You may be wondering where I am going. I do not know myself. Each day, I try to push a little further…connecting the dots. I go where they lead me.
But I can tell you where we’ve been. The bubble in tech and Net stocks cannot be understood in logical financial terms. So, we wandered…
"down where all ladders start, that old rag and bone shop of the heart"
That led us to look at the difference between the personal and the political…and at group thinking, mob thinking, and political thinking, which stand as close together as passengers on the Paris Metro at rush hour.
We considered how political thinking releases a person from individual responsibility…and how the crowd becomes convinced that nothing should stand in its way. On to Moscow! Dow at 36,000! Tippiecanoe and Tyler, too!
Crowds are guided by neither reason nor virtue. In extreme manias, they become unbelievably barbaric…as we saw in yesterday’s letter about Nanking.
It is a feature of the human condition that crowds tend to amplify base instincts, such as fear and greed. Crowds push aside the restraints of civil society as though they were police barricades.
All politics is to some degree based on group thinking and mob violence. Mobs love to be lied to…it is what animates them. Hitler and Mussolini were expert liars. There is a marvelous photo of Hitler practicing his gestures in front of a mirror…in order to get just the right rhetorical flair as he promised the Germans a "new order" of pride and prosperity. He and Mussolini were both elected.
Politics is the means by which violence is controlled and directed in a society. This definition will shock readers whose views have been formed by watching Crossfire or reading Hillary Clinton’s "It Takes a Village." They make it look so wholesome, so harmless. Men and women in tasteful clothes argue over which policy would be best for the country. Universal health care. Save Social Security. Protect the children.
It doesn’t sound like the Rape of Nanking or the liquidation of the kulaks.
But what makes it politics, rather than a civil conversation, is the hidden threat. Politicians pack heat. If you resist even the most innocuous of their edicts — they will punish you. They will take your money, your freedom or your life.
People can chatter all they want down at the Elks Lodge, too. The churches often have their own programs to help the needy. Families have protected children since the days of Lucy. But none of these civil institutions threatens to use violence against you.
The government not only uses violence regularly to enforce its rules, it claims a monopoly on the right to do so. Anyone attempting to use violence other than the government will be punished. In the United States, the government’s competitors are many…petty criminals, mostly. But they are disorganized, freelance and small time. They pose no threat to the government’s income.
In Russia, though, they government monopoly is less secure. Mafia, local political bosses and financial barons all compete for the right to use violence to get what they want. The Chechens are battling it out right now to determine who will have the franchise on violence in Chechnya.
In a democracy, politics involves a great number of people. Group think, lies and mob psychology are elevated to Clintonian levels. Thus the poor citizen is doubly assaulted…first by lies and empty slogans…and then by taxes and regulations. His good sense is battered by the lies…his balance sheet and freedom by the legislature.
Jim Davidson points out that democracy, which had been out of fashion for many centuries, was particularly well-suited to the demands of the industrial era.
"Democracy invites a popular game of wish-fulfillment," he writes. "It tells voters to dream of a world where anything is possible; where someone else educated their children, pays their medical bills, and, yes, the ATM machines are free. Is it any surprise when politicians come along promising something for nothing to everyone?"
Democracy invites participation in politics. This is what gave it a competitive advantage over communism. Rather than take 100% of their money, as the Soviets did, western democracies took about 50%. And they allowed people a say in how the loot was to be spent.
That’s why politicos and the mass media (which should be regarded as an arm of the political class) always supporter greater participation in politics. Get out and vote. Get involved. Lower the voting age. Encourage minorities to vote.
This involvement reached a zenith during the `60s. John Kennedy told voters to "ask not what your country can do for you…but what you can do for your country"…and nobody laughed. Tax rates exceeded 100% in Britain. Stokely Carmichael said, "If you’re not part of the solution, you’re part of the problem."
Left otherwise free to earn and spend, the citizens of the western democracies innovated, worked hard and built wealth. The Soviets couldn’t match them. As a business model, democracy was surely superior. In biological terms, government is a monopolistic parasite, and democracies were better adapted to the conditions of the industrial age. They did not weaken their hosts as much as the communists did.
But we are leaving the industrial age. "The question," Davidson asks, "is what new or revived system of governance will emerge with the Information Age?"
More on that…as it emerges…
December 14, 1999
P.S. Visit "Strategic Investment" at
*** Techs up again…so what’s new?
*** Nobel Laureate frets about the bubble
*** Men have babies
*** It was all Lucy in the Sky with Diamonds yesterday. The Dow was down 32 points. Most stocks fell. There were 438 new lows…and only 86 new highs.
*** But the Nasdaq and the Internet average, the IIX, both hit new highs. This is the tippy point of the tech needle…getting vanishingly small.
*** The bear market has been going on for 20 months now…with most stocks down and most people, presumably, losing money. But the hype in the tech and Net sector is deafening. The mob has gone mad.
*** Which makes it an exciting time to watch the markets. This period will certainly be recalled in the financial history books.
*** Nobel Laureate Paul Samuelson says the major danger facing the U.S. economy is the bursting of the stock bubble. He urges Greenspan to raise rates again.
*** But while the Fed discusses interest rates, employees at the Bureau of Printing and Engraving must be collecting a lot of overtime. A Reuter’s report says the money supply increased at its greatest rate ever, over the last 13 weeks.
*** They’re working overtime on Wall Street, too. "It’s a tech frenzy," said a communications director for Charles Schwab. His staff is working long hours trying to keep up with the volume of business. Christmas usually slows things down. But this is Mammon’s Christmas…not the Nazarine’s.
*** The Internet itself adds to the frenzy. New investors discover the "mutter from the gutter" on chat lines. They think they are getting an inside track. The "Financial Times" reports that a new form of investor has been created…almost a day trader, but with a real job, too. He gets on the Internet in the morning and evening…picks up the buzz…and places his bets.
*** "On to Moscow!" That was the slogan of Napoleon’s army and then Hitler’s a century and a half later. And now Manuel Schiffler, on Kiplinger.com, argues that the Dow will go to 25,000 by 2010. And why not! "If the last decade has taught you anything," he suggests, "it is that there are always lots of worries…and yet the earnings roll in…and stock prices, ultimately, keep rising."
Hmmm…maybe 10 years is not long enough to gain a historical perspective.
*** The dollar rose against the yen and euro yesterday. For what it is worth, I’m making a major shift out of the dollar this week. I have big obligations (for me) in French francs…and this seems like a top to me.
*** The dollar hit a 10-year high against the Swiss franc last week. Remember when the Swiss franc was a store of value? It was a long time ago.
*** In Louisville, Ky., a 150-year-old giant gingko tree has a limb that is bearing fruit. Odd, because the tree, like a gay porno site, is all-male. It is only the seventh of its species in the world to do so.
*** But if a tree can do it…so can humans! Two British guys have gotten together and had a pair of twins…posing a challenge to biology as well as tradition. This story rated a minor note in "USA TODAY," but it was front-page in the conservative "Le Figaro." "For some children, parents of the same sex are the best thing that could happen to them," declared Elizabeth Butler-Sloss, family court judge, perhaps overstating her position.
*** "Tell the world what is happening in Alkan Yourt," pleaded one resident of the Chechen city. Russian soldiers are not always nice. Especially when they are drunk. At best, they steal everything. One man, confined to a wheelchair in his house, protested. They burned the house…and him alive.