Saturday, November 1, 2008

We Want Change

When Obama supporters shout 'We Want Change' they seem to be, at least on a subconscious level, actualizing what they feel is already happening about them. They tend to sense the presence of a strong undercurrent of ‘Change’. Change with an upper case 'C' represents a paradigm shift; a global power structure rearrangement. In a recent WSJ opinion piece, titled Obama And The Politics Of Crowds, Fouad Ajami discusses Obama's mastery of crowd politics. He argues that Obama, like all revolutionaries before him, is using the crowds, building up their hope, ultimately to disappoint them.

I spent years of my life studying the behavior of aggregate media. An aggregate medium is a large mass made up of a very large number of particles. Various types of aggregate media share similar dynamics. This is generally true, whether we are talking about a fluid medium, such as a large body of water, or a public medium, such as a large society or a nation. Masses, as such, are usually found in one of two states. The first state (scientifically called the ‘steady state’) is a state with a strong and discernible current or flow. In such a state, the current is too powerful for any one (or a few) human actor (actors) to alter. Thus it is hard for charismatic leaders to truly shine when the medium is in such a state.

The second state is a state of turbulence. The currents may be strong, yet the aggregate overall is directionless. This type of state is inherently unstable. The longer it lasts the more chaotic it gets. Such a state eventually results in the ushering in of a charismatic leader. In addition to being in command of crowd dynamics, this leader has to be well in tune with the most dominant of the prevailing undercurrents. The leader then acts as a crystallizing catalyst who helps the alignment of particulate direction. The charismatic leader ultimately helps the return to a steady state as chaos subsides. Observers tend to attribute the state change to the abilities and extreme skill of the charismatic leader. The truth, however, is that in a large pool of talents there is almost always such a leader. Unstable dynamic systems, almost invariably, ultimately reach a steady state stable configuration. The charismatic leader is more like a skilled surfer. When the right wave arrives there is usually a talented surfer around to ride it.

Socially, economically and demographically the world lives in a state of unclear direction. The currents have been building underneath the surface for a long time (see Greenspan's book The Age of Turbulence). It took the recent economical and financial crisis, however, to bring it all to the surface. Mohamed El-Erian, in his book When Markets Collide, analyzed certain of these currents and their impact on the field of investing.

As an example let us briefly examine one such undercurrent, namely the public view regarding the economic direction of America. It seems, at least on the face of it, that Obama supports a socialistic redistributive economy. McCain, on the other hand, seems to advocate the continuation of a regulation-free laissez-faire capitalist economy. The truth is: this is just a hoax. The country is already undergoing the most socialistic wealth redistribution since its inception. The amount of money randomly distributed by the US government in the last year is mind boggling. The sums of money involved in the current economic bailout by the Treasury Department, combined with the unrestrained liquidity offered by the Fed to curb or mitigate the failure of banks and other financial institutions (Bear Stearns, AIG, Fannie Mae, Freddie Mac, Lehman Brothers, WaMu, Wachovia, …), add up to trillions of dollars. By the time the current financial crisis is over, the government would have randomly injected more than $3 trillion into the system. This is in excess of the total IRS collection for the year 2006 of $2.5 trillion. Stated differently, the current government is effectively doubling the tax burden on every American taxpayer. This is happening without the taxpayer’s awareness, since it is done through money supply inflation. Taxpayers still think we live in a free market; and fear Sweden style socialism. When the citizens expect the government to bail them out, they have already voted for socialism. Even more foreboding, when the citizens act irresponsibly for years, turning their economy into a third order one, a form of socialism is almost a foregone conclusion.

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