By: Bill Bonner, Eric Fry & Kevin Kerr, Daily Reckoning –
One of the great mysteries of life is how people seem to come to believe what they need to believe just when they need to believe it. When stocks dip towards an epic low, people think they will go down forever, which is just what they must believe in order for stocks to reach their epic low!
Likewise, when a country sets out to destroy itself – as, say, Japan did in the 1930s – its people must believe that their course of action is not only advisable, but also inescapable – even if it means attacking the one nation with the power to crush them. If they were to stop and think clearly – ‘wait, why would we want to pick a fight with the world’s strongest economy?’- they could never fulfill their historical destiny.
Put another way, the phenomenon of “regression to the mean” wouldn’t exist unless there were a way to get beyond the mean in the first place. Without excess, there would be no moderation…and no mean to regress to. And unless people were prepared to believe preposterous and outrageous things, they would never get themselves in an excessive position.
Natural phenomena have their own exaggerations. But we leave droughts and heat waves to others. We’re interested in markets and politics – where exaggerations require a kind of collective insanity in which vast numbers of people come to believe remarkable things.
Actions give rise to words; situations breed thoughts. In America, until the late 19th century, people felt they needed to tend their own fields and mind their own affairs. There was no point thinking they needed to reform foreign governments, or dictate the terms of a distant peace. They had no means to do it. It was only after the United States became the world’s leading industrial power, around the turn of the century, that its thinking people began to think that they should mind the rest of the world’s business as well as their own. One hundred years later, in the early 2000s, hardly anyone questioned the U.S. imperial role; the only questions concerned how it should be played.
But in June of 2005, the empire suffered a shock to its amour propre; China entered the homeland markets with a bid for one of its oldest oil companies, Unocal, following an earlier offer for one of its oldest and most famous manufacturers, Maytag. We have been watching the response with great interest. Thoughts are arising; words are coming up. As you might imagine, they are just the thoughts and words the times require – those that make it possible for a great empire to fall on its face.
The challenge for all the late, imperial institutions – the Bush administration, Congress, the media, economists and Wall Street – is to spin the facts in such a way that people keep spending…investing…and voting as they are told.
They already spend too much. Their investments are already overpriced. And the characters for whom they vote are the worst sort. But that is the point…the historical hand the U.S. has been dealt must be played out. People need to believe absurd things; otherwise they would never go along.
The problem for the spinmeisters currently, is that a fact as big as an asteroid has come along; they are having a hard time finding a lie big enough to spin it. The fact is China is making a bid for resources that Americans thought were theirs. Asians have been recycling their profits back into the United States for a long time. As long as they were buying T-bonds everyone was happy. Americans thought they could stiff their lenders; they never expected to have to pay up. But now the Asians are coming into the U.S. and competing directly for resources – both natural and man-made.
The politicians and media want to tell the public that protectionist measures are needed. But the trouble is that this lie contradicts the lie they have been telling up to now, that the U.S. economy is the world’s most dynamic and most flexible form of capitalism. If it were really so dynamic and flexible, you wouldn’t think it would need to be shielded from competition from a third world nation run by communists.
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Source: Last Man Standing