Page added on November 5, 2014
Excerpted from Paul Singer’s Elliott Management letter to investors,
MASS DELUSIONS
The trouble with mass delusions is that they are recognized as such only when they are over – when the dazzling absurdity of certain widely held beliefs is unmasked by subsequent events. Interestingly, many delusions relate to war. At the beginning of World War I, there was a widespread misconception that the war would be over in months. In hindsight, this delusion was fueled by a deep misunderstanding, among citizens and military experts alike, of the impact that evolving technology would have on modern warfare. Parenthetically, we would argue that the current drawdown of military capability throughout the developed world is based on a delusion that ignores thousands of years of immutable, or at least always repeating, human history of almost continuous (in the grand scheme of things) warfare.
Economics also provides its share of delusions, including the debt-fueled bubbles of both the 1920s stock market and the first dotcom boom. The real estate boom of the 2000s was another one, as excess demand was fueled by the combination of near-free money, the most marginal financial products ever invented, and the frenetic selling of houses to people who could not afford them and did not actually own them in any meaningful sense of the word.
These examples are easy, because they were mass beliefs that were unreasonable in the extreme at the time they were held. Of course, at the time not everyone held the same deluded views, but the disbelievers were (and always are) discredited, demoralized and ignored while the delusions were alive. The problem is that while the delusions remain intact there is no proof available to convince the believers of their folly. Simply repeating that a mass belief is crazy does not make it so (nor convince anyone else that it is nuts). Furthermore, the amount of time necessary to reveal the truth is sometimes too long for nonbelievers to bear, so they just stop trying.
There is a current set of delusions that is powerful and dangerous:
that monetary debasement can be infinitely pursued without negative consequences; that the financial system is now solid and sound; that the low volatility and high prices of stocks, high-end real estate and bonds are real; that bonds are a safe haven; and that large financial institutions which get into trouble in the future can be unwound in a much safer way than they could be in 2008.
We have discussed each of these elements in the pages of this report and previous ones in an attempt to reveal the fallacy and unsustainability of such beliefs. But, as stated above, they will only enter the history books as mass delusions if they are unmasked in the future as unjustifiable and erroneous beliefs at the time they were held.
We think that test will be met, perhaps soon.
43 Comments on "The Trouble With Mass Delusions"
Dredd on Wed, 5th Nov 2014 11:03 am
Mass delusions are real, and sometimes they are quite interesting (Oil-Qaeda Wins Big).
Northwest Resident on Wed, 5th Nov 2014 11:06 am
Mass delusions, compliments of mass propaganda.
J-Gav on Wed, 5th Nov 2014 11:30 am
Humans seem sort of hard-wired to engage in significant delusions, both individual and collective. I don’t exempt myself from this tendency, by the way, though I would hope my approach to such delusions might dilute their significance to some extent.
Some of the main ones I would like to think I have personally overcome include those set out in the paragraph near the end of the article concerning the “current set of delusions.” But there are many more which I’l less sure about …
Plantagenet on Wed, 5th Nov 2014 1:00 pm
Money itself is a mass delusion. I’m always amazed when I hand people a few pieces of paper and they give me an iPhone or a down parka.
Solarity on Wed, 5th Nov 2014 1:24 pm
The most outlandish mass delusion widely prevalent today is the idea that man can counteract Mother Nature. A large group of zealots is pushing an agenda with an intensity bordering on religious fervor. Perhaps this faith is the contemporary belief system (religion) indicative of our coming decline (as per Toynbee’s hypothesis).
herrmeier on Wed, 5th Nov 2014 2:00 pm
Mass delusion is not a prevalent as one would assume. Many a good folks are very aware that something’s wrong or that we are on the wrong track. Yet there’s hardly anything the individual can do about it.
Bob Owens on Wed, 5th Nov 2014 2:36 pm
Delusions are a part of human psyche and will never go away. They can, however, be fought. A good education, a good grounding in science, a bit of logic and common sense, a more stable world, a stable family environment and most of the delusions we occupy ourselves with would be of short, limited nature. They would burn out on their own if we didn’t interfere. That is the world we have to work towards if we wish to accomplish anything.
J-Gav on Wed, 5th Nov 2014 2:40 pm
Solarity – It indeed includes religious fervor! That is absolutely required in order to forget about ‘Mother Nature’ to a very large extent in our present world configuration. otherwise, how could we extract the hell out of it qith no qualms? I hope it’s obvious that this is not a critique of your comment but merely a (what I consider to be) a logical extension of it.
turningpoint on Wed, 5th Nov 2014 2:47 pm
“At the beginning of World War I, there was a widespread misconception that the war would be over in months.”
The same as the Civil War. Imagine seeing all those picnics of families going out to watch some the battles of Bull Run. I’m guessing Civil War spectators, picnicing near a batlle field didn’t last throughout the whole war.
Some Americans watched from the roof tops, the Mexican revolution unfold in border towns from the American side of the border. There are photographs of people doing that. They even took tours of cities following the aftermath of devastation casued by revolutionaries. I guess it was pretty good business for some.
The Mexican upper class refused to believe a revolution was even possible in Mexico.
In the beginning, few people suspect war will end up being as horrific as it sometimes becomes.
Many Dutch citizens never imagined the tulip bubble would someday burst. Some people lost everything due to Tulips. Their land and their shirts.
Never say never!
turningpoint on Wed, 5th Nov 2014 2:55 pm
herrmeier on Wed, 5th Nov 2014 2:00 pm
“Mass delusion is not a prevalent as one would assume. Many a good folks are very aware that something’s wrong or that we are on the wrong track. Yet there’s hardly anything the individual can do about it.”
That’s because most people do not know or accept the reasons behind our new normal.
J-Gav on Wed, 5th Nov 2014 2:57 pm
Herrmeier – Time will tell whether or not you have a valid point. When I say that, I’m not referring to a general awareness that something is wrong. In today’s world, those who don’t realize that are a dwindling minority.
It’s the ‘hardly anything’ we can do as individuals or small groups which could make the difference in the end. No-one can say at present if that would suffice to carry humanity up to or beyond the 22nd century. I’m hardly an optimist but I try to recognize the little chunks of viability as they evolve.
GregT on Wed, 5th Nov 2014 3:04 pm
The largest delusion is our belief that we are somehow in control of nature. Nothing could be further from reality. Our technologies all have adverse consequences for the natural environment. If we hope to survive as a species, we have a lot of ‘un-learning’ to do.
turningpoint on Wed, 5th Nov 2014 3:20 pm
Most people think emotionally rather than logically. Even people who are highly educated and generally logical can sometimes find themselves thinking emotionally, especially when they’re emotional. Scientists must fight preconceptions and biases. They also must sometimes fight their own emotions to try to develop more accurate theories.
We may have modern science and technology, but human nature hasn’t changed at all over the centuries or millennia.
We’re just a better version of bipedal apes than we were half a million to one million years ago.
We are australopithecine, or Homo Habilis 2.0
Maybe Homo Erectus and Neanderthals were 2.0
Maybe we’re more like 3.0 or 4.0
Either way, we’ve changed a little but we’re still animals with brains that carry evolutionary baggage from the past. A bigger cerebral cortex, a little more logical and smarter, and better at controlling our environment, but not as far removed from our hairy ancestors as we’d like to pretend.
We have bigger brains plus we developed math, writing and science an due to libraries we can literally learn from the dead to build on the present. plus we can work in teams. That, and opposable thumbs gave us a serious advantage over other animals.
But we still carry evolutionary baggage from the past and even if we continue to evolve, assuming there’s natural pressure to do so, that will never change.
Our society and our environments have changed. We’re no longer hunter-gatherers or farmers living in a feudal societies, we now live in an industrial world, but we’re still basically the same people we were hundreds or thousands or even tens of thousands of years ago.
Northwest Resident on Wed, 5th Nov 2014 3:36 pm
turningpoint — In terms of geological time, humans descended from the trees a few hours ago and stopped dragging their knuckles on the ground just a few minutes ago. Any advanced civilization of aliens that might be watching us right now would be sure to consider us very primitive. My own point of view is that taken as a whole, humanity is like a big baby who has been handed a loaded pistol — extremely danger, to bystanders and to him/herself. We have a lot of bright light bulbs floating in a sea of very dim ones, but taken as a whole, humanity is comparable to an idiot savant — very bright in some ways, but mostly not very bright at all.
turningpoint on Wed, 5th Nov 2014 3:52 pm
Northwest Resident, that’s pretty much how I see things. The scientific and industrial world we live in has very little to do with most people.
penury on Wed, 5th Nov 2014 4:12 pm
To speak of mass delusions on the day after the election is to pint out a mass delusion that we are prone to: the fact that electing a person to a position of leadership will confer wisdom and caring. Spending more money than everyone else on earth combined on a mass killing machine will assure your safety/ Because you are born to wealthy parents makes you special. Because you believe in a mystical omnipotent being (one of many) you are destined to live in (wherever)with your family and friends and possibly your dogs and guns forever. Without mass delusion life as we know it would no be possible.
J-Gav on Wed, 5th Nov 2014 4:29 pm
Penury – Well then, maybe it’s time we turned to life as we haven’t yet known it.
Phil Woodard on Wed, 5th Nov 2014 4:30 pm
Yes, Mass delusions. A great book about the topic is:
Extraordinary Popular Delusions and The Madness of Crowds by Charles MacKay
http://www.amazon.com/Extraordinary-Popular-Delusions-Madness-Crowds/dp/1897597320/ref=tmm_hrd_swatch_0?_encoding=UTF8&sr=8-1&qid=1415226204
Which mass delusion are we talking about anyway? Peak Oil, the Economy, Climate Change, or take our pick!
Thanks
GregT on Wed, 5th Nov 2014 5:05 pm
Turningpoint,
The scientific and industrial world that we have created is unsustainable, and is killing life as we know it on this planet. Not only was technology unnecessary for our survival, it is now threatening to end our survival as a species.
We lived for tens of thousands of years without modern industrial society, and then in a few hundred short years we have completely decimated the natural environment. We can survive without science, industrialism, and technology, but we will not survive without a healthy natural environment.
We have a short period of time to unlearn much of how we think, or we face not thinking anymore.
J-Gav on Wed, 5th Nov 2014 5:25 pm
GregT – Exactly. At least from my standpoint. ‘Unlearning’ is just as important as learning in our societies. They go hand in hand.
ghung on Wed, 5th Nov 2014 5:41 pm
The greatest mass delusion is that everyone thinks it’s everyone else who’s deluded.
GregT on Wed, 5th Nov 2014 5:52 pm
J-Gav,
And much of what we now need to quickly learn, is what we have forgotten in the last three generations.
Davy on Wed, 5th Nov 2014 6:31 pm
Greg, a clarification but an agreement to your view of technology. Our survival is necessary with technology because we must protect ourselves from ourselves. We are in a competition to subdue our neighbors. As our technological abilities increase as they must so we can out compete our neighbors we destroy our ecosystem. This explains why we as a species are an evolutionary dead end. Our disposition towards technology alienates us from ourselves and nature. What could be worse as a species?
Perk Earl on Wed, 5th Nov 2014 7:01 pm
Gail the Actuary has a new post!
http://ourfiniteworld.com/
Oil Price Slide – No Good Way Out
“The world is in a dangerous place now. A large share of oil sellers need the revenue from oil sales. They have to continue producing, regardless of how low oil prices go unless they are stopped by bankruptcy, revolution, or something else that gives them a very clear signal to stop. Producers of oil from US shale are in this category, as are most oil exporters, including many of the OPEC countries and Russia.”
turningpoint on Wed, 5th Nov 2014 7:22 pm
GregT,
“The scientific and industrial world that we have created is unsustainable, and is killing life as we know it on this planet.”
Yikes! You’re bashing the scientific method? Wow!
steve on Wed, 5th Nov 2014 8:15 pm
“Any advanced civilization of aliens that might be watching us right now would be sure to consider us very primitive.” Do you think there are really any “advanced civilizations” seems like a paradox to me….just as people who criticize the States for their actions…if it had not been them it would have been someone else….they were just the last man standing….I think it will all end with a nuclear war…I had a vision of it once… but who knows…..don’t believe anyone that tells you what the future is going to be. Even if you think they are smarter than you because no one knows…..
GregT on Wed, 5th Nov 2014 8:55 pm
turningpoint,
Only interested in the truth. The path that we are on is not sustainable. We are not in control of nature. Never were, never will be. The ‘scientific method’ is destroying the only planet that we will ever have to live on. We either grow up, or we will be removed.
steve on Wed, 5th Nov 2014 9:12 pm
peak said “Gail the Actuary has a new post!
http://ourfiniteworld.com/
Oil Price Slide – No Good Way Out”
Gail has some good points but most of her thoughts come from her very square point of view…have you ever met an Actuary actually?? Not someone I would want to be following or taking advice from… I notice she now has a cult like following that praise her and attack dissenters. That being said I think she is on the right track as the Nicole Foss of the times..
Northwest Resident on Wed, 5th Nov 2014 10:30 pm
The Greatest Mass Illusion: That the global economy, the thing that sustains us all in the manner to which we have become accustomed, is stable and secure.
When in fact it is anything but.
Davy, Perk, GregT, notable others. If you could read this article and give me your take on it, I would greatly appreciate it!
This article appeared on ZH today, so I’m guessing you’ve already read it. The alt-market website that it is originally posted on seems to slant in directions that I don’t necessarily agree with, but I’m having a hard time disputing most of the conclusions that the writer comes to. What do you think?
We Have Just Witnessed The Last Gasp Of The Global Economy
http://www.alt-market.com/articles/2394-we-have-just-witnessed-the-last-gasp-of-the-global-economy
Perk Earl on Wed, 5th Nov 2014 11:13 pm
“have you ever met an Actuary actually?? Not someone I would want to be following or taking advice from…”
Not sure why you would write that, steve. Sure she looks square but that’s her business. I take people for the information they have to offer and a lot of what she writes about is in my opinion accurate. It’s like all sources you need to read it with an independent viewpoint and glean from it what you think is right.
Perk Earl on Wed, 5th Nov 2014 11:34 pm
NWR, in that article he ends it with this line: “Needless to say, the coming storm is a deliberately engineered one, meant to achieve very specific goals, including a fearful and panicked populace, easy to manipulate as the system goes off the rails for the last time.”
I think that’s a bit conspiratorial. It’s more likely TPTB are simply doing what they can, (even if that includes a lot of behind the scene manipulations that are unethical), to keep BAU alive just a little longer in hopes that some corn tech will save us with abundant cheap energy (good luck).
The other stuff about QE worldwide is a big concern. That game is a last ditch desperate effort to keep things going, but it’s reaching the point where in spite of all that printing things are beginning to come unglued.
I’m actually shocked by how fast events are now occurring. There’s a saying I have when things are getting bad, “time is getting short”. That sums up the current situation. But I’m still uncertain about the timing of a coming black swan event. I guess we’ll know when it hits.
Northwest Resident on Thu, 6th Nov 2014 12:24 am
Perk — Thanks for your feedback on that article. Time does seem to be running short.
I’m one of those who actually believe that there is a consolidated, coordinated and centrally controlled power behind so much of what we see going on.
The stock market is certainly being manipulated — but by who? There is a method to the madness, and that seems to indicate at the minimum a powerful and entrenched group of individuals that have planned and are directing events.
Many people believe that the propaganda we are being exposed to is just the wishful thinking of deluded individuals who can’t embrace the fact that BAU is staggering toward certain death in the near term. But to me it appears that the propaganda has a purpose, that it appears not randomly but in response to certain events. I tend to think that mass media is being controlled by the same group that is controlling the (former) markets and central banks, and that everything is being coordinated with the single goal of keeping the masses calm and peaceful even as the wolf pack circles closer.
I tend to think all that, but of course I don’t have any proof. There is a brief discussion over on Gail’s article that you linked to about the “Deep State”. I catch flak about it, but I tend to believe that the Deep State actually does exist and is controlling events as best they can, knowing at the same time that they are just buying time. That’s what makes sense to me, based on what I see and read.
But it was a very interesting article, you have to admit, and made a lot of very valid points whether you agree with that one conclusion by the author or not. Agree?
GregT on Thu, 6th Nov 2014 12:38 am
NWR,
Here is another article written by Brandon Smith:
http://www.alt-market.com/articles/2277-order-out-of-chaos-the-doctrine-that-runs-the-world
Well worth reading IMHO. And yes, I do agree with the article written by him that you linked above.
If Arthur was still posting here, I’m sure that he would write a small novel, being the historian that he is. Myself? I started to, but I simply don’t have the time, or the focus.
Annuit Coeptis-Novus Ordo Seclorum
ORDO AB CHAO
GregT on Thu, 6th Nov 2014 1:30 am
“The other stuff about QE worldwide is a big concern. ”
We are witnessing the largest transfer of wealth in the history of mankind. When TPTB are done this time, the masses will beg for their NWO.
Perk Earl on Thu, 6th Nov 2014 1:56 am
“But it was a very interesting article, you have to admit, and made a lot of very valid points whether you agree with that one conclusion by the author or not. Agree?”
Oh, sure the article was interesting. As far as the deep state controlling things – I’m not even sure what the deep state is exactly or what we could do about it.
The one thing that does seem to be going on is the manipulation of gold/silver. That seems easily plausible due to the fact that if they didn’t currency valuations would plummet in relation to skyrocketing gold prices. One report I saw, but don’t have a link to said gold was priced from paper transactions, not physical transactions so it is more easily manipulated. If gold was at 3,000 an ounce what would the dollar be worth? The crux of the message was when SHTF, gold/silver will go ballistic and currency will drop off a cliff. We’re going to pick up some silver out of our next contract.
Anyway, I’m a little out of it today with an allergic reaction. Just need to get some sleep and hope the benadril does the trick.
GregT on Thu, 6th Nov 2014 4:16 am
Perk,
There is reportedly at least 10 times the paper gold as there is physical gold. Very easily manipulated, and has been for a very long time. If you are not already aware, fractional reserve lending was first realized by the goldsmiths, or bankers if you will. They have been at this game for ages and have passed their ‘trade’ from generation to generation. Contrary to popular belief, gold is still recognized globally as a means of exchange. I suspect that as this debacle unfolds, gold will shine very brightly. It is now trading for less than it can be mined for in many places. Gold is now undervalued.
GregT on Thu, 6th Nov 2014 4:50 am
Also, most people are unaware of physical gold. At least here in North America. Rising gold prices really have little effect on currencies. Low gold prices only make gold cheaper to acquire, or cheaper to pay back, like in the case of the gold that the US owes to Germany. All of the above ground gold is already owned. It isn’t like paper money. It can’t just be printed at will.
Davy on Thu, 6th Nov 2014 6:46 am
NR recommended – http://www.alt-market.com/articles/2394-we-have-just-witnessed-the-last-gasp-of-the-global-economy
NR, this article covers much of what is going on in my head. I had a comment recently that mention one of the points in this article:
“There is literally nothing left to the financial system but rigged statistics, false promises, and ever expanding debt. In fact, the concept of debt creation is the only thing holding our facade of an economy together.”
“I believe that the admissions of financial danger by internationalists, the sharp drop in stocks at the beginning of fall, the reversal of the political theater, and the fact that mainstream investors now recognize the illegitimacy of the markets yet continue with the scam anyway, signals the last gasp of the global economy. I expect increasing market instability from this point on, as well as numerous geopolitical distractions which will be blamed for the fiscal chaos.”
I do believe we are seeing the last gasp of the global economy. Diminishing returns along with a business cycle that cannot be transcended are in effect. We have also comment before on the “this time is different idea”. I see a new normal recession as moving into another new and dangerous normal. I see this because we cannot return to central bank debt fueled pseudo growth racket of the 1%ers, carry trade, equity markets bubbles, and sovereign debt games. These rackets and their tools have been spent.
This time we will have a new normal recession. Recession in the past had mechanisms and time frames for recovery. The next recession will only have the wreckage of the traditional capitalism markets destroyed by QE’s debt binge and contracted ruined global economic networks to wander through. This new normal recession may be the beginning of the paradigm shift of descent. There will be a bouncing decline that will proceed uninterrupted until we are at a postindustrial man.
We will see aspects of modern man continue with irrational economic abandonment, dysfunctional markets and networks, and socio political muddles. We will find a reboot point I hope that will be stability for a time. Life will go on and we will be conditioned into a new normal but lower economic activity. I imagine a lower complexity and less interconnected world. The big “IF” is can the social fabric survive this initial descent with so much population and carrying capacity overshoot. A drop in economic activity means one profound danger that over population and carrying capacity risk and that is a decline in complexity, food insecurity, and liquid fuel scarcity causing a die off. We know from our studies here what is needed to maintain food and fuel. We also have multiple evidence that complexity is energy intensive with both food and fuel.
I keep getting back to this idea concerning collapse “how dramatic” will the degree and duration of the fall be? We saw in the great depression a jagged fall in the markets that proceeded over a time with some momentary recoveries. Will we see a drop that bounces around until enough damage is done for a sharp drop that continues for a very long time before it stabilizes at a level that is sustainable? So many questions to explore. We know energy issues of PO, POD, and peak economic energy of oil are waiting to strike a further blow of energy scarcity along with loss of complexity and social fabric decay. Scary times indeed. Folks start prepping please.
Davy on Thu, 6th Nov 2014 7:09 am
Perk said – I think that’s a bit conspiratorial
Perk I am only partially on board with NR’s grand conspiratorial thesis. I am agnostic with it. It is like believing in God, Geeze, my little mind can try to get around the absolute and infinite but just barely. A long term grand conspiratorial theory of TPTB planning and running the train into the ground for their own selfish reasons is ephemeral to me. Maybe but maybe not who knows so I can’t dig into it much. Aliens may be watching us too who knows.
Where I do think we have a conspiratorial situation is the current new normal end game. TPTB understand the predicaments we are in. They understand their tools are spent and the financial repression results a worse situation. They may even have a plan for a bust with a point of recovery somewhere.
They pulled a rabbit out of their hat last time. TPTB may have a reboot plan. They may understand a contraction is imminent and they are planning on a reboot. This reboot plan may acknowledge a lower economic level without a recovery. I think anyone with a brain can see the debt levels, the unfunded liabilities, and the market bubbles are too extreme to fix. These are predicaments with no solution.
There may be a loosely stated plan or direction by the major powers to head in a certain direction. I feel the socio economic system we have today in not manageable at the top except for a management of the fall. The top may be recognizing the end game and planning a fall plan. I actually hope there is something in the works. A fall at this point can be greatly magnified by the wrong decisions and plans.
The wrong decisions and plans that advocate maintaining BAU could be catastrophic. This includes for example the US trying to maintain hegemony, China maintaining high growth, Europe maintaining the EU, and Russia expanding its influence. The status quo will have to adapt. The above ideas were BAU driven and cannot continue without dangers and risks to a worse fall. A retracement strategy must be planned on. A contraction or a retreat form BAU must be ordered by all major powers together in some way shape or form. I am probably fantasizing but that is my take on what I hope is happening.
Northwest Resident on Thu, 6th Nov 2014 9:48 am
Guys — Thanks much for your comments and insight on this article. Now I see it is posted at the top of the page on this forum, so I guess I’ll move to that article and make any other comments I might think up between programming assignments here at work. Damn! It is getting very interesting!
turningpoint on Thu, 6th Nov 2014 11:18 am
GregT on Wed, 5th Nov 2014 8:55 pm
“turningpoint,
Only interested in the truth. The path that we are on is not sustainable. We are not in control of nature. Never were, never will be. The ‘scientific method’ is destroying the only planet that we will ever have to live on. We either grow up, or we will be removed.”
The scientific method is just a tool. It can be used to do things that are ositive and helpful or things that are negative and hurt society.
It’s a excellent, very useful tool. People who think scientifically, generally, think more clearly.
GregT on Thu, 6th Nov 2014 6:25 pm
People who believe that science and human society are having positive effects on the planet earth, generally, are incapable of rational thought.
Davy on Thu, 6th Nov 2014 6:35 pm
Greg, I am with you on this one. Technology, knowledge, and network complexity is as Mark Twain once said “genius is the handmaiden of hunger. Our brains are our evolutionary dead end. This may take some time but the dualism knowledge creates destroys the knower. In Taoism “the clever will be deceived”. An ancient Egyptian prophecy say “Nature enjoys nature and only nature can overcome nature”. Where do humans fit into that? They don’t!