It seems that whatever the media and most people think is going to happen, does. Our behaviour as a group often predicts what will happen in the future. If, as a group, we decide that a particular group of stocks are going to go up and things are going to boom in that area, then it will. We see this kind of thing again and again, with stocks, housing, jobs, and so forth. What the media writes about in a large enough quantity will happen. Of course it will, because human greed is such a powerful force.
IT Stocks in the 90’s
We saw this happen with these stocks in the 90’s there was no real value in these companies, but people speculated on a mass basis that they would go up in value, so they did, simply because of the mass amount of speculators. Then media and analysts started writing about this phenomenon and how there was no value behind the stocks, since the companies had no assets and weren’t showing the expected profits. What happened? People dumped the stocks, and they did exactly as predicted – they crashed.
Construction in the Last Few Years
In the earlier part of this decade we started to see a huge boom in the housing market. Many people with little actual knowledge in real estate took advantage of this and speculated by buying properties that they wanted to flip for quick profits. For some this worked very well, but others got caught at the end and lost huge amounts on properties they couldn’t sell for what the mortgages were. This was easily predictable and was written about in the media for months before it happened. Did it happen because the writing and because people thought it would, or was the writing simply people showing what was going to happen if people didn’t stop being greedy?
The entire construction industry was based on this, and there were companies that charged as much as they possibly could, simply because they knew that at the time people had no other choice, since there was so little supply and so much demand. And what happened? As with everything, there was a swing back reaction. What is the physics saying? “For every action there is an equal and opposite reaction.” This holds true for economics as well as for physical objects. We see it constantly, and we are constantly reacting, with bailouts and so forth.
Market Corrections
The beginning of our last boom was as much a market correction as an actual boom. People overreacted to that and that is why the boom went to high. Greed is such a powerful force! Always I am amazed at it. I admit that I occasionally have my own issues with restraint and greed. If I didn’t then I wouldn’t be in the situation I am right now, trying to get rid of my debt. Of course there were outside influences to that. But I shouldn’t make excuses.
We are now seeing another correction in the opposite direction. And we are also seeing greed motivating people to overreact again. Fear helps in that. People in power are afraid of losing what they have and therefore they get rid of the expenses that they can in their companies. Sometimes this means layoffs. And that just exacerbates the whole problem, because when people have no money, they worry about their own hides first. And therefore they don’t spend what little they have. They budget tighter, and so do the companies. And it becomes a big circle that is its own self fulfilling prophecy. People think it’s going to be bad, so it is. Hmmm…
The Current Economy
There are indicators that our economy is on an upswing, that things are stabilizing. But too many people are afraid and greedy. These really are the two largest motivators in human nature. All around us others are afraid of the economy and what it is doing for them, therefore they are behaving in such ways that the betterment of the economy is slowed. Honestly, if people would use their logic instead of their emotions, we would have a more stable economy all around. But we are human, and ruled by our emotions…. What choice do we really have?
