Monday, 13 October 2008

Synchronicity, investor psychology and history in the making.

In a strange synchronicitous event on former British Prime Minister Margaret Thatcher’s 83rd birthday, we are seeing her 1983 reforms of the UK money markets dramatically reversed. What would Carl Jung have to say about that? Well as he’s no longer with us, I’d like to have my say first.

The current facts: the ongoing collapse of free market capitalism is today resulting in a move towards nationalisation of many major financial institutions, with governments the world over considering major international reforms of the global banking system. In Britain this has amounted to nothing less than a socialist coup, that is the unelected take over of financial boardroom strategy of 3 major banks by a Labour government, without any need for re-election or opposition from parliament. These are the most far reaching reforms of our economy since Thatcher’s deregulation of financial markets in 1983, and prior to that the nationalisations of the 1940’s. The UK taxpayer now owns large parts of these banks and their elected representatives (treasury staff) now have a say in how these assets are managed.

Some of the reforms made include bank CEO’s bonuses no longer being awarded in cash, but bank shares, thus encouraging a long term view when making decisions on lending and borrowing, as they stand to win or lose on the basis of their own decisions. The banks’ declared ‘loss of confidence’ (returning to this below) will not be able to hold the taxpayer to ransom either ( as I feared it might), because the government shares in these banks are large enough to ensure control of boardroom decision making and thus, the freeing of money for lending to small businesses and homebuyers, at reasonable rates.

However, there have been some objections to what’s happened from the public, such as ‘but they're spending our money, tax payer’s money, to bail out banks’. Hmmm. But the city spivs were running off with huge amounts of our money anyway, money they were earning through risky investments of our savings in volatile markets, causing spiralling debt and a property boom that ensured we spend a greater proportion our income on housing than any other country in the developed world. Effectively we UK mortgage holders were paying rents for our homes to banks (the real homeowners) who were investing the profit in further property development (through, for example, selling high interest ‘buy to let’ mortgages offered to increasingly greedy landlords) which fuelled a house price boom that excluded many working people in Britain from the stability of having their own home. Instead many have been forced to pay high rents to ‘buy to let’ property tycoons for substandard housing. Meanwhile, bank CEOs, mortgage brokers, bank share holders, property developers and such like, coined in huge profits generated by their risky investments of our money… leading to the crisis we have seen in the past few weeks. The ‘loss of confidence’ that led to the drying up of funds and frozen liquidity was caused by fear amongst financiers of each others greed. In psychoanalytic terms, this economic collapse has been driven at bottom by paranoid schizoid greed and envy.

The ultimate fear was that continued lending might fail to bring in the big bucks that had been previously lining the pockets of city spivs at the ordinary working person’s great expense. So they stopped lending. Today we are seeing the return of managed markets, restored confidence, as the government intervenes to contain the paranoid schizoid confidence crisis. This demonstrates how ethereal high finance really is, and how driven our economies are human emotions such as paranoia, fear, enthusiasm, greed and envy. As our financial institutions have increased in size to embrace a deregulated global free market, their default position during uncertain times has been driven by increasingly primitive processes, which is how large groups tend to operate in a crisis. Today we see the resuscitation of nationalisation as the only workable strategy of containment.

Happy birthday Maggie.



  1. Hi Jo. You and/or others may be interested in a website on the crisis recently set on by some (libertarian-marxist/Bion readers) friends. It's a collection of material they've found in a whole range of places.

    Check out the video with the beautiful song by Cat Powers, "We can all be free" under "Jump" at the bottom left.

    What interesting times we are in!

    For a world without money,

  2. Interesting psychoanalytic article on this topic in the IJPA:

    (2008). International Journal of Psycho-Analysis, 89:389-412

    Phantastic Objects and the Financial Market's Sense of Reality: A Psychoanalytic Contribution to the Understanding of Stock Market Instability

    David Tuckett and Richard Taffler

    "This paper sets out to explore if standard psychoanalytic thinking based on clinical experience can illuminate instability in financial markets and its widespread human consequences. Buying, holding or selling financial assets in conditions of inherent uncertainty and ambiguity, it is argued, necessarily implies an ambivalent emotional and phantasy relationship to them. Based on the evidence of historical accounts, supplemented by some interviewing, the authors suggest a psychoanalytic approach focusing on unconscious phantasy relationships, states of mind, and unconscious group functioning can explain some outstanding questions about financial bubbles which cannot be explained with mainstream economic theories. The authors also suggest some institutional features of financial markets which may ordinarily increase or decrease the likelihood that financial decisions result from splitting off those thoughts which give rise to painful emotions. Splitting would increase the future risk of financial instability and in this respect the theory with which economic agents in such markets approach their work is important. An interdisciplinary theory recognizing and making possible the integration of emotional experience may be more useful to economic agents than the present mainstream theories which contrast rational and irrational decision-making and model them as making consistent decisions on the basis of reasoning alone."