American ideal before the 60’s, it is gone forever.
Teddy Roosevelt warned against America becoming the polyglot boardinghouse of hyphenated Americans a hundred years ago.
We have allowed the “special interest” groups to use the Constitution as a suicide note for our nation. I don’t think it is possible to be a Republican or a Democrat and be a true American; putting American values ahead of all special interest groups.
Last night, the names changed (some of them) but the game is the same.
and of our time: the Protocols of the Elders of Zion
mass delusion of willing participants
http://www.ushmm.org/wlc/en/article.php?ModuleId=10007058
http://www.bibliotecapleyades.net/esp_sociopol_zion.htm
Cat out of the bag , or Cat in Catastrophe ?
See
https://www.academia.edu/9136281/Acropolis_and_Catastr
It is not so much that these beliefs are widely held but that they are proffered by the media.
Most people who are aware of the baseline economy understand the drastic lies being told but the ordinary man who has the rest of his life to live, the man who gets his news from the TV, he is just believing the lies. If he decided to educate himeself the delusions would rapidly fade.
The government understands that most men do not ever do this.
Its not a mass delusion. We were lied to at every step. The three states of matter are gas/liquid/solid. Thats what they told us in school? Except there is the plasma state a fourth state.
Saying that we are delusional is more trickery. Blame the victem. Economics is no different. FFS fraud is not a financial inovation its certainly not new either. Even now experts are trying to sell us on the Fed being stupid or missguided. When in fact they are getting the outcomes they were after from the very start.
This is the norm across all sectors. Food,energies,right/wrong,science,religion,transport you name it. No we are not delusional, we were lied too. About all of it. Vengance is mine sayith the lord? BS that was some sick evil POS that said that. God would expect us to kill that guy ourselves. The sooner the better.
How many times have we been lied too? Well experts are only experts because they will tell a certain lie. Or repete some dogma shit. The concensus was you cant build a car that gets 100 mpg. Yet it was proven long ago to be possible and in fact VW did it and then some. VW XL1 ?
So go get your flu shots. Because they work. Just not for you or your kids. They work for the ones making some coin from it.
If you taught a child that red was blue and up was down. Most would think the kid crazy or developmentaly disabled. When the truth is the one that taught that kid is the one thats nuts.
« Of course, at the time not everyone held the same deluded views, but the disbelievers were (and always are) discredited, demoralized and ignored while the delusions were alive. »
Well, we know the origin of the spell : Apollo in love with Cassandra, bestows a fantastic gift on her : she will predict the future and she'll always be right. Then Apollo asks Cassandra to go to bed with him. She refuses. Apollo punishes her by adding a terrible spell to the gift he's just bestowed :
« You will always be right, Cassandra, that's my gift, but nobody will ever believe you, that's my punishment and spell. »
Since then the gods in power and the massmedia play the Apollo spell's game, and Cassandra plays Apollo's gift game; more often than not, Cassandra is right, but she's often also out of her mind because so few people believe her, when any. She should never be out of her mind, though, it hinders the gift and can make her err, that's Apollo's trap. Cool, Cassandra, cool, your gift will show you more of itself.
Yes, I love Cassandra. She's right, and she's certainly not dull. To try to lift the spell is up to us..
Which takes me back to Zero Hedge ..
The public be suckered
http://patrick.net/forum/?p=1223928
Want to know how bad it is? Ask yourself. How many lies you have told. Now add all the times that you simply repeted some other persons lies as truth. The messages you sent were and still are dead wrong. Maybe the issue is we dont go back and correct the things we taught others dumb enough to listen to us. Integrity matters.
We have names for it. Towing the line? The dark side?
Its still not true. And YOU taught that lesson to some crazy kid that was? So please show some respect. The right way.
Like Goerge fuckin Carlin