Be vewwy vewwy quiet...
Fear, Uncertainty and Doubt – FUD – covers the markets like ooze right now. As I write, the markets are rocketing upward, erasing most of the aggregate losses of the day, and in fact putting the market up over 200 points. Regardless of what the picture looks like at the end of the day, it’ll have been one of the most volatile trading days in history.
The more that the government interferes in the markets, and the less they act according to established legal precedent, the more impossible it becomes for business to operate. Every government action is an act of violence. The less predictable the violence becomes and the more intense that it gets, the more difficult it becomes to conduct business.
If the US markets were a neighborhood, it would look something like this. One gunshot every few months in a typical city neighborhood would go unremarked upon. However, if there started to be gunshots every week – automatic weapons fire, the occasional explosion, frequent arson – you would imagine that people would start to flee that neighborhood, and that those that would remain would become extremely cautious. Free trade would continue, but erratically, as all players would need to shift much of their focus to preserving their physical safety.
As people become more afraid, they are also likely to assign greater credibility to rumors than they would otherwise. If a mis-step could result in being obliteration, you’re liable to believe far more that you hear than you would otherwise. Six months ago, no one would have given credence to a rumor that, say, Morgan Stanley, would be nationalized. Now, such a tip gets posted and read by millions. There were rumors at the beginning of the day that the Dow would drop 1000 points today – but it’s up 250 right now, although it did flirt with such a drop at a few times during the day.
Predictability has always made the US an attractive business environment relative to other parts of the world. The government, within limits, could be expected to respond promptly to campaign contributions and offers of post-government employment. The legal system is well understood, and, in general, there isn’t a long historical record of the government taking over businesses by force. This country is miles away from being a free society or having a free market – and it would be inaccurate to describe the American competitive advantage as it being “freer” than other countries.
Rather, the violence that the state inflicts is more predictable and more easily influenced than it is in other countries. That is not freedom – but it does make it less frightening to operate in than in other parts of the world. Instead of bribing cops ad hoc, you pay your bribes every year at tax time. Instead of handing briefcases full of cash to politicians, you send them a campaign contribution, provide “research” to influence legislation, or fund a Political Action Committee.
Portrait of Gottfried Wilhelm Leibniz - German School, 17??
One of the fundamental errors of the religious approach to philosophy – which is near-universal, even among the secular – is that it cannot tolerate uncertainty. Rather than accept the fact that they do not know the solutions to complex social problems, the religious approach is to invent a conclusion and to inflict it upon others.
The uncertainty principle is fundamental to the scientific method. No matter how much data that you collect, there will always be a certain level of uncertainty – which can be quantified within limits.
Every act of violence creates waves that roll over human society, terrorizing billions.
Accepting the fact that we are uncertain is the first step towards living rationally. Stick to known knowns and known unknowns. It is destructive to speculate the presence of demons and dragons in the mist beyond our field of vision. Give rumors no more credence than you would during times of calm. Check your premises. Alter your conclusions when presented with new evidence.
And fear will no longer be your master.
