The Credit Crisis: An under-explored perspective...

[ThinLizzy]

I'm sitting doing some work, listening to Radio 4 talking about the financial solutions to the current financial crisis...fiscal stimulus, quantatitive something-or-other, corporate bonds, etc etc.... It strikes me that we are concentrating on the economic issues, but forgetting to explore the psychological issues that got us into this mess in the first place.

a) Why did the brokers of the banking system get addicted to taking larger and larger risks? What is it in the brain that causes us to take higher risks when the going is good?

b) Why are we, the consumers addicted to buying more and more stuff? Why are we tempted and courted by the banks and their offers to get more goods on credit? Is it because this 'war on terror' society makes us feel vulnerable and unsafe, and so i) like hoarders we buy more stuff to make us feel safe in our nests & ii) buying expensive stuff makes us look affluent (even though it is on credit!) and so like peacocks we strutt our stuff (MPVs, latest gadgets) to make us seem powerful and thus less under threat!

The conclusion: a) (W)bankers: stop your impulsive, risky buy/sell, think before you act -- go cold turkey! b) Consumers: Stop feeling under threat! Buying more stuff is not going to make you feel safer -- and the war on terror....was it just a way to fluff us up a bit anyway, to get us to spend??

Just my opinion -- but I think we should start thinking about the psychological causes of this pandemonium, as well as the effects :)

Discuss ;)

[????]

I think your being a bit simplistic - the human psycholoigies that create boom and bust go back way, way beyond the credit crisis! 'tis in our nature innit

[ThinLizzy]

Ha, you would say that Quids :)

Simplicity is the key to truth as a wise man once said...

Yes, but although this goes way back, the 'bubble-burst' activities of sub-prime and consumer credit tipped it over the edge. See Kannerman & Tverskey's work on economic thinking...

It's sometimes useful to take a reductionist stance to figure out the bigger picture methinks.

Another interesting question: what affect will this boom and bust era have on our children's thinking in the future? For example, my parents, after the war years believed in tinned food etc -- wouldn't catch me eating too much tinned food, because I'm an advocate of the buy fresh & wild culture. Be interesting to see how our kids react to credit and buying big -- hippies are coming back I tell you....

Can you tell I have a lot of work to do (procrastination is great isn't it!) Don't encourage me!

[????]

i am being reductionist...I think it's human nature and it's happened loads....this particular 'crisis' is therefore irrelevant, and, I think it is in our pysche rather than any structural paradoxes in the means of production...humans just repeat their mistakes - optimism, pessimism, herd behaviour, etc etc

Nothing will change, I laughed when after the early 1990s recession social commentators were saying "we have left the "I" 80s and joined the "Us" 90s"..ditto after 9/11 there was much shite spouted about a reassessment of values in the investment community to giving something back etc....all horseshit...the next bust 2022 or so......

[ThinLizzy]

...I guess it's the same thing with snow :)

So you reckon we should just sit pretty until it passes?

I'd like to think that we can take advantage of advances in medical research such that we learn more about ourselves in time to correct maladaptive behaviour. But I guess it's too optimistic, we're just essentially stimulus-response beings, no matter how much we try to exercise delayed gratification

[????]

It's human behaviour not maladaptive behaviour

[Mick Mac]

Its a cycle - Invest now (not at Cheltenham, I mean proper investing)

[ThinLizzy]

Prima facie, Radio 4 seems cozy, but look what it's done to me tonight -- got me into all sorts of trouble :)

So, what would you recommend investing in MM?

[Mick Mac]

I think in very general terms - so have nothing specific in mind except that when the markets pick up they will pick up quite quickly as money goes back in and confidence is restored, and generally a bull market will average 3-5 years (from memory - no time to check statistics)

I'm all for taking a spread of risk, so in the past I have selected 5-10 unit trusts with a good track record. Nothing more exciting than that, but its timing thats important and always spread risk.

[red devil]

Mick, what happens to shares in a company that eventually gets nationalised e.g. banks?!

[ThinLizzy]

Hey Red Devil -- meant to say, thanks for that great vid of Oh you Pretty things (I know, wrong thread, but just wanted to put in a thx!)...as you were....

[Mick Mac]

Red Devil

I'm not sure but would have thought you would not get anything back. This presumably only happens when the banks are valueless - hence you would already have lost your money as the bank would, without Govt support, have gone out of business.

[snorky]

The points you raise are timely & legitimate, the answers/ solutions you provide are maybe somewhat, but not wholly relevant

Wilhem Reich would have urged everyone to have more sex and spend a bit more time in the Orgone accumulator to detach us from the man made capitialist urges behind this

The banks are an easy victim and take all the flak, but they are not the ones who organsied this whole collapse, they merely funded it, lent us the money & sent out the credit cards. We are increasinglyu being viewed and educated to be consumers - every aspect of our lives is picked through in minute detial by analysts/ marketets / ad men et al - just to exploit and sell more and more tat to lonely people, who have been criminally exploited to keep this pyramid scheme of sales going.

have a look around ED and see how many people are involved in these industries or on their periphery.

We are all to blame, some more than others, most unwillingly, but we are all to blame

[ThinLizzy]

Your response is spot-on Snorky -- and very well scripted... I agree, and think it's a shame that a) we are being squeezed to fit consumer-shaped pegs and b) anyone who bucks the trend is seen as weird. I just don't get the mentality that we need to buy so much stuff, and compete with other people doing the same. Isn't it obvious that such activity is vacuous? Or do we eventually all get sucked in to the consumer vacuum that we forget/lose the ability to think for ourselves? I cannot think of anything more wonderful than cycling down a hill first thing on a sunny spring morning, or sitting in a field on a hot summer's day with my favourite book, a smile from a stranger, the first kiss from a new boyfriend. Call me an old romantic, a dreamer, or someone who lives on another planet, but I tell you what -- none of the above cost a bean (apart from my bike, a long time ago!), and I never feel under pressure to compete for status envy (even in Dulwich). In fact, I worry about myself when people who follow the consumer dream start befriending me -- because they must think I'm one of them -- so I make myself scruffy for a week or so and put them off!

Don't get me wrong -- I like spending my money -- but on what I regard as good stuff, presents for dear friends, books, a nice beauty treatment, paintings, good coffee. Just not the latest phone, or the biggest car, etc. It doesn't take too many synapses to realise that if one really wants to compete for status envy, save all your cash for a 'blinging' gravestone! xx

[giggirl]

Spot on Snorky. Well done that man.

Children learn about values from their parents and it's worrying that buying on credit (the never never as it used to be called) is so acceptable. My parents never ever bought anything on credit - the notion of credit just wasn't acceptable to them. They would be in a minority today. We do need to go back to living within our means (that sounds so old fashioned, doesn?t it?).

[ThinLizzy]

Hear hear ggirl -- imagine how happy we'd all be :) I'm inclined not to get a mortgage afterall, not for a while anyway, just to experience 'living within means' when I finish my training :)