Last night I was staring
at a computer screen with numerous bullet points for this article and was
wondering how to weave them together and what to call it. After sleeping on
it, the perfect title for this came to me..."The Confidence Game".
In human psychology, there are many different levels of human emotion or
behaviour, from which other forms of behaviours stem. This might seem like a
pointless exercise, but follow the flow chart below with a background thought
about relating this to money, the banking system and precious metals.
This is a really
simplified diagram for a breakdown of human psychology and inner components,
but is described as follows. The Reptilian Brain is the most basis level of
the brain, but is governed by perceived or actual threats. This is where mass
psychology can occur with panics in stock markets or runs on banks.
Breathing, heart pumping etc...all basic life requirements are controlled by
this level of the brain.
The next level is the
limbic system, which is the center for sensory control and processing. This
is where long-term memories lie, which is also tied to the creation of
emotional markers...the ex-wife or ex-husband, that passionate kiss, foods
linked to food poisoning, dislike for certain groups, trust for certain
groups etc.
The final level of the
brain is the neocortex, which is where language (speech and writing) and the
realm of logic (all of the items described in the box above) are found.
Although this section is used most of the time, periods of panic often see
this area of the brain not used at all.
From an awakened state,
there is either a "Peaceful" or "Perceived or immediate
threat" state of mind. At present, the broad stock market appears to be
in a state of peace. Although there are problems in Europe, the fight or
flight response has not yet been triggered. There has been an associated
"trust" within the banking sector, which fundamentally is a
response to a trust in the currency being used. I am sure this is not the
case for people with money in Cyprus or former MF Global, but again, it does
not represent the majority view of the global populous at present.
With trust comes
confidence that one can deposit money and take it out next week or that it
will most likely buy a loaf of bread next week without requiring 1000x that
amount or more (in the event of hyperinflation). With overall trust within a
system, there will be peace, less conflicts, social order and day to day
living as people interact to build society as whole.
When governments print money
to essentially pay their bills, there is more money in the system chasing the
same number of goods, so the result is higher prices. The entire fractional
reserve banking system can naturally lead to a slow expansion in the money
supply, but when the money printing is handed over to government, levels can
dramatically increase in a relatively short period of time. Poor handling of
finances at the level of government quickly spreads, which then starts to cause
a breakdown in the system which will ultimately cause a challenge of the
belief system.
This is the really
critical point that everyone understands.... "A breakdown in the system
will ultimately cause a challenge of the belief system". Everyone has
friendships with people they trust, participates in organizations because
"they believe" in its benefits. People go to church because
"they believe". John Lennon said it best that "Everybody has
to believe in something".
When the level of
questioning a belief system on the level of a society occurs, there is a
tipping point a major shift in public sentiment that triggers a fight or
flight response. The fight response can be futile just as much as the flight
response, depending upon given circumstances but when the masses are running,
anyone in the way gets trampled.
For this reason, it is
very important to try and engage the neocortex part of the brain and think
logically. If anyone is engaging in this level of reasoning, then minimal
funds should be kept of of the banking system, own gold and silver bullion
and yes, even mining companies. When people lose trust, they lose confidence,
so when confidence is lost in the banking system, eventually a fight or
flight response will occur.
This flight could be money
leaving banks or a flight into tangible assets such as gold, silver, mining
stocks other currencies etc. When this panic sets in, those that were
intelligent enough to utilize their neocortex abilities will be rewarded.
There will be a flip side to this however, as those participating in the
ownership of gold, silver etc. will at some point have the belief that they
can make more money and then become complacent with thought or actions when
their prices approach their peak. As all other bubbles, the prices of gold
and silver will reach some conclusion at high levels that will have nowhere
to go but down. And then again, people will panic and fight or flight
mentality kicks in.
It is so important to
keep a logical perspective on life overall and to always challenge the belief
model on a rational basis so that the neocortex is not blocked. By keeping
this thought in mind, it allows one to mostly bypass the fight or flight
response and to logically follow the paths presented by markets or anything
else.
The Contracting Fibonacci
Spiral seen in the broad stock market indices is a direct reflection of how
the US Dollar has evolved from 1932 until present, which in turn is guiding
the mass of human psychology down a guided path that can allow somewhat
accurate glimpses into what the given mood of a populous should be
experiencing at a particular point in time.
Since this theory is at
its infancy, there is not enough research that has been conducted to fill in
a lot of the holes to link human behaviour at a certain part of the cycle and
how reproducible this has been seen throughout history.
The illustration
presented in this article is a further expansion of the article from the
April 2013 Issue of Stocks and Commodities titled "The Contracting
Fibonacci Spiral". The hard cover issue does not hit the news stands
until April 1st, so I have yet to secure a copy for myself. Be very aware of
surrounding news, because although random, there is order in the chaos and it
is leading to a huge surprise to the downside sometime between October 2013
and no later than February 2014. Most of 2014 is going to be down, based upon
the CFS, which in turn should be followed by a move similar to that from 2002
until 2008 (6 years) and 2009 until 2013 (4 years). The year 2013 represents
the 5 year time post for the CFS cycle, with the next one occurring in 2016.
This cycle is a true reflection of the channelling of mass psychology through
the broad stock market indices of the United States with the point of origin
linked to how the US dollar has been treated as a currency.
In a sense, we are
experiencing a living experiment of evolution within the context of human
psychology. If people as a whole can learn from this experience we are
trapped in (there is no way to stop this cycle unless the governments
outright were to remove democracy and seize all assets), then future
generations can have societies constructed so that there is peace and
prevention of future internal conflicts.
