The Western World Stock Markets are all over the place, plummeting and rising at the slightest provocation. Why are people panicking at the slightest provocation? In short it’s because our Stock Market has become a sham.
The Stock Market has existed as a thing for just over 360 years. It has been prone to crashes and growth. Crashes are usually resets to a more reasonable level when consumer optimism gets out of hand. Human greed can do odd things to large population groups. Our nature to acquire wealth and goods gets beyond reason and we speculate on future acquisitions as if they were real. We are greedy and as a result jump on any band wagon that we think will lead us to a higher level of financial or social standing.
Over the last 360 years there have been several resets, but as we evolve into the modern Human our greed being one of the driving forces of our evolution, the Stock Market reflects our flawed genetic predisposition to acquire. Partially due to communication limitations and access, but mostly due to our unquenchable desire for more, the Market resets have grown closer and closer, and after each reset the time for the market to reach the same unreasonable level it was at to cause the crash becomes shorter. It always grows, it always exceeds its previous level and recently it has been pushed not only by our personal greed, but government intervention has mimicked consumer confidence and has made the whole market structure into a fantasy of unrealistic growth and confidence in the economy.
Below you can see my Crash Clock, a history of major market crashes, at first a century apart, then 50 then 20 then 10. The crashes are getting closer at an exponential growth level, matching the exponential growth of our greedy nature. By the beginning of this century crashes were less then 7 years apart and since the Bail out of markets around the world to stop the last great recession by artificially boosting the market that didn’t have our confidence it has been in a constant state of crash.
The Markets are highly unstable due to the fact that the Bailout skipped a critical feature of Market growth. Consumer confidence. The market is suppose to reflect our confidence in the economy. At times we as a nation or species begin to question the actual value of our lives and products and the market reacts to that mass doubt.
This time when confidence was at a point comparable to the 1929 crash, our governments stepped in and fed the market directly. This was one of the most flawed and self serving acts in history. Governments and oligarchs so desperate to remain in power, they faked a global economy and tried to tell us everything was fine.
They created a crisis on top of a crisis and now the whole thing is set to topple over. After the 1929 crash there was the New Deal. Where the American government created tax funded jobs to put money back in the hands of consumers and let them reinvest in the markets where they had confidence for growth. Then following the second World War, there was so much new tech and reconstruction that the market actually continued to show a strong growth for 20 years (see the break in the crash clock above).
This time the Governments bypassed the consumer. They did not ask us what we were confident in, they told us what we were confident in and that it was the exact same thing that we had just rejected. As a result the market rebounded and continued to grow. But now based entirely on a lie. Sure there is growth for actual consumer confidence, but that is resting on the same unstable unsupportable base that the Governments created in their haste to rectify a situation they really had no control of.
Combine that with the parasitical nature of the modern investor and you have a recipe for disaster.
A second major factor leading to the instability is the modern investor. While in days gone by people invested hoping to see a modest growth in their investment over time, the major investors have enlarged their expectations, while also shortening their timeframe. A pattern further reinforced by the technical advancements that created the average Joe home based day trader. Over the last 3 decades the demand for instant returns has reached epidemic proportions and is now considered the norm. A company that cannot show a quarterly ( that’s 3 months or 90 days) growth, every quarter is considered failing. Think about that, a noticeable growth every 90 days to be considered successful.
If you show a drop in even quarter you are risky, in 2 (that’s 180 days) they start selling off as fast as they can. Companies are now desperate to show these unsustainable growth demands to maintain value and there is only one commodity that is flexible enough to change valuation in such a short time frame. People. The work force that those companies depend on for productivity are the commodity they begin to trade in. Long term by hiring cheaper and cheaper labour, while short term, eliminating positions and lay offs while still expecting an increase in production.
Eventually hollowing out the shell and pretending it’s still a whole company. Like owning a big house but selling off the furniture to pay the mortgage so even though it’s empty, you can still show your neighbours how nice your home looks…from the outside.
The second aspect is the parasitical investors who thrive on this market. They are not there for the long term, they don’t care about company growth, they are only investing for the moment. Buying large blocks of stocks in successful companies while demanding instant returns. The company enacts the above policies to create that profit margin, and the parasite sells off to the next parasite who demands the same growth profit in an equally short time. Eventually the company can no longer function effectively. Either quality, or production or distribution fails and the company begins to lose profits. The last parasite jumps ship, the short term ears jump, then the regular investors scramble to try and recover some of their loses by selling. If the company is lucky, it will still retain enough of its infrastructure to recover, but often it is just swallowed by another company or disassembled into spare parts and buildings for another company that has parasites already screaming for their margin.
Humanity has learned the lessons of greed to well. We have lost our ability to assess value in our ever increasing quest for more rather then better. Another factor leading to our downfall unless we as a species, engage in a paradym shift of our nature.