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As
a young man in a foreign land, my curiosity was piqued by the crowd standing
five or six deep in a circle. On pushing my way forward, the focus of the
crowd’s attention quickly became apparent – a fight, although for
reasons I’ll explain momentarily, “fight” is not the right
word.
The
setting was the annual wine festival in Neuchâtel, Switzerland. I was
just 18, a wet-behind-the-ears puppy from a small town in Hawaii. But even in
the remote backwaters of my youth, the Swiss reputation for a certain decorum
and circumspection had made its way into my consciousness. How then to
explain the sight of several dozen Swiss citizens, a cross-cut of ages and
gender, standing placidly by as one young man proceeded to batter another?
Now
I have seen a number of fights in my life – in pre-PC days it was how
kids often concluded their strongest disagreements (today, very much not the
case) – and this was no fight. It was a beating, and a brutal one at
that.
Adding
to the surrealism of the scene – already surrealistic enough given the
tableau of a polite crowd of plain Swiss folks watching the brutality,
cow-like, against a setting of the placid beauty of the Swiss countryside
– was that the girlfriend of the man being beaten was screaming in
anguish as she appealed, futilely, to the crowd to intercede.
While
memory can dim with time, I can still recall the scene, and my emotions,
quite vividly. My initial reaction was that this was wrong, and I was unable
to comprehend why no one did anything – especially in that the champion
of this country fight had so dominated the contest that his opponent was all
but knocked out, lying bloody on the ground unable to defend himself. Not
content at his domination and ignoring the man’s screaming girlfriend,
the champion pulled his victim to his feet as I watched in shock and, holding
him standing with one hand, brought his other fist back dramatically and
bashed the poor guy in the jaw, sending him crashing back to earth.
Clearly
intending to do it all over again, he bent over and began to lift the target
back to his feet. It was at that point that it dawned on me that no one else
in the crowd was going to intercede in the carnage, not even to raise a voice
in opposition. Instead, they were quite content to stare stupidly at what
could have very well evolved into murder.
Recognizing
the situation as some form of societal aberrance – though not
understanding then how apparently normal people could fail to act against
such wanton viciousness – I pushed my way through the crowd and into
the circle and grabbed the brute, spun him around, and yelled
“Enough!” in his face.
Things
then proceeded to get a little wiggly. Dropping his victim, whose girlfriend
quickly helped him crawl off into the crowd, the brute stared at me,
uncomprehendingly at first, probably because of my use of an English word.
But with his blood still up, it quickly became clear I was to be his next
target. At which point, and I kid you not at all, someone tugged at my sleeve
and when I turned, forced the handle of a knife into my palm. While I was
still trying to register what had just happened, the herd made a noise that
brought my attention back to the Swiss brute, and I was shocked to discover
that he, too, was now similarly armed.
Now
there were any number of reasons I had made the trip
to Neuchâtel that day – to sample the local viniculture, tuck
into a nice fondue for lunch, perhaps even to meet a cute Swiss girl –
and I can assure you without double-checking that nowhere on the list was
“get into a knife fight.”
And
so without the slightest shame at overtly exhibiting cowardice, I dropped the
knife and turned tail, shoving my way through the tightly packed crowd and
making good my escape by leaping up on a parked car and running its length,
then diving back into the crowd on the other side.
What Happened?
In
the years following the events just related, I often wondered what happened
that day. How was it that a crowd of otherwise normal-looking people –
and Swiss at that! – could have stood by so
passively as one man brutalized another, ignoring even the dramatic pleadings
of the victim’s girlfriend?
Answers
didn’t begin to come to me until some years later when I picked up
Professor Robert Cialdini’s excellent book, Influence. In it, Professor
Cialdini discusses a number of stimuli that trigger
an automatic response in people, including the effect that “social
proof” has on the human mind.
The
mechanics of social proof, while somewhat complex, are pretty easy to
understand. Simplistically, we humans have a strong tendency to glance over
at other members of the herd in an attempt to gauge the correct action or
reaction to take in any given circumstance. While this tendency can be useful
in identifying the right bread plate to use at a fancy dinner party, it can
also have devastating consequences.
In
one of the most notorious examples of the downside of social proof, in 1964
Kitty Genovese was slowly murdered on a New York sidewalk over the course of
about 30 minutes, despite 40 or so witnesses, none of whom took action. They
figured someone else would.
Likewise,
the very average Swiss citizens I encountered that day in Neuchâtel
clumped together and, seeing that no one else was making a move to intercede,
stood mute.
In
any event, understanding the concept of social proof – and its close
cousin “social convention” – seems to me to be of
fundamental importance to us as members of the human race, and as investors.
As
far as the former is concerned, if you ever find yourself doing the same
thing as everyone else, it should concern you. Stop and ask whether you are
doing the thing because you want to or because you think it is the right
thing to do – or are you doing it just because it’s what everyone
else does?
As
for the latter, if you rely on the cues coming from the mainstream financial
media and officialdom, you would likely believe the country has exited the
latest economic crisis and will now steadily make progress towards a return
to normalcy.
Even
I find myself fretting that maybe we have it wrong about the nature, depth,
and likely duration of this crisis. The hard data say the crisis will almost
certainly again worsen and – given the tenuous nature of the world’s
monetary and economic systems – perhaps even result in a wholesale
breakdown.
Yet,
the indicators we look to for warning signals – the stock market and
interest rates, to name two – are signaling that nothing particularly
untoward is headed this way. This despite the data related to the “big
two” of unemployment and housing being truly terrible, and zero
progress being made in reducing the runaway deficit.
It
gets harder to reconcile when the data clearly point to the eurozone as being in the grips of a slow-motion break-up,
but yet the euro continues to hold up remarkably well.
Or
that the Middle East is in flames and gasoline prices are over $4.00 a gallon
in many U.S. localities. This week the International Energy Agency went on
record with a statement that if additional supplies of petroleum don’t
come online urgently, prices could spike higher and do serious further damage
to the global economy.
Meanwhile,
restaurants appear to be doing good business, and the parking lots in the
local “box town” (Dick’s Sporting Goods, Best Buy, etc.)
are full on the weekends: social proof that all is well, even though my own
research tells me it very much isn’t.
It Gets Worse
The
seeming disconnect between the true state of the world’s economy and
the public reaction is actually not a particularly bad thing for those who
have their eyes open. After all, anyone who can see what’s coming,
while the masses do not, has the opportunity to get positioned in investments
that will do well when the truth of the situation becomes evident to all.
But
there are matters much more important in this life than money-making.
This
week, the Supreme Court ruled by an 8-to-1 majority that search warrants are
no longer required before police commence to kick in your doors. Instead, the
new test of armed intrusion into your house revolves around whether a
policeman hears what he or she interprets to be “suspicious”
noises coming from within your abode.
And
this is just the latest in a long, long series of actions of a similar ilk
that, together, add up to a vicious beating of the citizenry’s
constitutional rights.
Where’s
the public clamor, the outrage? A casual glance around reveals the masses as
dumbly going along with these and other such travesties. But only because
they are.
In
the face of such apathy, it should come as a surprise to no one when the
government continues to degrade individual liberties in favor of the
all-powerful state.
It’s
always been something of a joke that you can tell if a politician is lying by
whether or not his lips are moving. But the joke has now morphed into a hard
fact. Thanks in no small part to the mechanics of social proof, lying,
deceiving, self-dealing, and obfuscating by the leadership are now considered
perfectly normal and acceptable.
Now,
I wish I could muster up some hopeful thought to interject at this point
– even the smallest sign of a pushback against the state’s
growing envelopment of all that comes under its gaze – but for the life
of me, I can’t.
Rather,
I feel today as I might have all those years ago in Neuchâtel if, on
discovering the brutal beating going on, I had been bound and gagged and
forced to stand in the crowd and watch it continue to its bloody conclusion.
Hopeless.
But Not Helpless
The
fact is that I am not bound and gagged. At least not yet.
And
thus, while I still have the ability to do so, I will continue to take
measures to protect my family and myself – first and foremost, by
diversifying globally.
For
many people, the idea of packing up and picking up in order to head elsewhere
is a non-starter. They may feel an obligation to aging family members back
home or have small children and worry that somehow a life abroad will not
suit. Or they may not have the funds or income stream to assure they’ll
be able to get by for a protracted period.
While
there are good responses to all of those concerns, the truth is that
physically expatriating is not for everyone. Yet that shouldn’t stop
you from prudently – legally – diversifying some of your wealth
globally.
Although
I have mentioned it before, I’ll again mention what I took away as the
biggest lesson of Adam Fergusson’s book When Money Dies. And that lesson is that if in
the early days of the great German inflation, you had taken the simple step
of investing money even one foot across the border with France or
Switzerland, you would have saved yourself. Those who stayed put – who
out of apathy, ignorance, or misguided nationalism left their money in the
currency units of their native country, Germany – saw that money made
worthless over the course of just a few years.
Of
course, it is not strictly required that you have your wealth parked in
assets domiciled in another political jurisdiction – gold and silver
close at hand can serve much the same purpose. That said,
if all of your eggs are in one basket, and that basket is located in a
single, corrupt political jurisdiction, then the potential for that basket
being grabbed away from you remains a constant threat.
For
those of you with the means and a sense of adventure, creating a home away
from home in a place you like is also a very worthwhile endeavor –
though should you do so, I can assure you that your friends and family will
think you unconventional. Maybe even unpatriotic or paranoid.
But
that’s only because that is what they have been taught to think, and
because they look around and don’t see other people doing it – so
it seems strange to them.
Now
don’t get me wrong: the United States is certainly still largely an
agreeable place to live and to do business in. And it’s likely to remain
that way for years to come. If I had to place a bet on any one scenario, that
is the bet I would make.
That
said, if the current trends continue, as they show
every appearance of doing, then in our lifetime individual liberty could, de facto, be extinguished.
While that may seem a radical statement, just ask yourself how secure your
liberty will be if all three branches of the government purposely degrade the
substance and intent of the U.S. Constitution and Bill of Rights?
The
records of the last decade or so make it clear that the Executive branch and
Congress are all too willing to push constitutional rights aside for
political purposes, or in an “emergency” – even
institutionalized torture is no longer off the table. With the latest ruling
on search warrants, the Supreme Court has thrown its hat into the same ring.
And
things could get much worse, much quicker than most think they could. All it
would take is another 9/11 – perhaps like the Oklahoma bombing, with
domestic origins. Regardless of where it comes from, should an attack of the
scale of 9/11 happen – as it almost certainly will – the final
nails on Liberty’s coffin would be pounded in and the
already-militarized domestic security apparatus will become openly antagonistic
to those who take opposing views.
When
sitting down to write today, I hadn’t planned on writing on this
particular topic. But the Supreme Court’s ruling has clearly gotten
under my skin. Even more bothersome than that has been the lack of public outrage
at the ruling. After a day or two in the news, the ruling has now vanished
from the public discourse, injected into the code of law like a dose of
slow-acting poison.
Some
readers may think that diversifying internationally is the wrong thing to do
– that as a good American I should burn the proverbial boats and fight
for what’s right. To which I would reply that I don’t intend on
wasting what remains of my life in a knife fight with a far better armed
opponent.
You’ll
make your own decisions about how to best look after yourself and your
family. But if you look to your fellow citizens for clues as to what’s
going on, and how to react to it, you will be setting yourself up for a very
rude awakening.
Trust
your own instincts.
[Every
month, David and his co-editors of The
Casey Report help savvy investors look behind the smokescreens
government and mainstream media create to disguise the grim truth. And while the
investing herd is losing money without even realizing it – through
monetary depreciation – they show the way to extraordinary profits in
the face of crisis. Read
more here.]
David Galland
Managing
Editor, Casey Research
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