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Authored by Jeffrey Tucker via The American Institute for Economic research,

I was sitting in the green room in a Manhattan television studio on the day that the storm seemed to hit. It was Thursday, March 12, 2020, and I was waiting anxiously for a TV appearance, hoping that the trains wouldn’t shut down before I could leave the city. The trains never did shut but half of everything else did. 

On this day, everyone knew what was coming. There was disease panic in the air, fomented mostly by the media and political figures. A month earlier, the idea of lockdown was unthinkable, but now it seemed like it could happen, at any moment. 

A thin, wise-looking bearded man with Freud-style glasses sat down across from me, having just left the studio. He was there to catch his breath following his interview but he looked deeply troubled. 

“There is fear in the air,” I said, breaking the silence. 

“Madness is all around us. The public is adopting a personality disorder I’ve been treating my whole career.”

“What is it that you do?” I asked. 

“I’m a practicing psychiatrist who specializes in anxiety disorders, paranoid delusions, and irrational fear. I’ve been treating this in individuals as a specialist. It’s hard enough to contain these problems in normal times. What’s happening now is a spread of this serious medical condition to the whole population. It can happen with anything but here we see a primal fear of disease turning into mass panic. It seems almost deliberate. It is tragic. Once this starts, it could take years to repair the psychological damage.”

I sat there a bit stunned, partially because speaking in such apocalyptic terms was new in those days, and because of the certitude of his opinion. Underlying his brief comments were a presumption that there was nothing particularly unusual about this virus. We’ve evolved with them, and learned to treat them with calm and professionalism. What distinguished the current moment, he was suggesting, was not the virus but the unleashing of a kind of public madness. 

I was an early skeptic of the we-are-all-going-to-die narrative. But even I was unsure if he was correct that the real problem was not physical but mental. In those days, even I was cautious about shaking hands and carrying around sanitizer. I learned later, of course, that plenty of medical professionals had been trying to calm people down for weeks, urging the normal functioning of society rather than panic. It took weeks however even for me to realize that he was right: the main threat society faced was a psychological condition. 

I should have immediately turned to a book that captivated me in high school. It is Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay (1841). I liked reading it because, while it highlighted human folly, it also seemed to indicate that we as a civilization are over that period in history. 

It allowed me to laugh at how ridiculous people were in the past, with sudden panics over long hair and beards, jewelry, witches, the devil, prophecies and sorcery, disease and cures, land speculation, tulips, just about anything. In a surprising number of cases he details, disease plays a role, usually as evidence of a malicious force operating in the world. Once fear reaches a certain threshold, normalcy, rationality, morality, and decency fade and are replaced by shocking stupidity and cruelty. 

He writes:

In reading the history of nations, we find that, like individuals, they have their whims and their peculiarities; their seasons of excitement and recklessness, when they care not what they do. We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first. We see one nation suddenly seized, from its highest to its lowest members, with a fierce desire of military glory; another as suddenly becoming crazed upon a religious scruple; and neither of them recovering its senses until it has shed rivers of blood and sowed a harvest of groans and tears, to be reaped by its posterity…. Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.

After 2005 when the Internet developed into a serious repository for human knowledge, and it became accessible via smartphones and near-universal access, I too was tempted by the idea that we would enter into a new age of enlightenment in which mass frenzies would be quickly stopped by dawning wisdom. 

You can see evidence of my naivete with my April 5, 2020 article: With Knowledge Comes Calm, Rationality, and, Possibly, Openness. My thought then was that the evidence of the extremely discriminatory impact of the virus on plus-70 people with underlying conditions would cause a sudden realization that this virus was behaving like a normal virus. We were not all going to die. We would use rationality and reopen. I recall writing that with a sense of confidence that the media would report the new study and the panic would end. 

I was preposterously wrong, along with my four-month-old feeling that all of this stuff would stop on Monday. The psychiatrist I met in New York was correct: the drug of fear had already invaded the public mind. Once there, it takes a very long time to recover. This is made far worse by politics, which has only fed the beast of fear. This is the most politicized disease in history, and doing so has done nothing to help manage it and much to make it all vastly worse. 

We’ve learned throughout this ordeal that despite our technology, our knowledge, our history of building prosperity and peace, we are no smarter than our ancestors and, by some measures, not as smart as our parents and grandparents. The experience with COVID has caused a mass reversion to the superstitions and panics that sporadically defined the human experience of ages past. 

Eventually, people have and do come to their senses, but it is as Mackay said: people “go mad in herds, while they only recover their senses slowly, and one by one.”

The Trump administration has denied a request by Minnesota Governor Tim Walz (D) for $16 million in federal aid to help rebuild widespread damage in Minneapolis caused by rioters protesting the death of George Floyd.

Late Friday, Walz spokesman Teddy Tschann confirmed that the July 2 federal aid request to the Federal Emergency Management Agency (FEMA) was denied.

“The Governor is disappointed that the federal government declined his request for financial support,” said Tschann in a statement. “As we navigate one of the most difficult periods in our state’s history, we look for support from our federal government to help us through.”

Over 1,500 buildings were damaged by fires, looting and vandalism following Floyd’s death on May 25 while in police custody. According to Walz, over $500 million in damages ensued.

Many small businesses and grocery stores, pharmacies and post offices were damaged during the unrest. In his letter to FEMA, Walz said what happened in the Twin Cities after Floyd’s death was the second most destructive incident of civil unrest in U.S. history, after the 1992 riots in Los Angeles.

The Walz administration conducted a preliminary damage assessment that found nearly $16 million of eligible damages related to fires. The federal funds would have been used to reimburse local governments for repairs and debris removal. –Star Tribune

On Thursday, Republican Rep. Tim Emmer (MN) sent a letter to President Trump asking for a “thorough and concurrent review” of how state officials handled the civil unrest so that “every governor, mayor and local official can learn from our experiences.”

“If the federal government is expected to assist in the clean-up of these unfortunate weeks, it has an obligation to every American — prior to the release of funding — to fully understand the events which allowed for this level of destruction to occur and ensure it never happens again,” wrote Emmer.

“Current damage estimates are now five times their original projections, but the extent of the destruction cannot be calculated solely in dollars and cents,” continues Emmer’s letter. “Thousands of livelihoods have been permanently disrupted, future economic development plans have been derailed as businesses reconsider investing in and around the Twin Cities, and numerous public lifelines for the community have been cut leaving Minnesotans searching for alternative means of care for their families.

“To date there have been no federal analysis of the actions that were – or were not – taken by local and state officials to prevent one of the most destructive episodes of civil unrest in our nation’s history.“

Authored by Jonathan Turley, op-ed via The Hill,

Washington was sent into vapors of shock and disgust with news of the commutation of Roger Stone. Legal analyst Jeffrey Toobin declared it to be “the most corrupt and cronyistic act in all of recent history.” Despite my disagreement with the commutation, that claim is almost quaint. The sordid history of pardons makes it look positively chaste in comparison. Many presidents have found the power of pardons to be an irresistible temptation when it involves family, friends, and political allies.

I have maintained that Stone deserved another trial but not a pardon. As Attorney General William Barr has said, this was a “righteous prosecution” and Stone was correctly convicted and correctly sentenced to 40 months in prison. 

President Trump did not give his confidant a pardon but rather a commutation, so Stone is still a convicted felon. However, Trump should have left this decision to his attorney general. In addition to Stone being a friend and political ally, Trump was implicated in those allegations against Stone. While there was never any evidence linking Trump to the leaking of hacked emails, he has an obvious conflict of interest in the case.

The White House issued a statement that Stone is “a victim of the Russia hoax.” The fact is that Stone is a victim of himself. Years of what he called his “performance art” finally caught up with him when he realized federal prosecutors who were not amused by his antics. Stone defines himself as an “agent provocateur.” He crossed the line when he called witnesses to influence their testimony and gave false answers to investigators.

But criticism of this commutation immediately seemed to be decoupled from any foundation in history or in the Constitution.

Indeed, Toobin also declared, “This is simply not done by American presidents. They do not pardon or commute sentences of people who are close to them or about to go to prison. It just does not happen until this president.”

In reality, the commutation of Stone barely stands out in the old gallery of White House pardons, which are the most consistently and openly abused power in the Constitution. This authority under Article Two is stated in absolute terms, and some presidents have wielded it with absolute abandon.

Thomas Jefferson pardoned Erick Bollman for violations of the Alien and Sedition Act in the hope that he would testify against rival Aaron Burr for treason. Andrew Jackson stopped the execution of George Wilson in favor of a prison sentence, despite the long record Wilson had as a train robber, after powerful friends intervened with Jackson. Wilson surprised everyone by opting to be hanged anyway. However, Wilson could not hold a candle to Ignazio Lupo, one of the most lethal mob hitmen who was needed back in New York during a mafia war. With the bootlegging business hanging in the balance, Warren Harding, who along with his attorney general, Harry Daugherty, was repeatedly accused of selling pardons, decided to pardon Lupo on the condition that he be a “law abiding” free citizen.

Franklin Roosevelt also pardoned political allies, including Conrad Mann, who was a close associate of Kansas City political boss Tom Pendergast. Pendergast made a fortune off illegal alcohol, gambling, and graft, and helped send Harry Truman into office. Truman also misused this power, including pardoning the extremely corrupt George Caldwell, who was a state official who skimmed massive amounts of money off government projects, like a building fund for Louisiana State University.

Richard Nixon was both giver and receiver of controversial pardons. He pardoned Jimmy Hoffa after the Teamsters Union leader had pledged to support his reelection bid. Nixon himself was later pardoned by Gerald Ford, an act many of us view as a mistake. To his credit, Ronald Reagan declined to pardon the Iran Contra affair figures, but his vice president, George Bush, did so after becoming president. Despite his own alleged involvement in that scandal, Bush still pardoned those other Iran Contra figures, such as Defense Secretary Caspar Weinberger.

Bill Clinton committed some of the worst abuses of this power, including pardons for his brother Roger Clinton and his friend and business partner Susan McDougal. He also pardoned the fugitive financier Marc Rich, who evaded justice by fleeing abroad. Entirely unrepentant, Rich was a major Democratic donor, and Clinton had wiped away his convictions for fraud, tax evasion, racketeering, and illegal dealings with Iran.

Unlike many of these cases, there were legitimate questions raised about the Stone case. The biggest issue was that the foreperson of the trial jury was also actually a Democratic activist and an outspoken critic of Trump and his associates who even wrote publicly about the Stone case. Despite multiple opportunities to do so, she never disclosed her prior statements and actions that would have demonstrated such bias. Judge Amy Berman Jackson shrugged off all that, however, and refused to grant Stone a new trial, denying him the most basic protection in our system.

Moreover, I think both the court and the Justice Department were wrong to push for Stone going to prison at this time, because he meets all of the criteria for an inmate at high risk for exposure to the coronavirus. None of that, however, justifies Trump becoming involved in a commutation, when many of the issues could have been addressed in a legal appeal.

There is lots to criticize in this move without pretending it was a pristine power besmirched by a rogue president. Indeed, Trump should have left the decision to a successor or, at a minimum, to the attorney general. But compared to the other presidents, this commutation is not even a distant contender for “the most corrupt and cronyistic act” of clemency.

Russia’s defense ministry (MoD) announced that on Saturday its Su-35 and MiG-31 fighter jets intercepted a US spy plain over the Sea of Japan.

“On 11 July, the Russian airspace surveillance identified an air target over the neutral waters of the Sea of ​​Japan [East Sea], flying in the direction of the state border of the Russian Federation,” the MoD statement said.

“On July 11, the Russian airspace monitoring system over the neutral waters of the Sea of ​​Japan discovered an air target flying towards the state borders of the Russian Federation, and Russian fighters escorted the American reconnaissance plane at a safe distance, and the Russian fighters returned to the airport after the American plane had rotated and moved away from the Russian border,” the statement continued.

The Russian statements identified the American aircraft as an Air Force RC-135 reconnaissance jet.

Over the past two months there’s been dozens of intercept incidents between the rival superpowers, but typically not in this location.

Most close encounters have taken place off Alaska’s coast, as well as over the Black and Baltic Seas, as well as the Mediterranean near Syria.

Last month there was a rare similar intercept incident over the remote Sea of Okhotsk just off the Russian far east.

Russian media detailed of this latest Sea of Japan incident: “Russian fighter jets escorted the reconnaissance aircraft at a safe distance and returned to the home base after the US aircraft flew away from the Russian border.”

The intercepts have been part of a developing tit-for-tat spate of intercepts between the US and Russian militaries over international waters and airspace. 

Authored by Brandon Smith via Birch Gold Group,

During the first wave of pandemic lockdowns, America became a rather surreal place. The initial shock that I witnessed in average people in my area was disturbing. Half the businesses in the region closed and a third of the grocery store shelves were empty. The look in people’s faces was one of bewilderment and fear; their eyes were like saucers, no one was staring into their cell phones as they usually do, and people huddled over their shopping carts like wild dogs protecting a carcass.

Luckily, this tension has subsided, but only because the majority of Americans have been assuming for the past couple months that the pandemic was going to fade away in the summer and that the “reopening” was permanent. Sadly, this is a delusion that is going to bite people in the ass in the next month or two.

In “The Economic Reopening Is A Fake-Out”, published at the end of May, I stated:

“The restrictions will continue in major US population centers while rural areas have mostly opened with much fanfare. The end result of this will be a flood of city dwellers into rural towns looking for relief from more strict lockdown conditions. In about a month, we should expect new viral clusters in places where there was limited transmission. I suggest that before the 4th of July holiday, state governments and the Federal government will be talking about new lockdowns, using the predictable infection spike as an excuse.”

I also noted:

Certainly, it appears that most Americans hate the lockdowns. But will they be fooled by the “reopening” into complacency for the next several weeks while the government gets ready to hit them with the next round of restrictions? Will they be so caught off guard they won’t know how to react? Imagine the economic devastation of just one more nationwide lockdown event? It will be carnage, and a lot of hope within the population will be lost.

In “Pandemic And Economic Collapse: The Next 60 Days”, published in April, I predicted:

The extent of the crisis will become much more clear in the next two months to the majority. The result will be civil unrest in the summer, likely followed by extreme poverty levels in the winter. No measure of “reopening” is going to do much to stop the avalanche that has already been started.

My position at the time, on secondary infection spikes in the summer as well as renewed lockdown restrictions, appears to have proven correct. Currently, daily reported infections in the U.S. are at a record 50,000 per day or more and cases are rising in 40 out of 50 states. Many of the new infection clusters are in more rural areas and states that a lot of people thought had dodged the initial wave, including California. There has been a massive rush of home buyers moving to rural and suburban America away from the cities. The great migration has begun.

Subsequently, public anxiety is rising yet again. Protests such as those in Michigan over the lockdowns were overwhelmingly peaceful, yet liberty movement activists were demonized and accused of “inciting violence” and “spreading the virus”. Some groups with left-leaning political agendas used the death of George Floyd to create civil unrest. The mainstream media mostly lavished these groups with praise and refused to acknowledge that they might be spreading the virus.

The double standard is clear, but this is just the beginning.

As I have argued for the past few months, the REAL public crisis will strike when the secondary lockdowns are enforced, either by state governments or the federal government. Make no mistake, these orders are coming. We can already see restriction in some states being implemented, though they refuse yet to call the situation a “lockdown”.

California has recently added 24 counties to its “Covid watchlist”, and most of these counties have added new restrictions, including many non-essential businesses being ordered to remain closed.

The governor of Arizona announced statewide restrictions including business shutdowns, suggesting there may be a reopening at the end of July. If the previous lockdown is any indication, this means the next reopening will probably not happen until early September.

Similar restrictions have been announced in Texas, Florida, Georgia, etc. This is essentially a new shutdown that has not yet been officially labeled a “shutdown”.

So what does this mean for the U.S. economy going forward?

Well, the first lockdowns caused an explosion in unemployment, with 40 million jobs lost on top of around 11 million existing jobless. Beyond that, you can add the 95 million people without work that are no longer counted on the rolls by the Bureau of Labor Statistics. Only a portion of these jobs were regained when the reopening occurred. According to Shadowstats.com, the real unemployment rate including U-6 measurements is 31% – around the same level as it was during the Great Depression.

So far in 2020 there have been 4,300 major retail store closings, added onto the thousands of businesses already hit in 2019 in what many are calling “The Retail Apocalypse”. Small business closings are harder to gauge at this time, but according to Yelp, over 41% of their listed participants are announcing they are closing for good.

This outcome was easy to predict when it became clear that only 13% to 18% of businesses applying for the small business bailout loans received aid, and half of those businesses were actually large corporations

What happens next? The companies that did survive the first phase lockdowns are now going to get hit again, hard. I expect another 50% of small businesses to either close permanently or announce bankruptcy over this summer and fall. This means a second huge surge in job losses in the service sector.

It’s important to remember that the U.S. economy is 70% service based, and around 50% of total jobs are provided by small businesses. The lockdowns hit both these areas of our system mercilessly. And, with most of the aid from the government bailouts being diverted to major corporations, it’s as if someone was trying to deliberately crush the small business pillar of support for our economy. If you were attempting to drag the U.S. into an economic collapse, the Covid lockdowns are a perfect cover to make this happen.

Another economic threat is the slowdown in the supply chain. There will be renewed shortages in many goods. I have received numerous emails from readers who work in manufacturing, repair and acquisitions of vital parts for major companies who have told me that simple components, such as electronic and industrial parts that are required for factories to produce goods and repair goods, are almost gone. Meaning they are not being produced overseas in places like China, either due to the pandemic or geopolitical conflict. They tell me there is a maximum of two months before these components are completely gone.

The greater danger, however, is the higher likelihood of civil unrest. I’ve heard many people suggest that Americans will “never” put up with another round of shutdowns. I think it depends on the state you live in. If you live in places like California, Illinois, New York, or even Florida, the majority of people are going to conform to lockdowns even in the face of financial calamity. Interior states with more conservatives are not as certain. Regardless, I expect at least half the country to be shut down in the next few weeks, and those places that don’t shut down will be accused of “selfishly endangering others”.

As I have said many times since this crisis began, it does not matter how dangerous or deadly a virus is; shutting down the economy is assured destruction and is not an acceptable response.

Of course, certain special interest groups benefit greatly from the increased fear and chaos that economic instability brings. Right now, states like Georgia are pushing to stage the national guard to quell unrest, and I think this will spread to many places in the U.S. over the summer. They know what is coming, and they are worried about people hitting the wall of poverty that is ahead and reacting angrily.

As the globalist Imperial College of London published in March, the plan is for lockdowns to continue on and off for the next 18 months or more. This is not going away, and after the next wave of lockdowns, most Americans are finally going to realize it.

Rather than promoting localized production, independent economies and self-sufficiency, the establishment is going to suggest martial law and medical tyranny as the solution to the pandemic problem. In other words, they will demand total control over the population and the erasure of constitutional liberties in the name of “the greater good”.

These are the same people that downplayed the pandemic at the beginning of the year and refused to stop travel from China until it was too late. They are also the same people (including Dr. Anthony Fauci) who gave the Chinese millions of dollars to play around with the coronavirus at the Level 4 lab in Wuhan, which is the likely source of the current outbreak. I’m not sure why ANYONE would want to give more power to the people that caused the crisis in the first place.

Three factors are working hand-in-hand to undermine U.S. stability and create a rationale for totalitarian controls including the economic crash, civil unrest and the pandemic itself. Understand that preparations to protect yourself and your family must be finalized NOW. There will not be even a minor recovery after the next shutdown.

*  *  *

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As the total number of confirmed COVID-19 cases in India passes 800k, pushing India past Russia and into third place on the ranking of most global cases…

…the country’s leader, Prime Minister Narendra Modi has been hard-pressed to come up with a solution, particularly after an economy-crippling shutdown.

Earlier this month, local officials in Mumbai and New Delhi, the country’s two hardest-hit areas, launched an effort to perform a ‘COVID-19 audit’ on the city’s inhabitants in an ambitious testing program that would ideally test everyone in the two cities.

Now, local media are reporting that the WHO has praised an effort to contain an outbreak in Mumbai’s Dharavi slum, said to be the largest slum in all of Asia, and also one of the densest.

World Health Organization Director-General Tedros Adhanom Ghebreyesus said during the WHO’s press conference in Geneva on Friday that the situation in Dharavi is an example of how even some of the most intense outbreaks can be brought under control with a proactive strategy.

“And some of these examples are Italy, Spain and South Korea, and even in Dharavi – a densely packed area in the megacity of Mumbai,” he had said.

According to local officials, the strategy they used to successfully start suppressing the outbreak relied on proactive testing first and foremost, along with the support of medical professionals and other medical resources focused on the area aside from the tests and the people needed to administer them.

The neighborhood, once deemed a global COVID-19 hotspot, has managed to flatten its curve.

One of the top hospital officials who participated in the effort said that the linchpin of the strategy was going out into the community and proactively testing individuals – especially the most vulnerable –  instead of waiting for patients to come to get tested at a facility.

“Proactive screening helped in early detection, timely treatment and recovery,” he said.

When positive cases were found, officials diligently guided the subject to care (if they needed it) or quarantine, then made sure to trace cases back to the point of infection while keeping confirmed patients from spreading it to others.

Across Dharavi, 14,000 people were reportedly tested and 13,000, were placed in institutional quarantine with medical facilities and community kitchen for free,” the senior official said. That’s across a slum that measures 2.5 square kilometers, with a population density of 2,27,136 people per square kilometer.

Soon, officials noted progress in the data. In April, the doubling rate was 18 days. It was gradually improved to 43 days in May and slowed down to 108 and 430 days in June and July respectively.

As many as 2,359 COVID-19 cases have been recorded in Dharavi so far, of which 1,952 patients have recovered from the deadly infection, while there are only 166 active cases at present. However, achieving this monumental feat was not easy for the local authorities, who had to overcome their fair share of challenges.

“At least 80% of Dharavi’s population depends on 450 community toilets and the administration had to sanitize and disinfect these toilets several times a day,” Dighavkar said.

[…]

“Our approach to tackle the virus was focused on four Ts – tracing, tracking, testing and treating,” he said.

Social distancing was next to impossible in Dharavi, where families of eight to 10 people live in 10×10 huts, and travel requires walking through narrow lanes in between the tenement houses.

Doctors and private clinics, as part of proactive screening and fever camps, covered as many as 47,500 houses, while 14,970 people were screened in mobile vans, the official said.

Apart from this, special care was taken for the elderly residents and 8,246 senior citizens were surveyed, he said.

Manpower was a major issue for organizing fever camps and proactive screening in high-risk zones.

“We mobilised all private practitioners. At least 24 private doctors came forward and the civic body provided them with PPE kits, thermal scanners, pulse oxymetres, masks, gloves, and started door-to-door screening in high risk zones and all suspects were identified,” he said.

City officials also cleared schools and other buildings to transform them into makeshift hospitals and quarantine units. In just 2 weeks, a 200-bed hospital was devised.

Like the US, India saw a surge in cases after exiting a lengthy lockdown. The lockdown imposed by the Indian government was by all accounts far more strict than what most Americans experienced. Still, the virus has made a comeback, suggesting that lockdowns in India aren’t a sustainable way to deal with the problem. But proactive testing sounds like it could certainly go a long way.

Submitted by The Swam Blog,

For years, I have heard fund managers and economists claiming that “a financial crisis is unlikely as long as central banks intervene”. This postulate has been the foundation of the well-known “Fed put”. Stocks should only go up thanks to monetary policy.

The past ten years have reinforced that conviction, since all the actions of the Fed and the ECB had strong positive impact on risky assets. But, as Tyler Durden would say, “on a long enough timeline the survival rate for everyone drops to zero”.

In fact, if you study economic history, then you are likely to realize that such relationship between money supply and asset prices has no real foundations. Besides, the purchasing power of money theory tells us that increasing money supply can lead to higher prices, but only if the so-called velocity of money does not decrease. Thus, velocity is a key variable. When it comes to investment, it seems that velocity is mostly driven by psychological factors. In other words, if QE has become so bullish for stocks or bonds, it is mainly because people believe that it is.

Therefore, everyone should remember that “the greatest trick the devil ever pulled was convincing the world he didn’t exist”. Not only can the market drop despite the Fed, but it might crash precisely because of such dominant belief.

Intersubjective Markets and Narratives

Intersubjectivity can be thought as a share agreement of meanings between multiple people. According to Yuval Noah Harari, without intersubjective frameworks like religions, governments, money, firms, etc., anatomically modern humans would not be able to form and control large social groups.

Financial markets can also be treated as an intersubjective framework. From that perspective, a market narrative can be defined as a subculture (or ideology) common to multiple investors, sharing a common vision on how markets work and how assets are priced.

Without narratives, there would be no bull or bear markets. Of course, bull markets can be driven by positive news such as earning growth. However, speculative bubbles would make no sense without intersubjectivity. The concept of narratives is the key to understand how markets work and how investor price assets.

The “Fed put” can regarded as the dominant narrative since 2009. And it has become so dominant that Nasdaq stock prices have disconnected from economic fundamentals like they did in 1999.

Fractals and Avalanches

Today, equity markets seem to display a macro-behavior, since almost everyone has turned bullish. Despite a few skeptical folks, even pessimistic investors have resigned themselves to the idea that markets would not drop anymore because of Jerome Powell. In other words, a form of order has emerged (i.e. low entropy), and the market has reached a critical state.

The problem is that such a state is very unstable, and a fast reversal becomes more and more likely. What could be the trigger?  It could be anything like the acceleration of the pandemic, bankruptcies, geopolitical tensions, etc. However, answering this question is not essential.

Indeed, the bubble has been driven by endogenous feedback loops. So, the market can crash without any obvious reason. This is what we observed on US equity markets in 1929, 1987 and 2000. And this is also how ended the bitcoin mania in 2017, and the China A shares rally in 2015.

What we know so far is that a reversal can lead to a significant volatility spike since the apparent order will be suddenly broken.

Hidden Risks Behind the Tech Rally

Some physicists state that the whole boom and bust process can be captured using the so-called log-periodicity power law singularity (LPPLS) model. Whether it is purely theoretical or not, the model indicates that Nasdaq euphoria is likely to terminate by the end of the summer (see It is All About Waves – Tech Stocks and The Log-Periodicity Power Law Singularity Model and We Are Warned – Precisions About the Log-Periodicity Power Law Singularity Model).

Beyond that statistical prediction, it is important to have a look at technicals as the current trend looks quite unsustainable (see Sven Henrich’s chart above) with numerous unfilled gaps below. And while the Nasdaq is breaking records every day, the VIX remains at historically high levels.

At this stage, the question is, what will support the market if the dominant narrative is broken? The Fed has our backs, until it has not. Extreme concentration and short-volatility bets are major risks for equity investors, especially Robinhood retail traders.

As Nassim Nicholas Taleb says, “missing a train is only painful if you run after it”.

The scene can be somewhat dystopian and third world when you look at it: as a result of the pandemic and the new way that our economy is forced to do business, Americans all over the country are waiting in line – even for the most basic of essentials. 

For example, Bloomberg points out that food banks in Vermont have to deal with “miles long” lines of cars and at Covid testing sites in Florida, people have to show up with full tanks of gas because of how long they have to wait. 

People applying for unemployment have similar horror stories – as we have detailed – trying to pile onto an overwhelmed website to collect benefits and left with no one to call when the system doesn’t function properly. The physical waits in unemployment lines are similarly distressing.

Kara Eaton, a 27-year-old industrial welder from Eufaula, Oklahoma, said: “We have to hope that the person next to us in line will hold our place while we use the bathroom — Subway usually doesn’t mind if we use theirs.”

Rachelle Basaraba of Oregon said: “Having to be patient and wait your turn — I don’t know if that’s necessarily the American way.” She says that a “herd mentality” and respect for rules bring order to waiting in line in Denmark, where her company is based. She called this a “a positive thing,” though was unsure about how it would catch on the U.S.

This time in America is the first since the Great Depression to make Americans wait in line for limited resources. 

J. Jeffrey Inman, a marketing professor and associate dean at the University of Pittsburgh’s Katz Graduate School of Business, said: “The U.S. is getting a dose of the scarcity economy, and we don’t like it. The U.S. has gotten spoiled where we’ve always had a plentiful, efficient supply chain. Now we’re seeing what can happen once it gets disrupted.”

But capitalism is trying to swoop in and solve the problem. For example, a company called Lavi Industries, that usually makes post-and-rope systems for Homeland Security, is now involved in making plastic sneeze guards and portable stations for lines to make the waiting for bearable. They are also working on their “virtual queueing technology,” which is a smart phone technology that can summon customers out of line from afar. 

Perry Kuklin, Lavi’s marketing director, put it simply: “People hate to wait. If you make it more pleasant, make it more efficient, you as a business can not only profit from it, but you create a better passenger experience or theater experience.”

Richard Larson, a Massachusetts Institute of Technology professor and expert on queuing theory, says the issue is just temporary: “My parents had to wait in a bank queue line between 10 a.m. and 3 p.m. and now ATMs are everywhere. We have umpteen more gas station pumps you can stop at. A lot of traditional pesky queuing is gone.”

Some Americans are trying to make the best of the situation. “It was time to stop and notice, to look around and watch, to not be on my phone. I tried just to be there,” said Dena Babb of Torrance, California, about trying to be mindful while enjoying waiting in line.

But other Americans continue to grow more and more skittish about the practice, leading to another vein of increased tension across the nation. Francisco Salazar of East Meadow, New York, concluded: “Earlier in the pandemic, they were checking people for masks, cleaning the carts, giving sanitizer — they’re no longer doing any of it. I feel paranoid. I don’t want to be on these long lines.”