Recently by David Galland: Interview with Milos Dedovic, Serbian-American Chamber of Commerce
The definition of fear seems obvious, but only because it is.
As a noun, it refers to “An unpleasant emotion caused by the belief that someone or something is dangerous, likely to cause pain, or a threat.”
Used as a verb, it references “Being afraid of someone or something as likely to be dangerous, painful, or threatening.”
Moving to the proverbial 50,000-foot view, we humans have an innate capacity to experience the “unpleasant emotion” of fear in myriad ways. While fear is an intensely personal emotion, it can sweep through entire populations, much the same as a herd of gazelles are sent into fearful flight by the scent of a lion.
Unlike a few dozen gazelles foraging on the plains of the Serengeti, however, the technological advancements made by the human ape can result in a population numbering in the hundreds of millions, or even billions, becoming almost simultaneously “afraid of something or someone.” While the flash-fire of fear usually won’t result in wholesale scampering for cover, la the always graceful gazelle, it can absolutely result in quick modifications in human behavior on even a global scale.
For example, an economic crisis can cause billions to clamp their wallets tightly shut and refuse to open them until the scent of danger passes.
That said, while fear can be experienced more or less simultaneously by the multitude, per my remarks just above, by definition the emotion is intensely personal and individualized. Simply, the level of fear experienced by each of us, and our response to that fear, will largely depend on the nature of the fear-evoking stimulus and our individual psychology. The aurophobic, for example, is frightened by the presence of gold whereas I suspect most dear readers will experience exactly the opposite emotion. (Think you know how many different phobias there are? You’ll think again after reviewing this list.)
With that bit of stage-setting, I will now proceed in what I hope will be a mostly methodical fashion on to the ways that these unpleasant emotions can affect us as a society and, more to the point, on an individual basis.
Institutional Fear
It is no secret to any thinking person that the institutions we humans allow to grow up above us on the societal org chart – governments and religions, to name two of the most prominent – long ago made the calculation that fear equals control.
It is not an accident, in my view, that in the history of most nations, there are no prolonged periods where there isn’t some sort of big threat dangling over the populace like the proverbial blade of Damocles.
And if, by some oversight, a government had allowed a lapse in its drumming up of mass fear, the gap is invariably filled by the “always there” threat of fire and brimstone, or its equivalents in the world’s many religions.
While it may seem cynical to accuse governments and religions of deliberately unleashing fearful scents into the herd, the historical record is clear on the matter. In fact, the record is so well documented that it must be taken as a standard operating policy. And it has only gotten worse in modernity as the fear-spreading operations of these institutions are made easy in the extreme by a combination of massively improved communications and a media without any ethical reservations when it comes to enthusiastically exaggerating the things we fear in order to gain eyeballs on their pathetic offerings.
But even if you were to take a kinder view toward the PIPs (Ponzis in Power) and assume that their constant concerns are sincerely felt as opposed to callously calculated, the net effect on society is the same. Case in point, Lyndon Johnson was, apparently, completely convinced that victory in Vietnam was the only thing standing between the free world and global communist domination. In his own words, following the end of his presidency:
“I was as sure as a man can could be that if we didn’t live up to our commitments in Southeast Asia and elsewhere, [the communists] would exploit the disarray in the United States and in the allies of the Free World.”
~ Former President Lyndon Johnson
Apparently, he was so convinced in his fears that he used a false report of an attack on US destroyers in the Gulf of Tonkin off the coast of North Vietnam as an excuse to ramp the Vietnam conflict into a full-blown war.
Whether Johnson was a part of the falsification of the report might be debatable, but what is not debatable is that on the very night he purported to have received the report, without waiting for any details, he went on national television and announced in terms evoking comparison with FDR following Pearl Harbor that “Aggression by terror against the peaceful villagers of South Vietnam has now been joined by open aggression on the high seas against the United States of America.”
The film of his televised speech is available on YouTube, and worth a watch in that he goes into some detail about the attack that never happened. And then, having secured his rationale, Johnson never looks back as he revs up the military-industrial complex to unleash near total war on the backward country, ultimately causing the death of 58,000 young US men, about 30% of whom were drafted against their will and made to serve, and another 300,000 wounded. Then there’s the death toll on the other side, which, while the data is debatable, almost certainly runs into the seven figures.
Coincidentally, this morning I received an email from an ex-military officer friend of mine on the topic of Vietnam. I am going to excerpt it here because (a) I found it interesting, and (b) hopefully it will help head off angry emails from those Vietnam vets who still think the cost and the carnage of the war was justified.
I replied to Doug on his Conversations with Casey interview on the new Kim in Korea this week. As it turns out, about twenty years ago, I had dinner with Aaron Bank, the founder of modern Special Forces.
Pretty tough dude, even though he probably weighed no more than 150 lbs soaking wet in his prime. He had jumped into France during WWII to train the resistance and later went to Indochina to fight the Japanese. It was there that he met Ho Chi Minh, whom he got to know well and apparently found him to be agreeable and very intelligent.
While a communist philosophically, Ho Chi Minh seemed more an anti-colonialist than anything else. He shared with Aaron Bank that more than Marx and Lenin, his true idol was Thomas Jefferson. Furthermore, it was his hope that once the Japanese were drummed out of Indochina, the Americans would support him in getting the French to take their leave as well. Bank reported back to his American superiors that Minh was the likely leader of the inevitable insurgency that would be waged against the French by the Vietnamese, and given the diminishing viability for colonialism, Americans would do well to reach out to Ho Chi Minh and perhaps broker a deal.
Well, they didn’t, and the rest is history, as the saying goes. For their arrogance, the French were rightfully rewarded with a bad case of Dien Bien Flu, and America went on to make every idiotic choice possible in dealing with that region. Watching Colonel Bank look at us (we were about 12 seated at the table) wistfully was a very powerful experience for me as a young officer starting his career with Special Forces. Those were eyes that said “what could have been and what could have been avoided.”
But my purpose is not to dwell on the past – because as unfortunate as Vietnam may have been, it is but a speck of dust in the historical record – but rather simply to make the point that not only are governments capable of deliberately propagating fear for their own purposes, they are susceptible to fears of their own… some warranted and some not. In either case, the result can lead to catastrophic miscalculations.
Given more time, we could go on and on evaluating the motives of those people in position to instill fear in the PIPs – for instance, foreign governments looking to hide under the US military umbrella or to protect steady streams of money and other concessions reserved for regional allies. Likewise, the people in the military-industrial complex – which is to say official military and the private concerns that profit so mightily from military operations – have a clear interest in protecting their turf and stirring the pot should they think it necessary to do so.
The fact remains, however, that each of us – including members of government, as hard as it is to believe sometimes – is a member of the same species, and that species is never more than an instant removed from a fear reaction. In other words, we are completely susceptible to becoming fearful at any time, and for a multitude of reasons. This condition does not fade away when a person assumes power. In fact, if anything, it is heightened.
Imagine, if you will, what sort of preparation the military now provides a newly elected president and senior members of his incoming administration, and the sort of fear that preparation might evoke.
On that point, following is an excerpt from the excellent Top Secret America by Dana Priest and William Arkin, describing a mock crisis meeting held for Obama’s national security team just before his inauguration.
As they all sat around a large conference table, Obama’s national security advisers during the campaign, Richard Clarke and Rand Beers, laid out the scenario: Israel was about to bomb Iran. Discuss.
While they debated next steps, Clarke announced some more bad news: al-Qaeda was carrying a nuclear bomb on a freighter headed for Manhattan. Discuss.
The team forgot about Israel and Iran, and called upon a clandestine U.S. rapid-response team to interdict the ship. But the scenario shifted again: the terrorists had slipped off the freighter and onto a boat. Al-Qaeda was now headed to Boston. Discuss.
Before the team could identify which boat carried the deadly device, they were informed it had been offloaded and detonated. Cities along the eastern seaboard were evacuating. Discuss.”
Far be it from me to rationalize the steady missteps of the PIPs, but after going through such an exercise, I’m surprised that the Obama administration’s first collective act upon assuming power wasn’t to just turn most of the Middle East into a glass-topped parking lot. Is it any wonder the US has a trillion-plus-dollar defense budget?
In my opinion, which will come as no surprise to regular readers, the way to greatly reduce these sorts of institutional fears is to stop running around the world taking sides with petty despots and starting wars. Isolationism? Maybe, maybe not – but it seems like things couldn’t get a whole lot more screwed up than they have by following the current policy of widespread meddling.
Pulling sharply back onto the tracks, the point I am trying to make is that fear as both a policy and a policy driver is of no small consequence. Continuing with the US-centric commentary that is an understandable consequence of the geographic accident of my birth, fear has rarely been as big a factor in US policy as it is today.
In addition to the massive military budget that provides funding to huge new entrenched bureaucracies that will resist every attempt at real cuts, I’ll also mention:
- The trashing of the Constitution. I have written enough on this topic – you and I both know the situation, so it doesn’t need to be repeated.
- Economic uncertainty. The policy of constant meddling in the Middle East is only causing things to get more uncertain and unstable. Sure, some of the ruling thugs in the area are being chased out – but only to be replaced by a new group of ruling thugs. Much of this is happening in and around the world’s fuel station, and the situation has the potential to get much, much worse if any one of the sparks now floating in the air of the Middle East – especially those around Iran – touches one of the many piles of powder that have been allowed to build up. At that point the price of oil is going to go ballistic – and if there is one thing a struggling economy can’t handle, it is another surge in oil prices. (You can click on the interactive graphic to get some sense of the relationship between oil prices and GDP growth.)
- Interestingly, now that the fires of discontent in the Middle East are burning brightly, the Obama administration has announced that the Pentagon will be shifting its attention to Asia in order to counteract the threat from China. That should be fun.
- A steady increase in the public’s reliance on the government to protect it. A culture of fear inevitably leads to public support for government policies ostensibly designed to protect the citizenry from every possible bogeyman. One result of the ramp-up of fear following September 2001 has been the proliferation of massive new bureaucracies, as well as huge new bodies of regulation that hamper the free movement of people, materials and technology so essential to economic growth. At this point, things have gotten to the point where they are as ridiculous as they are concerning. Case in point, we now have TSA “VIPR” squads setting up security check points here, there and everywhere. This video shows such a checkpoint set up to screen people getting off a train in Savannah, Georgia. Which makes me wonder what they would do to a citizen who refuses to play along? Force them back onto the train? And how is this different, I ask, from the iconic line associated with fascists the world over, namely, “Your papers, please!”? Ultimately, not only is 99% of this dangerous nonsense ineffective, but it is also emasculating to the character of the people. Hey, did you see the latest?
The spread of mandates and discussion of ignition interlocks will “prime the public” for the day when the government requires auto manufacturers to install even more sophisticated alcohol-detection devices as original equipment, Longwell said.
The Driver Alcohol Detection System for Safety, funded in part by automakers and the National Highway Traffic Safety Administration, says it is working on “potential technologies that could detect alcohol from air samples in the vehicle passenger compartment, through the driver’s skin using tissue spectroscopy, from emissions through the skin, from eye movements, and from driving performance.”
It matters not that drunken-driving fatalities have fallen by half over the last twenty years, the nanny-state meddling will continue apace. And while you could argue that a car that senses when you should drive based on what has been shown to be a largely artificial and dubious standard (a topic for another day) is a good idea, when you look to the government to provide total security in a world that is inherently insecure, you multiply the meddling to the point where you might as well just have the state plug you into the Matrix and be done with it.
As you know, I could go on, but chances are good I’d just be telling you things you already know. The point, though, is that the build-up of fear-driven policies has been so extreme since September 11, 2001 that we now face the very real potential of a police state-caliber crackdown on the citizenry should another 9/11 occur. And, given the amount of meddling the USG does around the world, such an event could happen anytime.
At least that is my personal fear. Which, conveniently, brings me to the next segment of these musings.
Personal Fears
There is, of course, a feedback loop to the societal fears discussed above. For example, the stampede caused by self-serving NGOs’ over-inflated environmental concerns that resulted in a fearful public demanding that governments spend yet more money they don’t have on wasteful and often counterproductive subsidies, such as those involved with ethanol and Finland-built electric super cars. However, as mentioned, the need to assess threats and deal with fear is something that each of us have to deal with on a very personal level.
While there is literally no end to the fears that might torment the human mind, I’d like to tackle just a couple of the big ones that I know – from your letters and from your comments when we meet at our events – weigh heavily on the minds of many.
Fear of Government. In his client communications, libertarian defense attorney Marc Victor likens the government to a crazed ape, explaining that job number one for anyone who comes into contact with the crazed ape is to get out of its grasp as quickly as possible. This advice, Mark will tell you, applies to every interaction with the ape – including something as mundane as a routine traffic stop that, should you decide to be confrontational or think it a dandy time to lecture the officer on your constitutional rights, could end with you bleeding out on the pavement.
Given the wanton trashing of the Constitution in recent years – and the trashing has been done by all three branches of government – you are entirely justified in fearing your government. The question, then, comes down to, “So, what can I do about it?”
Following Marc Victor’s advice, the decision tree is fairly simple.
? Stay within the easy reach of the crazed ape, but quietly tip-toe through daily life in the hopes of avoiding attention. Should a hairy hand be laid on your shoulder – or, in the case of a TSA pat-down, your groin – make appropriately supplicating sounds (thanking them for protecting you, or even a slight whimper may suffice) and hope they will let you go. Try your hardest to comply cheerfully with all the latest taxes and regulations (I say “try” because at this point, no one can even know what all the regulations say, let alone afford the bevy of legal counsel required for complete compliance) and get on with your life. ? Spread the risk. Having all of your assets, and all your personal support systems, within the boundaries of one political regime leaves you and all you own as so much chattel. Diversifying your assets and your life across jurisdictions, if you can afford to do so, will open up new intellectual and lifestyle horizons, as well as provide you with the peace of mind that should the crazed apes in one country become especially frenzied, you can more readily step out of reach.
There really aren’t any other options, making your decision on how to cope with this particular fear actually quite simple. So, make your choice and fall in line with it and stop worrying so much. Personally, I choose the latter.
Economic Outlook. We investors have any number of fears related to the economic outlook, many of which are overlapping. Again, these fears are justified, for the simple reason that serious bouts of inflation, deflation or depression can literally wipe out the personal assets we have spent a lifetime of hard work accumulating. Though the government is capable of taking abrupt actions that result in near instantaneous wealth destruction, the persistent effects of a serious economic crisis – which are almost always also the result of government meddling – can be just as devastating, albeit over a somewhat longer period of time.
How do you cope with fears over the future of the economy? For starters, by facing the facts. For example, while we here at Casey Research have a very respectable track record of forecasting economic trends – as often as not by analyzing the most likely actions a government will take, and the most likely consequences of those actions – the truth of the matter is that no one can predict the future.
Let that sink in, because it’s really important.
Thus, while we believe that the logical consequence of any fiat monetary system is the creation of excess debt leading ultimately to the wholesale currency debasement of the currency and, so far, that’s the way things have mostly worked out, tomorrow, literally, everything could change. Things could, in fact, get much worse, much quicker, than we expect. Or things could surprise us by getting much better. Who knows, maybe the US government will come to the conclusion that the path it is currently on is not going to be helpful in fulfilling its political agenda (i.e., to retain power) and make actual change, versus just flapping its collective gums about it.
The key point I am trying to make is that no one can predict how any particular economy, let alone the rather wiggly construct of a “global economy,” will roll out over the next few years. So how can you and I personally manage the risk that the economy is headed towards a net worth-destroying outcome? After all, if we can’t get a handle on that risk, we can’t get a handle on our fear.
Some thoughts.
First, recognize that if you actually knew how things were going to unwind, you would be entirely justified in betting the house (literally) on the investments that would do well in the environment you expect. But given that none of us can really know how things are going to turn out, that sort of certainty will almost always cause you to end up being not just a loser but a bankrupt one.
Sad to say, a number of dear readers regularly tell us that they are “all in” on precious metals in expectation of elevated levels of inflation. If that sounds like you, then good luck… but given the vagaries of the future, you should give serious consideration to dialing back your allocation to something less than a “do or die level.”
Accepting that the future is immune to accurate prediction, what approaches can you take to avoid a life-changing wipeout?
- Diversify assets internationally. This diversification has to take a number of forms to be effective. For instance, the assets you invest internationally have to be denominated in a variety of different local currencies. And the assets should include gold, as that is the soundest form of money. Equity investors should also look to build a portfolio of common stocks of financially strong and profitable companies in foreign markets that are deeply undervalued. Even if you thought the US market were going to do well in 2012, you would need to approach the matter from the perspective that there are much cheaper markets elsewhere. For example, while the US stock markets were flat in 2011, the Brazilian market fell close to 20%. I would contend that when it comes time to go equity shopping, shopping for high-quality issues in the Brazilian bargain basement makes a whole lot more sense than sticking entirely to overpriced US issues. (On this general topic, gold stocks are now looking very undervalued, something addressed in the just-released Casey International Speculator (risk-free subscription details here). To put that contention in perspective, while gold bullion was up about 9% in 2011, the Toronto Venture Exchange index, which is dominated by junior resource stocks, was off 35%.) Sadly, it is a well-documented fact that most investors pour their money into stocks and markets only after they have had their big run-up, versus taking the run-up as a signal that the market is more likely to be overvalued and therefore it’s time to think about selling. Regardless, while the US government has been creating de facto price controls by implementing regulations that make few foreign institutions want to do business with Americans, there are entirely legal and prudent ways to open foreign bank and brokerage accounts and relationships with financially sound precious metals storage businesses.
- Understand the true nature of risk, and operate your investment portfolio accordingly. If you ask the average investor to explain the meaning of risk as it applies to investing, the vast majority will get it wrong. They might, for example, say risk means that a particular market or markets could crash, or that this gold stock or another is risky because it could go down. Risk in terms of an investment, however, has to do with the probability that you will be forced to sell your investment at a loss. There are two facets to that concept. 1) Your personal balance sheet is in tatters. If you owe more than you own, or your outgoing exceeds your incoming, then the odds are pretty high you might be forced by circumstances to scramble for liquidity during a downturn in the market or the economy. Conversely, if your incoming exceeds your outgoing, and you have liquid assets tucked safely away in sufficient quantities to meet your reasonable needs for a year or more, then the odds of you being forced to liquidate at the wrong time – and therefore take a real loss, versus a paper loss (a misnomer) – are very low. A good way to think about this is to think in terms of your home. If you plan on living in your home for an extended period of time and can easily handle the mortgage and attendant costs, then whether the housing market sinks or soars is largely of no consequence. Likewise, if you own good assets and have no foreseeable need for the money tied up in those assets, the price action of the markets those assets trade on will, in most cases, be irrelevant. 2) You don’t overpay for your investments. In the paragraph just above, I used the term “good assets.” So, what makes a good asset when it comes to an investment portfolio? Generally speaking, it is an asset with strong fundamentals that has some specific role to play in meeting a particular investment goal. Sometimes that goal will be to contribute to portfolio appreciation, sometimes it will be to generate yield, and sometimes it will be as insurance to protect against currency debasement. Regardless, there are no conceivable goals to be met by an overvalued asset. Put another way, overpaying for an investment is the quickest way to add risk to your portfolio. That’s because while an undervalued investment may get even more undervalued over some period of time, the inherent value in the asset ensures that it will return to fair value at some point in the foreseeable future. By contrast, the best an overvalued asset can do is to fall to its fair market value. More likely, given the nature of markets, it will almost certainly fall even further than that. Thus, paying too much for any asset you buy is essentially buying investment risk. Know what you own and why you want to own it… never chase a stock or a market after it has already had a big run-up (unless you know of an external reason why it almost certainly must go higher)… and even when you find a fair value, be patient in buying it (either with a stink bid or through buying it in a series of purchases to take advantage of dollar cost averaging).
Owning good assets, internationally diversified, will go a long way to reducing your fears over both the actions of your government and the uncertainties of the economy. While it may not be as easy as parking your money in CDs down at the local bank, it’s not brain surgery either.
As I am, as usual, running late and long, let me try to wrap this up.
It is ingrained in all of our nature to worry about things. Objectively, there is no question that the US and many of the world’s largest economies have been misdirected by all-powerful governments into a state of heightened risk. Thus, we are correct to fear what’s coming.
But it is very difficult, and entirely counterproductive to a high quality of life, to mentally stay in crisis mode over a prolonged period of time. In other words, it’s not healthy or helpful to spend hours each day fretting over the future.
In these musings, I have tried to make what I believe are some commonsense suggestions for breaking the cycle of fear, at least as it relates to the big issues of governments that are increasingly willing to trample individual rights, and to the consequences of historic levels of sovereign debt that make the dead hand of the state on the economy especially heavy just now. As things are likely to get worse on both fronts before they get better, caution and taking active measures to mitigate the risks are certainly warranted.
But once you take those steps, then do yourself a favor and step away from the electronics and get on with whatever gives you the greatest pleasure in this life.
In the final analysis, no one gets out of here alive, and that makes time your most valuable asset – don’t squander it by spending even a minute longer than necessary in fruitless worrying.
And now I must move along. Because I’m running so late, I’m going to skip Friday Funnies this week in order to ensure I have time to share a quick review of some items that came to my attention over the holidays that I think you might enjoy.
Entertainment and Apps
Never being particularly good at coping with excessive amounts of free time of the sorts normally accompanying year-end holidays, this year I did some casting about for diversions and found a couple I thought you might also find diverting, and maybe useful, in the new year.
Cool iPhone Apps. There were two free iPhone apps that tested out over the holidays that I thought you might also find pretty cool.
Dragon Go! I haven’t yet experienced the Siri feature that is built into the latest iPhones, as I have the previous-generation phone sans Siri, but my understanding is that the Dragon Go! app provides much the same, and maybe better, functionality. The app allows you to push a button and say what you want to know, or find, on the Internet – and in the proverbial blink of an eye, a page comes up with tabs for various website pages containing the information you are looking for. For example, if you say, “Chinese restaurant near here,” Dragon Go! might assemble a page with tabs for OpenTable, Trip Advisor, Maps, and Google… all of which would have used your phone’s location to hone in with the names of local Chinese restaurants, complete with ratings, reviews, contact information and the quickest routes to get there.
But it’s much more robust than that – and so far I have been hard pressed to stump the chump – despite periodically (and, admittedly, annoyingly) whipping my phone out in the middle of conversations throughout the holidays to ask it to produce arcane bits of information to settle a question or point of contention.
Why, I bet I could ask it, “What’s better, Siri or Dragon Go!” and get a prompt answer. So I will. (The answer, according to PCMag Mobile, is Dragon Go! If I wanted to watch a YouTube review, there were dozens of those, too.)
Not so long ago, I did a write-up of the Singularity conference presentation by the folks who designed the Watson computer that unseated a human Jeopardy champion. While that computer and programming are clearly a lot more sophisticated than Dragon Go!, it’s worth noting that it takes up a space the size of a cargo container and requires massive power inputs whereas Dragon Go! requires an undetectably small corner of your iPhone’s memory.
Though it won’t give you a single answer to your request and takes a few seconds longer than Watson might, the end result is that it is remarkably effective at getting you the information you are looking for in just seconds. Not only is it a great tool for quickly finding the answers to just about anything, it’s great party trick – although you might wear out your welcome at said party if you pull it out every couple of minutes to settle some discussion point.
Google Translate. Google Translate, which is also free, is just as much of a game changer. Those of you familiar with the books and TV series The Hitchhiker’s Guide to the Galaxy will remember the Babel fish, a small fish you can stick in your ear that automatically translates spoken foreign languages into your own. While you wouldn’t want to try to cram an iPhone with the Google Translate app on it into your ear, the functionality is much the same. Specifically, you speak any phrase you want, and it is immediately translated into text in any one of 60 languages, on many of which you can also then play back the audio. Thus, when you are lost in transition somewhere, you can talk your question into your phone and either show the resulting translation to a helpful local or even play it back. Of course, not all the translations will be perfect, though that they have come this far, this fast makes it a certainty it will only get better. But it sure beats waving your arms around and speaking louder in the hopes of being understood.
Damages. Changing mediums to entertainment, I will mention that while we caught a couple of decent movies over the holidays, none were particularly noteworthy. But we did stumble across a television series – Damages – running on the FX cable channel that very much was. The series is available as a Netflix instant download (we don’t have cable), and after watching the first episode of Season One, we were utterly hooked. The series is about a high-powered, high-stakes lawyer played by Glenn Close who, if memory serves, won an Academy Award for her performance in (wait a second… “Academy Award winner Glenn Close” I say. The World According to Garp, Dragon Go! helpfully answers). The show is designed so that each season is a single story, told episodically. And the story, much to our surprise given normal television fare, is very complex and intriguing. Once you start watching, it is very hard to stop.
Hope you find those diversions of interest.
David Galland is the managing editor of Casey Research.
