In his latest edition of "The Privateer", Bill Buckler has an enlightening 'compare and contrast' between that one species that will every so often engage in acts of such sheer stupidity, it will blindly follow the herd, oblivious of the near certain resulting doom, right over the cliff, and lemmings...
Lemmings don’t do this. Like other animals, lemmings are instinctively compelled to migrate. Like other animals, when the urge takes them they ignore all potential danger. That does not mean that lemmings go out to commit suicide every time they want to be somewhere else. They don’t. But they do often try to swim bodies of water which are too wide and some of them (even most of them) drown in the attempt.
Lemmings don’t ignore potential danger, they are simply not stopped by it. Human beings often behave in exactly the same way. But unlike lemmings, human beings have the capacity to pretend to themselves that the danger they see right in front of them is not really there at all. They are potentially prey to what has been called “extraordinary popular delusions”. There is no delusion more popular or extraordinary today than the one that is governing financial markets and economies. This is the delusion that a terminally indebted financial entity can be rescued and preserved by increasing the debt it is carrying.
Most people stop before going over the edge where the value of their assets (paper or real) is insufficient to service or repay the debts they have contracted. These people stop borrowing, reduce their spending and begin to pay down their existing debts. They sell what can be easily sold to gain what is needed to meet obligations they cannot avoid. They cannot “recapitalise” because they cannot create any type of capital - real or money-based - out of thin air. If their best efforts are not enough, they have no choice but to renege on what is left owing and to take their lumps. They do not go over the precipice willingly. These are the people who must produce before they can consume.
Then there is another type of person. These people run legislatures, bureaucracies, central and commercial banks and large financial entities deemed “too big to fail”. They do not create wealth, they (literally) create claims to wealth which cannot be refused by those they govern. And of course, as those who create it, they have first use of it. Behind them are legions of acolytes in the media, in the halls of higher “education” and in the offices of lending agencies of all sizes and descriptions.
Some individuals in some governments in Europe are dragging their feet over the prospect of a lemming- like rush to drown in a sea of red ink. They are being roundly vilified for baulking at the precipice. President Obama says that they are “scaring the world!”. Treasury Geithner holds forth by warning that “the threat of cascading default, bank runs and catastrophic risk must be taken off the table”.
Meanwhile, with every upsurge in hope that another ocean of IOUs will be decanted in a soothing balm over the ocean of existing ones - the “markets” rally - only to fall away again as the financial version of the miracle of the loaves and the fishes is not forthcoming. The louder the claims that the process is “unsustainable”, the more insistent the chorus that it must continue. The alternative is too horrible to contemplate - to those who have spend their lives pretending that wealth can be created by a stroke of the pen. No matter how hard you try, you cannot fill a bucket which has no bottom.
Source: Bill Buckler's Privateer