Economic Irrationality and Systems Collapse: When The Irrational Is Considered Rational

Linked on our blogs with Danny Schechter, USA. – Published on Global, by Danny Schechter, August 11, 2011.

Oh thank you, Wikipedia*, for this definition: Irrationality is cognition, thinking, talking or acting without inclusion of rationality. It is more specifically described as an action or opinion given through inadequate reasoning, emotional distress, or cognitive deficiency. The term is used, usually pejoratively, to describe thinking and actions that are, or appear to be, less useful or more illogical than other more rational alternatives.

And what about this one? Market Psychology? This term is defined in the Investopedia this way: 

The overall sentiment or feeling that the market is experiencing at any particular time. Greed, fear, expectations and circumstances are all factors that contribute to the group’s overall investing mentality of sentiment.” Q: What do we have when we put the two together? A: The current madness and market mayhem,’ S&P’s downgrade is being blamed for the market panic even though all the business media expected a downgrade and initially minimized its potential impact. The ratings agency blamed the government’s failure to deal with the debt including the stalemate in Congress, The Republicans, predictably blamed Obama and the Democrats went after the Tea Party as the culprits behind the market plunge. But then, investors who at first denied that a downgrade would be significant overreacted to it by pumping more money into government treasuries adding to government debt. The Comedy Channel’s Jon Stewart’s sensible reaction: “are you f*cking kidding me?

Does this make any sense? We are taught to think of businessmen and their minions as absolute worshippers of objective truth as they allegedly practice “due diligence” to confirm underlying facts and insure that their decisions are based on research and thoughtful decisions. That’s what we are taught—but is that what they do? In fact, the “smartest guys in the room” as the Enronians were called proved to be the dumbest, buying into a warped worldview, and then, believing their own hype leading to decisions that brought the house down. And that’s what happens again and again, over and over, as panic seizes The Street followed by a herd of decision makers making bad decisions’ … //

… A closer look, usually in times of crisis, offers a window into another kind of financial world, a world of panic and fear, where irrationality is the order of the day, an irrationality that goes by the name of “Market Psychology.”

Forget the bulls or the bears…this is a world of sharks deeply in need of shrinks.

When things go well, the wizards of Wall Street are anointed by the media as geniuses. When they don’t, you get Time Magazine’s condescending putdown of “Wall Street’s mad scientists blowing up the lab again.”

This kind of humor seems out-of-place when we are talking about what many fear has lead to the collapse or at least a severe wounding of the global economy with millions of jobless and homeless victims who believed in the system until it failed them. And yet, as we saw in the great manufactured budget stalemate in Washington, members of Congress were and still are prepared to trigger a collapse in the name of a naïve but rigid ideology. Some of us argue with them thinking our facts can refute theirs but at bottom, fanaticism is not neutralized by rational argument. You need countervailing power and a willingness to fight for another vision. (full text).

(News Dissector Danny Schechter made the film Plunder The Crime of Our Time ( about the financial crisis as a crime story. Comments to this address. Danny Schechter is a frequent contributor to Global Research. Global Research Articles by Danny Schechter).

See also (2 exemples of many): … Behavioral economics, or/and Rationality and power

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