
The Only Thing We Have to Fear is…
The current ongoing panic at Wall Street comes from a fundamental misunderstanding about the randomness of things. Optimistic and greedy capitalists see no end to their enrichment, and any loss threatens their vision and hope of becoming the next billionaire. It’s not a perverse impish demon delighting in stirring the financial anthill, it’s merely math. More specifically: chaos theory.
Have you noticed how slight imperfection is beautiful in nature? Ripples on a lake are more beautiful than a flat mirror. Uneven bark on trees, and their seemingly random branches, leaves, fruit and flowers are more inspiring than an orderly plantation. An uneven mountain is more beautiful than a perfect cone. But these things, while chaotic, still obey a mathematical rhythm, structure and balance.
Greed is unbalanced. What goes up must come down. The faster the rise, the faster the fall. You can’t get rich quickly. Lottery winners often lose all their prize money within a year or two. Wealth must be patiently cultivated. This is the principle that investors are stubbornly ignoring, to their peril
A celebrated mathematician, Benoit Mandelbrot, has studied stock market economics and mathematics, and has published books on such subjects as “The Fractal Geometry of Nature”, and “The (Mis)Behavior of Markets: A Fractal View of Risk, Ruin, and Reward”. In those books he shows how randomness is not necessarily difficult to understand, and more importantly, that the models economists have been basing their wealth on are too optimistic; they are seriously and recklessly flawed. Sadly, no one paid attention to him in time to avert our current disaster.
When something is rhythmic and orderly, it tends to remain so. But, alter the system a bit, and randomness appears. Try to balance a broom in your hand. If you do it slowly, you will succeed. But, once you start to move too quickly, it becomes increasingly difficult to control.
By analogy, stock market rallies are doing exactly the same thing…moving too quickly. That’s why the gains evaporate just as fast as they came. The more violent the upswing, the worse the crash will be. The icon of the stock market should be a sheep, not a bull. They mindlessly stampede their false beliefs over the precipice.
Franklin D. Roosevelt, in his inaugural speech, in the midst of the great depression, called for truth, frankness and boldness. People only remember his trademark phrase about not being afraid of anything but fear, but ignore the rest of his speech. For instance:
“…the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance…”
“…the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men…”
“…Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish…”
“…Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men…”
“…We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.
In this dedication of a Nation we humbly ask the blessing of God. May He protect each and every one of us. May He guide me in the days to come.”
Image by Marco Belli, used with a Creative Commons license
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