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Socionomics and Deflation: Are We Set Up for the Perfect Storm?
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SOCIONOMICS AND DEFLATIONSocionomics and Deflation in the Greater Depression By Delwyn Lounsbury - THE DEFLATION GURU Robert Prechter has written extensively about socionomics and deflation. As President of Elliott Wave International, he wrote about a new study - socionomics a melding of sociology and economics. His first socionomics book, "The Wave Principle of Human Social Behavior and the New Science of Socionomics" was published in 1999. In the book he predicted a negative social mood change era evidenced by fear, xenophobia, pessimism, conservatism, thrift, savings and a general retrenchment. It is a waning instead of a waxing. He is also on record saying the GREATER DEPRESSION started in 2000 with the dot com bust and may last into 2016 with a 90% drop in most assets and 35% plus unemployment rate and finally that world war three started 09/11/2001. Xenophobia is the fear and loathing of strangers. Xenophobic trends increase as economies regress into deflation and people’s attitude turns sour. In a deflation economy, people in general become afraid and therefore hateful of strangers. The mood of the total populace wanes and pessimism begins to rule the day. It is starting to gain momentum In addition to xenophobia, during a waning mood swing society does not start new businesses, loan money or invest. The retrenchment we are having is textbook Robert Prechter Socionomics. According to him, socionomics is a marriage of sociology and economics that sees societal mood swings from positive to negative and back again as the driving force behind booms and a deflation economy. Also, the likelihood of war increases in the down-swings like we are having now. Man is a herd animal so he can't help following the herd. Not the way to invest, by the way. Buying more as prices go up and buying "hand over fist” at price peaks. Socionomics has to do with the change in the mood and minds of man from positive to negative. Man is a herd animal. So, he would get thrown out of the cave by the clan if he didn't get along. In THE WAVE PRINCIPLE OF HUMAN SOCIAL BEHAVIOR (see pp.342-343) it describes how the focal point of financial theory changes from exogenous (rising oil prices, turmoil the middle east, climate change to the earthquake/tsunami in Japan) to endogenous causes as the economy and asset markets move from bull to bear. An article from the March 21, 2011 Washington Examiner says the percentage of Americans worried about global warming fell 15% since 2008. "In 2008, there was a gaping 50-point spread between those who believed global warming had already started to occur (61%) versus those who didn't think it would ever happen during their lifetime (11%). By 2011, the gap had narrowed to 31%." You will see global warming disappear as an issue in the next bout of deflation, as gluts for everything but cash happen. People will have more pressing things to worry about other the WEATHER. Like SURVIVAL! Prechter also wrote the books: The ELLIOTT WAVE PRINCIPLE (1978), was written by Robert Prechter and A. J. Frost, C.F.A., about Ralph Nelson Elliott’s discovery in the 1930s that prices trend up and then reverse in recognizable patterns. Robert Precther's other books CREST OF THE TIDAL WAVE (1995) and CONQUER THE CRASH (2002) are both about deflation and the coming GREATER DEPRESSION. All three books discuss socionomics. Prechter says fundamentalist logic always makes sense and feels right even though it is wrong (people follow the herd and buy at tops and sell at bottoms). Socionomic thinking feels wrong even though it is right (the theory of contrary thinking has never been disproved). Prechter says markets and indeed all nature is governed by the golden ratio or golden number (phi) .618. Prechter reports that the basis of this theory is in the study of Fibonacci numbers and fractal relationships. He has found evidence throughout nature - even down to subatomic particles that validates his discovery. Remarkably, he has found investment markets follow Elliott Wave, socionomics, Fibonacci(one number added to the previous number 1,1,2,3,5,8,13,21,34,55-and so on), and fractals in predictable patterns that can be used to make investment decisions. FRACTICALITY, FIVENESS AND FIBONACCI When analysts talk about the .618 retracement level they are referring to Elliott Wave and Fibonacci number ratio studies and points where markets often make a turn. Important Elliott Wave Fibonacci turning points are .382 - .50 - .618(phi also known as the golden number, golden mean or golden sextant ruling all) - 1.382 - 1.50 - 1.682. Not enough attribution is given to this important number although awareness is growing in the investment and financial world. The socionomics book is an explanation of Elliott Wave Principle of (5 waves impulsive then 3 waves retracing) relating to Prechter's marriage of sociology and economics. Robert Prechter has found many instances of Fibonacci, and fractals in nature and in human relationships along with Elliott Wave Principle including: 1. Most anything that can have statistics gathered and then charted will show 5 waves with a 3 wave reaction. 2. Spirals in seeds, hurricanes, sheep horns, snail shells if you do the math are Fibonacci numbers. 3. Branches in trees, arteries, brain, lung, nervous system and vein construction. Phi apparently allows more efficiency and robustness. 4. Stock, bond & commodity markets in short and long time frames Since man is a (herd) animal and the stock market is a compilation of the work and industry of a mankind in total, the charts of these financial instruments show Elliott Wave Principles, fractals and Fibonacci in looking back and predicting future (retracement levels). 5. 5 pointed star or a spot on a line all the math is Fibonacci related. 6. Social man - self organizing progress ruled by Fibonacci mathematics because it allows the greatest efficiency and robustness. Precter has tracked use of words such as deflation and found they fit the 5 wave impulse and 3 wave retracement Elliott parameters and turn at Fibonacci ratio points. 7. Arboration. Not just the branching angles larger to smaller as one travels out from the plants base, but how stems and leaves both rotate around the base and spread to optimize the sunlight they receive. All are Fibonacci number based ratios. 8. Fractals - think broccoli - each small spear is a mirror image of the large bunch. Think tree - branch is image of whole. Think coastline - edge of tide pool looks same as if looking down from airplane. 9. Evidence clear down to subatomic particle behavior. Particles bouncing off walls of container look like coiled ferns which if you do the math are related to Fibonacci. 10. The limbic system in the brain relates to emotional feelings and guides behavior required for self-preservation and the preservation of the species. If early man did not get along with the clan he was thrown out of the cave to freeze to death or was stoned to death. Likewise, if he did not run with and follow his clan he was likely to get eaten by wild animals or get left behind and starve to death. So, now mankind invests the same way. Buying more and more as prices rise (evidence is the recent real estate top). Socionomics says following the herd is not the way to invest. Like the lemmings (little rat-like rodents) all following each other to death over the cliff and into the sea to drown in a mass suicide. It is not the way for you to survive either. When the big cycle goes into reverse there is no stopping the pendulum and no amount of government money thrown at the problem will get it to swing the other way before it is ready too. The excess waste, credit, government, rules and regulation - all the darned excesses - will come back down to reality. "Those who can not remember the past are condemned to repeat it." George Santayana We have only known inflation in our lives. We are in denial that deflation and depression can happen. Stocks are sliding down a slope of hope. People are worried and their mood is getting ugly. That is what socionomics is all about. Socionomics describes the waxing (positive-optimistic) and waning (negative-pessimistic) of people’s mood and how they act en mass. No matter how many trillions of dollars the government throws at the problem, they would be better off reducing taxes and letting business create the new jobs. The free market system is best. Better to be a contrarian investor now than to lose it all in the coming GREATER DEPRESSION and then be afraid to invest at the bottom in 2016 to 2018. There are new ways to invest to short stocks that for each one dollar invested you could get back many more. With the new short stocks ETFs (exchange traded funds), as well as actual short the market mutual funds like BEARX or the URSA fund you never get a margin call or run out of time on any of these since they trade like stocks. But, you have to get in on these early and here in 2011 we are halfway into the greater secular bear market in a bear market rally. Many of the short-the-market ETFs are property of Proshares or Ishares. Google short ETF. Contact your broker. Cash Is King in deflation! Prechter sees equities, antiques, many commodities and real estate loosing 90%, junk bonds going to zero and a strong dollar. He even says gold may drop in half. In addition, Prechter says the unemployment rate will be over 30%. When? - Probably in 2016-2018. You can learn more about socionomics and deflation by joining Club EWI free at links on this site. Hurry the CRASH IS COMING. Copyright 2011 – by Delwyn Lounsbury - THE DEFLATION GURU Use of this article allowed with attribution back to: http://www.deflationeconomy.com
SOCIONOMICS AND DEFLATIONThe following is from Club EWI (Elliott Wave International) mid year 2010. A Third of a third wave down is anticipated The decade-long collapse in real values for stocks as well as the credit implosion, economic contraction, terrorism and war of the past decade are consistent with our Elliott wave case that in 1999-2000 the direction of social mood changed from positive to negative at Grand Supercycle degree. We were pretty much bearish throughout the worst decade ever for the S&P. Reports talk only about the S&P’s poor performance in nominal terms, but in real terms it was the worst decade for stocks since at least the 1720s as the Dow plunged 83% in terms of real money (gold). But this is not the end of the story. The fact that investors are still giddy — which is an apt word for today’s readings on sentiment indicators — is consistent with our Elliott wave case that the bear market has barely begun. The year 2010 should get people to understand what we have been saying throughout this time: (1) the peak in 2000 was not just the end of a Primary-degree bull market but the peak of a Grand-Supercycle-degree wave that lasted over 200 years, and (2) the current bear market will prove to be the deepest and longest since the 1700s. … A “Prechter Point” of Cycle Degree Should Occur This Year The very center of the wave structure — the most volatile point in an impulse — should occur in 2010 when the market reaches wave iii of (iii) of 8 of 3 of (3) of 3. In a bull market, this point in the wave structure marks the time at which investors in the aggregate stop worrying about downside risk and begin projecting ever-higher levels (for example, by writing books about stocks for the long run and Dow 100,000). In a declining impulse wave, such as the market is in now, the same point marks the time at which investors in the aggregate stop focusing on the market’s upside potential and start worrying about how far down it will go. This is a very rare event at Cycle degree, and its upcoming occurrence will be stunning enough to set records for financial panic. I used to call this spot in the wave structure the “point of recognition,” but the Elliott wave model and socionomic theory make clear that investors in the aggregate never consciously recognize anything. It is more accurately described as the point of change in net social mood and directional rationalization. That’s a mouthful, so I’m just adopting a vanity short-cut and calling it the “Prechter point.” Here is how it comes about: From the start of a bull market, investors become increasingly less pessimistic and therefore act to make stock prices go higher. The center of the wave is when optimism becomes the dominant expression of social mood. From the start of a bear market, investors become increasingly less optimistic and therefore act to make stock prices go lower. The center of the wave is when pessimism becomes the dominant expression of social mood. Thus, as prices rise in a bull market, most investors still worry about downside price potential until the “third of the third” wave occurs, after which they focus on — and rationalize — upside price potential. Conversely, as prices fall in a bear market, most investors focus on upside price potential until the “third of the third” wave occurs, after which they focus on — and rationalize — downside price potential. Much academic literature equates such biases with levels of concern about “risk,” but investors in the aggregate never evaluate risk and never consciously take risk. Unconscious herding makes investors feel that they are taking non-risky actions, and rationalization comforts them with assurance that whatever action they take is the sensible thing to do…. As wave 3 of c passes its midpoint, expect very bad news to be rampant. Remember how you felt on 9/11? Remember how you felt in October 2008? Those were the centers of wave a and wave 1, respectively. The center of wave c will be scarier than they were. ----------------------------------------------------------------- Be Prepared Instead of Scared -- Start reading EWI's financial forecasts now to give you an all-around sense of where the markets are headed in both the short term and the long term. It's always better to have more knowledge when coping with your finances and the caprices of the markets. Learn more about EWI's Financial Forecast Service here by getting a FREE 90 page DOWNLOAD, What Is Deflation eBook. ----------------------------------------------------------------- SOCIONOMICS AND DEFLATIONThe Following is Review is Courtesy and Copyright 2010 The Socionomics Institute by Alan Hall - www.socionomics.net(all rights reserved) WikiLeaks: Authoritarianism Update WikiLeaks Takes Center Stage; Government Reactions Intensify Originally published in the August 2010 Socionomist In his two-part April and May study published in The Socionomist, Alan Hall predicted that: ·A continuing long-term trend toward negative social mood will cause society to become increasing fearful. This movement will lead to polarized views toward authoritarianism. ·Increases in surveillance and other authoritarian activities will lead to escalating anti-authoritarian actions. ·Anti-authoritarian activity will in turn generate legislation and other actions to curb freedoms. ·Whistleblower websites like WikiLeaks will increasingly illustrate that an unfettered Internet undermines governments’ ability to control information. The days of such unrestricted sites on the Web are numbered. ·Paranoid governments will seek the authority to shut down large blocks of the Internet, citing security concerns. Hall’s forecasts are playing out in rapid fashion. WikiLeaks Becomes the Hotspot In early July, WikiLeaks released 91,000 secret documents related to the war in Afghanistan. It was the largest intelligence leak in U.S. history. The White House at first downplayed the revelations as well-known problems. The media did as well: Unlike the explosive Pentagon Papers published in The New York Times during the Vietnam War in 1971, the files don’t show top U.S. officials misleading the public about the war’s course. But the dismissive attitude changed rapidly. On July 25, WikiLeaks’ founder, Julian Assange, claimed he had evidence of possible war crimes. On July 27, he started a war of words: He scoffed when the Frontline’s moderator spoke of British soldiers “giving their lives” in Afghanistan. “To what?” he asked. Just two days later on July 29, the U.S. government suddenly went from soft on WikiLeaks to very pointed: U.S. Defense Secretary Robert Gates and Joint Chiefs of Staff Chairman Admiral Mike Mullen strongly condemned WikiLeaks … . Gates said the [early July] leak was “potentially severe and dangerous for our troops, our allies and our Afghan partners … .” Mullen was even more direct and said that WikiLeaks “might already have on their hands the blood of some young soldier.” A former CIA director followed up by describing the leaked documents as “priceless” to America’s enemies. On August 3 the Washington Post joined the chorus, calling in an editorial for the U.S. government to break international law if necessary to stop WikiLeaks. The government should “contravene customary international law” and use “intelligence and military assets to bring Assange to justice and put his criminal syndicate out of business,” it said. On August 3, just nine days after the White House dismissed the revelations as old news, a U.S. Congressman said that U.S. Army intelligence analyst Private Bradley Manning, the alleged source of the leaks, should be executed for treason.
Rising Polarization WikiLeaks’ quick rise to firebrand status is but one fulfillment of our forecast for increasing conflict over authoritarianism. In the three short months since Hall’s study, the Washington Post published its “Top Secret America” investigation, a two-year project that describes the immense post-9/11 national security buildup in the United States as “a hidden world, growing beyond control.” Even more significant is the “Protecting Cyberspace as a National Asset Act of 2010,” introduced by U.S. Senator Joe Lieberman on June 10. The law would empower the president to “shut down the Internet, disconnect its networks, and force web sites, blogs, providers, search engines and software companies to ‘immediately comply with any emergency measure or action.’” The Baltimore Chronicle describes the proposed law as a “kill switch for the Internet.” Meanwhile, a number of other nations continue to negotiate the sweeping Anti-Counterfeiting Trade Agreement (ACTA), which the European Commission says would establish international agreement on enforcement of intellectual property rights but which anti-authoritarians claim will curb freedoms. An international panel convened in June by the American University Washington College of Law said the ACTA has: … grave consequences for the global economy … . [It would] curtail enjoyment of fundamental rights and liberties, … encourage internet service providers to police the activities of internet users, ... [and] encourage this surveillance, and the potential for punitive disconnections by private actors, without adequate court oversight or due process. Negative social mood is eroding fundamental rights in the European Union (EU). Member states have varying standards of civil liberty. The Union allows each country to use a “no-evidence-needed” European Arrest Warrant to require any other member state to arrest, detain and extradite criminal suspects—even if those suspects have committed nothing deemed a crime by the extraditing state. The number of European Arrest Warrant detentions in Britain has risen 43-fold since 2004 … . They can spend long periods in jail – here and abroad – for … offences which are not crimes in Britain. Foreign prosecutors do not have to present evidence to the British courts, just demand the person be “surrendered.” Why This is Happening? In April, Hall explained how such major ideological conflicts can develop rapidly in formerly concordant societies: A society’s authoritarian impulse is rooted in social mood ... A bearish mood can push a society with very low interest in authoritarianism into a significant authoritarian/anti-authoritarian conflict. Hall’s study included a five-step graphic illustrating the process. Figure 12 shows step 3, which depicts where Hall believes the U.S. is situated currently. To see the full graphic from the April issue, click on the figure below. Mood decline accelerates: Polarization increases, as do calls for separation, opposition and destruction of the status quo. Society's sense for what is "normal" loses definition. Figure 12 (go to website) What’s Next? WikiLeaks continues to push its agenda. On July 16, Assange said that the video it posted of a U.S. helicopter killing a dozen civilians in Iraq had inspired “an enormous quantity of whistle-blower disclosures of high caliber … . There are many things which are very explosive.” The founder also threatens to release a video purportedly showing a U.S. massacre of civilians in Afghanistan. CNN reported, “[Assange] said the site’s hope is that such video ‘will change the perception of the people who are paying’ for the war.” Time Running Out?: Wikileaks' hourglass logo may be more appropriate that its advocates realize. The site also posted for download a huge, encrypted file labeled “Insurance.”4 The file appears to be graymail—a thinly veiled threat to reveal state secrets. Should something happen to Assange or the web site, those who have downloaded the file would need only the password, not yet disseminated, to open it. On August 5, the Pentagon demanded that WikiLeaks recall all the leaked Department of Defense documents from the web and return them. Recalling the documents is impossible, as Hall noted in his study. On August 10, the Obama administration asked allies Britain, Germany, Australia and others to crack down on WikiLeaks with criminal charges and severe limitations on Assange’s international travel. On August 12, the Pentagon warned that WikiLeaks’ next posting will be more damaging than the initial release. As the conflict festers, the U.S. is no doubt rethinking its relations with Iceland, whose parliament voted unanimously in June to offer legal protection to whistle-blower sites like WikiLeaks and their employees. One sponsor of the legislation said, “They are trying to make everything opaque. We are trying to make it transparent.” Serious authoritarian/anti-authoritarian conflict is just beginning, Hall reiterates. “As Primary wave 3 accelerates, so will the conflict,” Hall says. “The WikiLeaks saga could end abruptly if the authoritarian impulse to extinguish the site prevails. Regardless, the struggle between secrecy and transparency—and authoritarianism and anti-authoritarianism—will continue to intensify.” Copyright - Socionomics Institue - www.socionomics.com
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