A Delusional and Dysfunctional State

By: Gordon Long | Fri, Feb 1, 2013
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To come to grips with our current economic problems we should first consider risk and whether real risk is being exposed and discussed in an open and transparent fashion. If it is, we can begin a public dialogue on solutions. If it is not, we need to ask the question why not?

When risk is masked, cloaked, hidden or mis-stated then you are going to formulate poor public policy. By masking risk we will consequentially become delusional about the the associated cost, consequence and elevating level of that risk.

Risk and cost are being hidden from us through unprecedented Monetary Malpractice, which by artificially lowering interest rates for a prolonged period, is mispricing risk, fostering malinvestment and allowing the economy to become delusional and dysfunctional through moral hazard and unintended consequences.

Financial Repression, as a central reason for hiding risk, is forcing the public to take on hidden and elevated risk in pursuit of ever shrinking yields.

Unfortunately the public is acting out what Charles Hugh Smith refers to as the "Spoiled Teenager Syndrome" within what he describes as the "Parasitic Financial Sector". A sector that now commands over 30% of corporate profits, 44% of the equity markets and 5.2% of GDP. A sector where the neo-liberal supporters of the central state, knowingly or unwittingly, both enable and enforce its predatory practices.

This sector has fostered the "Spoiled Teenager Syndrome" and is creating two fundamental problems. First it is not a productive use of capital and is bleeding productive capital from the US economy. Secondly, it is capturing the best and brightest in the workforce. As a leading Chinese government economist recently observed:

"In America the best and brightest are not creating products that people around the world want, but rather are engaged in trying to pick the pocket of others"


Psychology of Delusion

As humans we prefer illusion to the risk of adaptation. Much has been written about cognitive biases and errors, for example Confirmation Bias (seeking out data that supports our positions). Other well-known cognitive biases include:

These fail to describe the tremendous appeal of delusion. Remaining in a delusional state feels safer than risking the disruptive consequences of adaptation, innovation and change. So we cling to delusion as the "safer bet." But decisions based on illusion necessarily yield catastrophic consequences.

Politicians understand that people react negatively to unwelcome realities, and so they sustain a state of delusion with short-term politically expedient "kick the can down the road" policies and continual reassurances that the increasingly unstable system is permanently stable.


Our Delusional and Dysfunctional State

 


29 Minutes, 25 Slides

 


 

Gordon Long

Author: Gordon Long

Gordon T. Long
Publisher - LONGWave

Gordon T. Long

Gordon T. Long has been publically offering his financial and economic writing since 2010, following a career internationally in technology, senior management & investment finance. He brings a unique perspective to macroeconomic analysis because of his broad background, which is not typically found or available to the public.

Mr. Long was a senior group executive with IBM and Motorola for over 20 years. Earlier in his career he was involved in Sales, Marketing & Service of computing and network communications solutions across an extensive array of industries. He subsequently held senior positions, which included: VP & General Manager, Four Phase (Canada); Vice President Operations, Motorola (MISL - Canada); Vice President Engineering & Officer, Motorola (Codex - USA).

After a career with Fortune 500 corporations, he became a senior officer of Cambex, a highly successful high tech start-up and public company (Nasdaq: CBEX), where he spearheaded global expansion as Executive VP & General Manager.

In 1995, he founded the LCM Groupe in Paris, France to specialize in the rapidly emerging Internet Venture Capital and Private Equity industry. A focus in the technology research field of Chaos Theory and Mandelbrot Generators lead in the early 2000's to the development of advanced Technical Analysis and Market Analytics platforms. The LCM Groupe is a recognized source for the most advanced technical analysis techniques employed in market trading pattern recognition.

Mr. Long presently resides in Boston, Massachusetts, continuing the expansion of the LCM Groupe's International Private Equity opportunities in addition to their core financial market trading platforms expertise. GordonTLong.com is a wholly owned operating unit of the LCM Groupe.

Gordon T. Long is a graduate Engineer, University of Waterloo (Canada) in Thermodynamics-Fluid Mechanics (Aerodynamics). On graduation from an intensive 5 year specialized Co-operative Engineering program he pursued graduate business studies at the prestigious Ivy Business School, University of Western Ontario (Canada) on a Northern & Central Gas Corporation Scholarship. He was subsequently selected to attend advanced one year training with the IBM Corporation in New York prior to starting his career with IBM.

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

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