Human nature is an interesting beast. Take mourning for instance. Loss, bereavement, death.
Some psychologist somewhere came up with the 5 steps of mourning.
Denial, anger, bargaining, grief, acceptance.
It was originally an explanation of the process a person goes through when dealing with the death of a loved one. But it has grown from there to encompass a rather wider interpretation of loss. Here I am interested in the psychological dimensions of the loss of Prosperity.
Not something you might readily compare with a death in the family perhaps, but I will suggest that the same process holds true and to a surprising degree of intensity as well.
And in fact there has been a death. Our current economic model has died, in large part, we just haven’t realised it yet. Maybe because the body hasn’t hit the ground quite yet, it is still falling, but it has definitely taken a fatal hit.
So at the moment, we currently have large numbers of people in various stages of the mourning process. Denial, anger and bargaining. We really dont have people in the grief and acceptance stage yet.
As for me I am not in mourning at all. I am more than glad the whole corrupted mess has taken a bullet to the heart. With any luck there will be an opportunity to build something worthwhile over its ashes. However, I am an exception, and I can see an alternative. I wont miss the old ways and I can foresee an opportunity for a brighter future.
For most people that is not the case. They are familiar and comfortable with the status quo. But not for long. The status quo isn’t what it used to be….!
So, we are going to live through an adjustment period. the timing of this process is going to be different for everyone depending on their circumstances. Some people are going to fight and scrabble to hold together what they have accumulated, in the face of all evidence to the contrary, that what they have just cannot be sustained. Actually probably everyone is going to fight to hang onto what they have got, rather than look towards starting over at something different. It can be argued that the sooner you let the old system die, the sooner you get the pain over with and the less money you have pissed away into the wind in the meantime, trying to salvage the unsalvageable. Money you are definitely going to need to have as seed stock (capitol).
It is also remarkable to me just how long the whole thing can teeter and stumble along. I would have thought is was patently and painfully obvious that we are heading for a god almighty crash, but still the “optimists” talk about green shoots and bottoming out and recoveries. Whatever! So everyone continues to try to save the system, and hang in there and talk up the situation and keep it all going for just a little bit longer. Sooner or later thought it isn’t going to be sustainable, all the juggling balls in the air are going to come crashing down. But until then we don’t have to look at the corpse smelling up the living room. Lets live in denial just a little bit longer, or even a whole lot longer if we can just possibly get away with it.
Considering there are 5 steps to the grieving process and if we are still only in the Denial stage, then that suggests there is still a long way to go and a lot of heart break, pain and reconciling to come. There could be a lot of violence and death too quite frankly. People don’t take this sort of thing well as a general rule. After denial comes anger. As the sayings go:
“A person is smart. People are dumb, panicky dangerous animals and you know it.”
“Sheep have two speeds: grazing and stampede” (so do Sheople)
Well whatever will be will be, but I did just read a great column from “Of Two Minds” which I quote:
1. No living thing (there’s a general argument for you!) can ignore windfalls. If for whatever reason, the grass is greener this year, if you are a rabbit, you eat more of it. And have more kids, which survive in greater numbers. If you were some “sustainable” cautious rabbit that only had 2 kids and only ate what it usually ate, you’d lose out to the greedy ones. Nature selects for optimists that grow more or less as fast as they can.
2. We are social animals and there’s a huge cost to being an outsider. Living alone is deadly — you have no one to help you if you get into trouble, no one to look out for you, no one to hunt or gather with, and no one to share food with if you don’t do well today. One mistake and, like solitary animals, you may be finished.
Similarly, we worry about our status in the group. Being unpopular means getting beat up a lot, getting no help, having to give up your food/mates to the stronger members. Also very bad news from an evolutionary standpoint.
So as social animals, we crave status (or at least acceptance) by the group. This is why group-think has such a power over us, from fads and manias to adulation of heros and kings, to religious movements, wars, and revolutions. We think of ourselves as rational beings, but it’s just a gloss over those social instincts.
As long as we are human, we will have these crazy bubbles from time to time. Because as animals, we don’t ask why times are good, we just try to take advantage of it. And because as primates, if everyone else is buying houses, we will too.
Regulators are just as caught up in this as the general population. They don’t want to do the unpopular thing, and they don’t want to kill off a boom. No one does, except cynical “doom and gloom”-ers. Wishing it were otherwise is just futile….
Now that all the happy little consumer-rabbits have eaten all the once-lush green grass of consumer/home-equity-line-of-credit down to bare earth, we might ponder what happens next in Nature when the grass fails to grow back. Most of the rabbits die off.
If we extend this cruel aftermath of “windfall exploitation” from green grass and rabbits to HELOCs (home equity lines of credit) and other forms of once-abundant credit now shriveled or consumed, we get to a consumer-borrowing/spending “die-off” in which spending that was based on housing/credit bubble “windfalls” vanishes.
The consequences are rather obvious:
1. Businesses which depended on this spending die off.
2. Tax revenues based on this spending die off.
3. Lenders dependent on this borrowing die off.
4. Households which depended on credit to remain solvent die off.
5. Asset classes like residential housing which depended on abundant “windfalls” of credit to fuel valuation increases also stage the equivalent of a die-off.
6. Exporters[and manufacturers] who depended on this credit expansion to sell their goods will also suffer a die-off.
Hmm, now we’re talking about a significant chunk of the global economy, aren’t we? Extending the “windfall exploitation/green grass” analogy a bit further, we can anticipate that the consumers who require little to no new green grass (credit) will be the survivors. Everyone dependent on abundant cheap credit for their survival, from consumers to governments to enterprises to entire nations, will suffer financial starvation. That’s the inevitable consequence of “windfall exploitation.”
[“Quantitative Easing” is supposed to sow millions of new little green shoots, but all QE does is burden the government with collossal new borrowing; all the seeds sprouting will devoured because the consumer rabbits have eaten through or lost their collateral and so there is simply nothing left on which to subsist or to “grow” more credit. ~ edited]
Once all the grass and seeds have been consumed, starvation is the result. There is no collateral left in the U.S. except the “full faith and trust of the U.S. Treasury” and that is now (rightly) drawing mocking guffaws from university students in China.
Some see “green shoots” but the ground (collateral) is rock-hard; expect not lush new fields but numerous expired rabbits.
So if it is not actual bodies on the ground, it certainly will be the hopes and dreams of millions ground into the dirt. There is no escape, there can only in the end be grief and finally acceptance.
And hopefully, we can start to rebuild again on some sort of sensible basis and foundation. There is a lot that must and should change. I have a vision for that. No doubt so does everyone else… or they will have – once they get up to that stage. Que sera sera! But we can at least do our best to influence the course of events as far as we are able. Yes it will be tough, but it doesn’t have to turn into a slaughter house. The sooner we start going in the right direction the sooner we will be out the other end.
The sooner we can start, depends on enough people recognizing the problem and then all pulling in the same direction. We need to change the Group-think”, or create a new one. Heading further in the current direction will be fatal, and pulling in a multitude of different directions will also be fatal. Regardless – things will change! Will it be by chance or design?
None of this is new, the world went through very much the same thing in the 1930’s. The prosperity is gone again, it would be nice to think we could learn a few lessons from previous experience, instead of repeating that disaster over again. But that will come down to human nature I guess. We will move when we are psychologically good and ready.
Well… I at least am ready, how about you? Are there enough of us to form a quorum and take the lead? Or is there more time and pain needed to “set the scene”? Where is the tipping point in the process:
Denial – anger -bargaining – grief – acceptance
I would like to hope we don’t have to wait till the bitter end, that we could salvage as much as possible of our prosperity, as soon as possible, and begin rebuilding again. Rationally and intelligently would be nice too :-).