Tuesday, August 09, 2011


Criminals rioting in London and other cities, financial markets tumbling. Are we as a species bonkers?

The riots followed a police shooting in North London. After a brief peaceful protest the looters and firebrands moved in and have burnt and destroyed shops and buildings in many boroughs. It has gone on for three nights. All day today, I could see smoke rising from a fire somewhere away to the north of my office in Waterloo, possibly the giant Sony distribution centre burnt to the ground in Enfield. Does a youth in a mask who smashes in a shop window to steal the electricals inside do it to make a political point? Or those who torched a bus or buildings with people inside? Are these the same kids who complain about the lack of opportunities and jobs in their neighbourhoods?

As for the markets, the far east goes down because the Dow Jones goes down and the FTSE follows the far east and then the US markets follow the trend. This has been going on for over a week. The rerating of US National debt from AAA to AA+ by Standard & Poors contributed to the "fear" (not my word, the Guardian newspaper). But the rerating followed the trend, it did not make it. If the people selling could not work out for themselves that the huge US debt made it less likely to meet its obligations (and I use my words very carefully here, the word "less" does not mean the same as "unlikely") and had to wait for a credit agency to do it for them, then they should not be investing. Using an agency to get a snapshot about corporate health is one thing, using it to make an essentially political judgement is another. Fear doesn't come into it. We are dealing with stupidity. The debt problems have been there for a long while. Either you think the major economies will continue or you don't. If you don't then why hold any investments?

This morning the FTSE fell 3% then it went up to close 2% higher on the day. Absolutely ridiculous. These sort of swings exhibit the same crowd mentality that makes kids think it cool to burn and loot - because everyone else is doing it.

So the answer to my question is, I am sorry to say, yes. There is a fundamental stupidity built into the human psyche. We are terrified of making independent decisions or acting rationally. We protest about poor opportunities by taking actions that will further reduce what opportunities there are. We value our economies according to the rules of a gaming-house. And here in the UK where maybe some careful investment might have improved conditions in the poorer London boroughs and helped strengthen our economy, we waste billions on the farce of the Olympic Games. I was against the bid to stage the Olympics and when I think what might have been done with the money I could almost weep with frustration.

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