The Crazies

Although better known for Night of the Living Dead, horror film director George A. Romero managed to create the perfect analog for our current collective economic, political and social predicament in 1973’s The Crazies. Why are the good people of Evans City, Pennsylvania turning into hysterical, homicidal maniacs ? [Spoiler Alert] It transpires that a military plane carrying a viral bioweapon has crashed near the town, contaminating the entire water supply..

One could be forgiven for suspecting that something similar had happened across the G7 economies. Former Fed chair Janet Yellen has just warned that if Congress doesn’t resolve the latest stalemate over the debt ceiling, the US risks running out of money by the middle of October. Bond and stock markets are gyrating like the guilty party in a newly charged electric chair. On which theme, the UK government seems determined to railroad through wildly counter-productive green policies that have already led to the collapse of multiple energy suppliers; the same administration seems now to be softening us up for martial law by having the army drive fuel trucks. Police State incidents incorporating fascistic monstrosities across Australia, Canada and New Zealand are off the scale. In response to these wild incursions against civil liberties, economic common sense and the rights of the individual, all around the world, anxious citizens are taking to the streets in protest – a situation bizarrely left unreported by the world’s mainstream media. It is as if much of the world has become mesmerised by fear.

We are indebted to Sir Steven Wilkinson for his citation of the essay The importance of repression by Park MacDougald, which examines the lasting influence of the sociologist Philip Rieff, author of 1966’s Triumph of the therapeutic:

It seems intuitively obvious, almost tautological, to say that we live in a “therapeutic culture”. Even if we no longer speak of our id or superego, our everyday language is filled with pop-psychiatric jargon — trauma, grief, and abuse; narcissism and “borderline personality” and PTSD. When Congresswoman Alexandria Ocasio-Cortez described her experience during the January 6 riot to her followers on Instagram, she spoke of her “trauma” and her status as a “survivor” of sexual assault, while accusing Republicans who downplayed the event of using the “tactics of abusers”. Not that she’s alone: the conservative Daily Signal has accused AOC herself of “gaslighting” the public over rising crime rates.

But Rieff’s point was not merely that we had come to view ourselves in therapeutic terms, supplanting older moral and religious modes of evaluation. He was making an argument about the wider implications of this shift in perspective — a shift that he considered to be, without exaggeration, the most important cultural development in the West since the Enlightenment. Indeed, Rieff saw it as nothing short of an apocalypse. Modern therapeutic culture, in his view, had become what he called in his later writings an “anti-culture”: a negation of the very idea of culture that, because it set itself in opposition to everything that had traditionally given human lives meaning, was inherently unstable. It could not reproduce itself indefinitely, and would be succeeded, Rieff predicted, by barbarism and chaos..

Rieff predicted that the logical endpoint of therapeutic culture was an orgy of violence — “Immediately behind the hippies stand the thugs,” as he wrote in Fellow Teachers. Such an orgy is still nowhere on the horizon. But I suspect we should take seriously his suggestion that somewhere deep in our minds is a longing for, or at least a receptivity to, the demands of the sacred, which also happen to be the one thing that our culture seems genuinely comfortable repressing. And as good therapeutics, we can always count on the return of the repressed.

Particularly in the context of economically suicidal and scientifically questionable commitment to unsustainable green policies in the pursuit of an arbitrarily ‘woke’ virtue-signalling agenda, we certainly seem to be experiencing the post-therapeutic culture of barbarism and chaos. This commitment has echoes of GK Chesterton’s maxim:

When men choose not to believe in God, they do not thereafter believe in nothing, they then become capable of believing in anything.

One of the greatest human tragedies is that society seems to learn nothing from its historical mistakes. (One reason we have such commitment to systematic trend-following strategies as part of our investment armoury is that human nature never changes, so market prices inevitably come to oscillate around the twin axes of greed and fear.)

One area of the financial realm in which humanity and especially the ‘governing’ class seems most resistant to the learnt experience is in price fixing. What is truly alarming today is that almost nobody dares challenge the mandate or even ongoing existence of central banks as prime fixers of prices in the financial markets. Price fixing never works as a sustainable medium-term mechanism, whether in the context of US government bond yields, Chinese equity prices, or wholesale gas and energy tariffs. Not, at least, without triggering ancillary chaos in related markets that invariably make the cure worse than the alleged disease. (How coronavirus is that ?)

“Attempts to control and fix prices and wages span most of recorded history,” writes David Meiselman in the foreword to the definitive history of economic hubris, Forty centuries of wage and price controls (Robert Schuettinger and Eamonn Butler).

Price and wage controls cover the times from Hammurabi and ancient Egypt 4,000 years ago to this morning..

The experience under price controls is as vast as essentially all of recorded history, which gives us an unparalleled opportunity to explore what price controls do and do not accomplish.

I know of no other economic and public policy measure whose effects have been tested over such diverse historical experience in different times, places, peoples, modes of government and systems of economic organization..

The results of this investigation would merit attention for the light it sheds on economic and political phenomena even if wage and price controls were no longer seriously considered as tools of economic policy.

The fact that wage and price controls exist in many countries and markets and are being seriously considered by others, including the United States, compels attention to the historical record of wage and price controls this book presents.

What, then, have price controls achieved in the recurrent struggle to restrain inflation and overcome shortages? The historical record is a grimly uniform sequence of repeated failure. Indeed, there is not a single episode where price controls have worked to stop inflation or cure shortages.

Instead of curbing inflation, price controls add other complications to the inflation disease, such as black markets and shortages that reflect the waste and misallocation of resources caused by the price controls themselves. Instead of eliminating shortages, price controls cause or worsen shortages.

Despite the clear lessons of history, many governments and public officials still hold the erroneous belief that price controls can and do control inflation. They thereby pursue monetary and fiscal policies that cause inflation, convinced that the inevitable cannot happen.

When the inevitable does happen, public policy fails and hopes are dashed. Blunders mount, and faith in governments and government officials whose policies caused the mess declines. Political and economic freedoms are impaired and general civility suffers.

There seems to be growing evidence that in reaction to the blundering reactivation of the Big State that began in its incompetent response to the Covid crisis last year, there is a worldwide resurgence of spiritual activity, the ‘Great Awakening’. We note that a particularly disturbing facet of the so-called ‘Great Reset’ has been a violent hostility towards practitioners of the Christian faith. At a more mundane level, we seek solace – and capital preservation – from those investments most removed from the malign clutches of the Big State, namely listed, highly cash-generative and unindebted businesses run by talented, shareholder-friendly entrepreneurs where the shares of said businesses can be purchased at a meaningful discount to their inherent worth. We also see merit in the ultimate hedge against monetary debauchery, namely gold, which has been nicely described as a zero coupon perpetual bond which offers no credit nor counterparty risk, issued by God.

Meanwhile we also take solace from the current political and market madness by means of perhaps the most reassuring four words ever spoken in the English language:

This too shall pass.

Tim Price is co-manager of the VT Price Value Portfolio and author of ‘Investing through the Looking Glass: a rational guide to irrational financial markets’. You can access a full archive of these weekly investment commentaries here. You can listen to our regular ‘State of the Markets’ podcasts, with Paul Rodriguez of ThinkTrading.com, here. Email us: info@pricevaluepartners.com.

Price Value Partners manage investment portfolios for private clients. We also manage the VT Price Value Portfolio, an unconstrained global fund investing in Benjamin Graham-style value stocks and specialist managed funds.