John Mauldin in Frontline Thoughts on one off balance sheet vehicle that might get us out of this crisis faster than we think: psychic income, our dreams for our future…

“Every night we go to sleep on our psychic income, and every day we get up and try to figure out how to turn it into real income……The future is never easy for all but a few of us, at least not for long. But we figure it out. And that is why in 20 years we will be better off than we are today. Each of us, all over the world, by working out our own visions of psychic income, will make the real world a better place.”

My Comment:

In response to RobertinDC, my loyal reader, who politely calls this a “crock,” I should add the context of Mauldin´s note, which is technological change.

Mauldin argues that even if the market stays flat or depressed in real terms, even if unemployment increases and the standard of living falls, none of us can know for sure what the future holds. In ten years time, the world may very well be a better place.. in terms of possibilities… than it is today because of technological innovation.

Is this implausibly “feel good” stuff?

Well, yes.

Of course.

It takes no great courage or imagination to imagine plausible scenarios.

Imagination is the ability…the very creative and fundamentally life-giving ability..to imagine implausible..even unbelievable scenarios and then make them not only plausible but inevitable.

And, again in a fundamental sense, that is how creativity in all fields works. Focusing solely on the negative is itself a form of delusion.

I don´t mean by this that you can wish yourself into any outcome you want. There are also physical laws at work that you have to accept. You cannot wish away a contraction of the economy because of overspending, for instance.  The economy has to correct.

But the effects of the contraction, the extent, and its resolution can in fact be ameliorated by a change in attitude.

And by staying alert to every possibilty, we can also sense when deterministic interpretations – such as, “this is the way capitalism is”  — are being used to cover up what is in truth a very manipulated reality.

In that case, what we should focus on is an imagined ideal, the way capitalism should be, which may be implausible or even a crock, in some views, but is our only true guide to a way out of this debacle.

This is why I wrote, in 2007, that the economy didn´t have to crash. It was in a PR piece for the book.This wasn´t because I lacked a healthy sense of reality. But reality in the sense that physicists understand it is a very different thing from the “common sense” understanding of reality. The physicists´view is actually closer to what might be called implausible or even unbelievable. But it´s none theless true. The same divergence between common sense perception and underying reality exists in the economy.  Cynicism is often right. But not always. Pessimism is often warranted. But not always.

There were fundamental problems in the economy in 2006-2007, but the way the crash occured struck me then as very strange.

I suspected at the time that some of the indices were manipulated…and now the deepcapture team (and others like Pam Martens) have shown how they could have been (see prior posts).

In time, you are going to find that this is true of many of the indicators we use to read the mood of the investing public. Markets are driven by emotions. And smart crooks with the ability to manipulate that emotion can make big money from the manipulation….

And if they can, it stands to reason they will.

What is surprising is only why it took so long for supposedly tough minded financial reporters to figure that out.

In any case, whether manipulation is proved or not, what ordinary people can do is to take for their model the good trader. Good traders are people who can “keep their heads when all around you are losing theirs and blaming it on you”..as Kipling said.

The hall mark of expert trading is to control the emotions and rein them in from succumbing to mass moods. What does that mean in practical terms?

It means when everyone is panicking, look for silver linings, and when everyone is complacent, learn to worry…