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MOBS, MESSIAHS, AND MARKETS: Surviving the Public Spectacle in Finance and Politics

William Bonner and Lila Rajiva, Wiley, August 31, 2007.

Review by Rolf Dobelli, CEO and Founder of GetAbstract:With scimitar-sharp wit, withering one-liners and sledgehammer-subtle analysis, William Bonner and Lila Rajiva embark on an amusing and fascinating study of human nature. Along the way, they skewer just about everyone – Republicans, Democrats, fascists, communists, CEOs, hedge-fund managers, journalists and patriots all line up for a good tongue-lashing from the authors. Funny, irreverent and thought-provoking, this treatise is a joy to read, even if you don’t agree with all of Bonner’s and Rajiva’s conclusions. (And who could?) Human nature itself is the true villain in this sweeping work. Enjoyable as it is, this study tackles too much and at times turns into little more than a rant, albeit a readable and persuasive one. Even so, getAbstract recommends it to anyone who hopes to understand human behavior in business and politics.

Amazon Editor’s Choice, 2007

Best-selling financial author Bill Bonner and political writer Lila Rajiva team up for this hilarious send up of the follies of the “guv’mint,” the corporatocracy and the chattering classes.

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SALES RANKINGS
______________________________________________________________________________________________________Amazon

Amazon Top 20 Best-seller, First-releases in 2007

Amazon #1/Top 5 Best-seller, Finance for most of 2007-08

Borders Top 10 Best-seller, Finance in February 2008 and in most months in 2007

Amazon #1 Best-seller, All Sales in September first week, 2007

Amazon #1 Best-seller, Finance, Investing, and General Business in September 2007

Borders #4 Best-seller, Business in September 2007

New York Times Non-fiction Best-seller list (extended) #20 and #35 on September 23 and 30, 2007, and #14 on the print list (top 15) October 7, 2007

Amazon Editor’s Pick among Finance and Investment Books in 2007

Amazon’s Top 5 Most Wished for Finance Book in 2008

Amazon’s #1/Top 5 Bargain Business book in 2008

Top 10 Best-seller in Business in Canada for 2007 on December 10, 2007.

Top 10 Best-seller in Business in Canada in September 2007.

http://www.advantage-canada.com/page16.pdf.

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PRESS  – EXCERPTS
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[My Favorite]

Do Not Buy This Book – Amazon Customer Review, February 1, 2008

“In 50 years of reading I have never come across a more inane set of typeface pressed between two covers and called a book. It reads lik e the totally unedited rants of two disconnected minds, which it apparently is, according to the introduction. I can’t believe this book was accepted for publication. No matter what your views, this book makes no sense.”

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On the Other Hand…

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“There’s a quotable gem on every page”

Harsh Gill on PIO-TV.com

“Extremely timely…. irreverent, but thought-provoking examination of the goings on in international finance today….Though the book is light-hearted in tone, it packs a serious punch.”

Roger Trapp, The Independent, UK.

“..this exhilarating — if somewhat depressing — book….valuable alternatives to accepted accounts of past events… will often make readers laugh out loud, [but] they will also find themselves wriggling uncomfortably at the manifold idiocies of human behavior….I guarantee it will also provide much food for thought.”

Araminta Wordsworth, The National Post, Canada

“..a sharp-witted jaunt through the mass hysteria that’s defined markets and people through the ages.”

Money Week, U.K.

“..a fascinating work…downright hilarious….a serious look at an important phenomenon in the human condition. ”

Dr. Jonathan Dolhenty, Radical Academy

“To say that this book is skeptical or contrarian is like saying Warren Buffett has money. This book could set the standard for skeptical writing….300 pages of entertaining criticism of anything and everything…..I loved this book and I read the full 400 pages in just a few days.”

Rob May, Business Pundit.

“If you’re the alpha type, you’ll undergo something rarely experienced in this day and age, despite the number of Mencken imitators currently around: you’ll actually feel the same way that a good, worthy, successful U.S. burgher felt in the 1920s when reading one of Mencken’s works when it was hot off the presses. ”

Daniel Ryan, Enter Stage Right

“Thank you, Lila and Bill, for unleashing this wild boar of a book upon civilised society….. our gestalt has been irreparably altered at the expense of our own self-deceptions exposed!”

“Visible Ghost,” Library Thing

“Funniest book ever on how to be skeptical of people who are sure they know how the world should be run.”

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“The book strikes at the center of conventional wisdom. It is brilliant, deep, and fun to read.”

Nassim Nicholas Taleb, author of the legendary international best-seller Fooled By Randomness and The Black Swan.

“Learn about Fed bubbles, and make Ben Bernanke unhappy: Read this book,”
Lew Rockwell, President of The Ludwig Von Mises Institute

“Entertainingly and irreverently investigates the “do-gooders” and “world-improvers” who stir up mass hysterias, unjustified wars and financial crises, while at the same time it warns readers how to better protect themselves and their pocketbooks.”

Congressman Ron Paul, Presidential Candidate

“If I had to name just one book investors should read, this is the one I would select. A classic for the student of the current period in history.”

Dr. Marc Faber, editor of the maverick Gloom Boom and Doom Report and author of the Amazon best-seller, Tomorrow’s Gold– Asia’s Age of Discovery

“As fun to read as it is thought-provoking.“

John Mauldin, author of the New York Times best seller, Bull’s Eye Investing, and editor of Thoughts from the Frontline.

“A cock-eyed, frolicking hell of a read.“

Dr. Mark Skousen, Professor of Economics and editor of The Worldly Philosophers.

“I laughed aloud, I learned, and I was even offended. Behind the crafty writing, the authors share the deeper secrets of investing and push us to question what we believe. ‘Think for yourself!’ this book screams.”

Steve Sjuggerud, editor of True Wealth, one of the worlds most widely read investment letters.

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FOREWORD
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World-famous contrarian investment guru and the author of several books, including, Tomorrow’s Gold– Asia’s Age of Discovery, an Amazon best-seller translated into numerous languages, Dr. Marc Faber is a former Zurich gnome and managing director of Drexel, Burnham, Lambert who now runs his own firm in Hong Kong. From there he publishes the maverick Gloom Boom & Doom Report.

Marc Faber
April 20, 2007

Mobs, Messiahs, and Markets by Bill Bonner and Lila Rajiva will never earn a Nobel Prize in Economics. Why? Because this book is highly readable, makes sense and does not contain the usual incomprehensible mumbo-jumbo one finds in other financial and economic books. Mobs, Messiahs, and Markets makes very complex economic, social and geopolitical issues understandable to normal people like you and me. What Barbara Tuchman did by writing informative and absorbing history books, Bonner and Rajiva do with this highly entertaining book written for the general public to understand economics and finance.

But who would have the time to read a close-to 400 page book? These days, most people are happy to gain “knowledge” and “become informed” about everything everywhere in the world from thirty second shots on TV news-channels. Still, it’s my opinion that they would be making a grave error if they did not find the time to read Mobs, Messiahs, and Markets.

Here is why. Books should be read for one or both of two reasons. Since reading is physically and mentally rather demanding, I obviously want to read a book that is informative, increases my knowledge, and is thought provoking. Otherwise why bother? The other reason I read a book is for pure enjoyment. Either the author captures my attention through the complex plot of a thriller or the tragic emotions of a drama, or he does it through his superb command of the English language and his ability to make me laugh.

Well, I read the manuscript of this book on flights from Bangkok to Ho Chi Minh City, from Ho Chi Minh City to Singapore, from Singapore to Shanghai and Shanghai to Dubai, and I read it on China Beach in Vietnam. On each of those flights, people were staring at me, because I would repeatedly burst out laughing. Mobs, Messiahs, and Markets is one of the funniest and most entertaining books I have ever read. But beyond that, Bonner and Rajiva are also accomplished and honest historians who expose the dangerous conspiracy engineered with lies and deception by American “elites,” politicians, Wall Street, and the US Federal Reserve, whose effect is to shift wealth from the middle and working class to the elites and their cronies.

Referring to the eroding purchasing power of the US dollar, Bonner and Rajiva note that even as the Federal Reserve increased the quantity of bank -notes, the quality of the notes declined. The problem, they argue, is that while political power is in Washington and financial power lies in New York, the real power is where the two come together in the Federal Reserve system. And while the Fed may have been chartered to protect the currency, its new job is only to get the politicians re-elected and keep the money flowing to Washington in order to give people the impression that they are economically better off. Not surprisingly, Bonner and Rajiva have a low opinion of central bankers. “Modern central banking, like bank robbing is a nefarious métier,” they write. “But while Bonnie and Clyde’s crime was obvious and deplorable, a central banker is often confused with an honest man.”

In the world of finance there are thousands of books on how to value stocks, on technical analysis, currencies, commodities, bonds and macroeconomics, but there are hardly any books that capture the Zeitgeist of gigantic financial excesses. “Reminiscences of a Stock Operator,” based on the life of the legendary Jesse Livermore, was one. It became an enormously popular book and a “classic” precisely because it captured the spirit of the investment mania of the late 1920s. I predict that Mobs, Messiahs, and Markets will in time become as much a classic for the student of the current period in history, because it combines so many interesting aspects of psychology, politics and finance into an informative and captivating narrative. I am confident that the first edition of this book will command a high price among collectors of rare books in the future and that your children will one day shake their heads and wonder how today’s generation could have been so badly deceived by blatant lies, “reformers,” “military heroes,” and “world improvers.”

In facts, Mobs, Messiahs, and Markets is such an excellent piece of work that if I had to name just one book investors should read, this is the one I would select.”
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Araminta Wordsworth in The National Post, November 2007

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It has been more than 25 years since gold hit the kind of highs we have been seeing recently and widows and orphans lined up round the block to get their hands on an ingot. Now, the yellow metal is building for another run-up and gold bugs, Who’ve been holding on for just such a day, are saying, “I told you so.”

But canny investors with money burning a hole in their pockets are looking elsewhere — to ethanol stocks, say, or farmland in Argentina. Or, if they insist on having a piece of this action, gold mining stocks, even though Mark Twain described a gold mine as “a hole in the ground owned by a liar.”

Yet gold will still find buyers at these prices, though logic and commonsense should quickly show the foolhardiness of the “investment.”

Why does this happen again and again, with those least able to bear the losses throwing away their money?

William Bonner and Lila Rajiva provide the answers in this exhilarating — if somewhat depressing — book. Although their insights will often make readers laugh out loud, they will also find themselves wriggling uncomfortably at the manifold idiocies of human behaviour.

The authors’ hope is that some of their advice will stick, enabling us to stand aside as the herd thunders by — and prosper.

Which is tough, as they admit humans are engineered to want to be part of a group. We are more comfortable when “everybody else” seems to be thinking along the same lines, whether it is investors stampeding into a sure-fire money earner or mobs of 17th-century New Englanders being convinced that harmless old ladies who lived by themselves were witches. Or Americans believing the world is being made safe against terror by invading Iraq.

As the Japanese proverb notes, “The nail that sticks up gets hammered down.”

Take real estate. In the past decade, as housing prices have risen like a cake baking in the oven, pushing many properties into the unreal category, buyers have been encouraged to purchase ever-larger and more expensive houses, taking out equally large mortgages. The belief is that you can always sell a house for more than you paid for it.

But as the subprime mess south of the border is showing in spades, this is just not true. Although Canadians have been protected to a large extent by tougher lending rules here — insistence on a down-payment in almost all cases, for example — we should not imagine we are insulated from any aftershocks.

It is clearly a global concern. For the first time in several years, house prices in England have stopped their meteoric rise. Many British house owners will be vulnerable to any fall in value as they have been able to borrow 100% of the purchase price. Canadian banks are also among those caught up in the disaster, thanks to their purchase of mortgage-backed securities, sliced and diced portfolios of mortgages often of doubtful quality. Massive write downs are already the order of the day south of the border.

 

As historians, the authors also provide some valuable alternatives to accepted accounts of past events. Among many examples is the first invasion of Kabul in 1842. This is usually portrayed in British history books as a valiant expedition that ended in unforeseen tragedy. In their hands it becomes a study in bungling ineptitude, with the tragedy being all too easily predictable.

Government types are also high on the Bonner/Rajiya list of betes noires. These range from the usual suspects, such as Hitler and Mao, to less obvious targets like the World Bank and Alan Greenspan, the former Federal Reserve chairman. New York Times columnist Thomas Friedman also attracts their ire for suggesting that U.S. gasoline consumption would be cut by giving the owners of hybrid vehicles free parking.

Read this book and laugh. But I guarantee it will also provide much food for thought.

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Roger Trapp in The Independent, UK, September 11, 2007

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The recent market turmoil stemming from concerns about loans in the so-called sub-prime mortgage market in the United States makes this book extremely timely. As markets around the world reacted first to the sudden emergence of doubts about the availability of credit associated with this lending policy and then to each other’s reaction, observers were treated to a typical example of the mania of crowds. None of it would have surprised William Bonner, head of Agora, one of the world’s largest financial newsletter companies. The easing of credit that was a characteristic of Alan Greenspan’s long spell as head of the US central bank, the Federal Reserve, was a disaster waiting to happen in his view.

He has long been a maverick commentator on the financial world and you get an idea of his world view from the titles of his previous books: Financial Reckoning Day and Empire of Debt. With Lila Rajiva, a contributing editor and writer at Agora, he has – rather like the historian Barbara Tuchman, whom he name-checks early on – decided to look at the present through the past. The result is an irreverent but thought-provoking examination of the goings on in international finance today.

Growing businesses have been less than impressed with the idea of gaining stock market listings for some time. This is a marked change from just a few years ago, when seeking a listing was a key ambition and sign that they had “made it”. Now, the level of scrutiny from both outsiders and market analysts, and the perceived inability to make the quick decisions necessary to succeed in an intensely competitive environment have combined to make it much less attractive than it once was. Anybody still contemplating seeking a listing – on either side of the Atlantic – who reads this book is likely to come away with serious doubts.

Though the book is light-hearted in tone, it packs a serious punch. One particular target is globalisation, as described by Thomas Friedman’s best-selling book The World Is Flat. Mocking this view in a chapter entitled “The Flat Earth Society”, Bonner and Rajiva write: “We are all one: one people, one world with one idea – to get rich. And in this new flat earth, we can all get rich, too. It is as if the world had been flattened into a kind of United States of Earth, where people in Mississippi can live as well as those in New Guinea – competing for the same jobs, trading, co-operating and schlepping their way toward a new world order that is better for everyone”.

It is all very tongue-in-cheek, but you get the point. The idea that globalisation is good because it enables people in less developed countries to buy the same clothes as those in industrialised ones has become pretty well accepted by most people, at least those in business, largely because it has been repeated so often. As Bonner and Rajiva point out, just a few don’t get this sort of “United States of Earth”. They are “losers, who think religion is more important than material progress; insurgents, who defy the empire; and protectionists, who want to push a stick into the wheels of history”.

Of course, it is not as simple as that. Not only is the spread of huge companies across the world not all good for people in less developed places it is also certainly not good for many workers in developed countries, who are suddenly seeing their jobs threatened by low-cost competition from the same sort of places that are being sold goods they never knew they wanted.

Though there will be many victims, this might be a fad that passes. More worrying is when the crowd or mob mentality takes over the stock markets. In a chapter towards the end of the book that advises on “how not to be chumped by Wall Street”, Bonner and Rajiva make the obvious point that investments should be bought when they are down and sold when they are up. Of course, the uninitiated do the exact opposite. “The lumps get excited about an investment when everybody else is excited about it – which is precisely the time not to buy”.

This is straightforward enough, but how does an individual know when a stock is up and when it is down? They tend to seek answers from the so-called experts in newspapers and elsewhere. But such commentary is part of the general noise. Without such sources of information, investing would be more of a private matter, more a question of an individual making his or her own assessments and acting accordingly – and it would be better for it, the authors assert.

Perhaps that is why owner-managers who know their own minds and have an instinct for what will work often see opportunities that larger organisations with all their strategists and analysts and advisers do not.

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Money Week, UK, September 2007

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Why do ostensibly intelligent people pay six times their salary for a home they can ill afford? Why did equally smart people rush to buy shares in technology companies that didn’t make any money and never would? The answer is mainly because other people were doing the same. Sadly, following others blindly is a certain route to financial ruin – as Mobs, Messiahs, and Markets, the new book from MoneyWeek’s publisher Bill Bonner and co-author Lila Rajiva, amply demonstrates.

In a sharp-witted jaunt through the mass hysteria that’s defined markets and people through the ages, Bonner and Rajiva observe that when large groups of people “are thrown into the company of legions of their fellow men, some chemistry turns humans who are individually of irreproachable integrity and unimpeachable prudence into stark, raving blockheads”. That’s when they start burning ‘witches’, swapping tulip bulbs for houses, or, as we saw not so long ago, putting money into stocks ending in ‘.com’. The message is simple. Man is a herd animal, say the authors. And just like the swallow or the wildebeest, he will move with his pack.
The writers don’t restrict themselves to crowds; the follies and delusions of the political leaders and “world improvers” who stir up these hysterias, from Che Guevara to George Bush Jnr, are skewered in the irreverent style familiar to readers of MoneyWeek and Bonner’s email newsletter, The Daily Reckoning. And special mention is reserved for Alan Greenspan, the man whose time at the helm of the Federal Reserve is arguably most to blame for the current financial crisis facing the markets.

So what has all this got to do with investing? Understanding the psychology of crowds is central to understanding the psychology of the markets, says Bonner. It is the mob, and not the free-minded individual, that determines which way the FTSE 100 and every other asset class under the sun moves. But mobs make bad decisions, which means that the assets that are most popular are inevitably the ones set to lose latecomers the most money. If you can understand that, then you’ll know what to do with your money when everyone else is scrabbling to get in or out of the next craze. Which is largely to do precisely the opposite.

To buy Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics by William Bonner and Lila Rajiva (priced £16.99), visit

www.moneyweek.com/bookshop, or call 01730-233870.

Bill and Lila on the war in Iraq: an extract from Mobs, Messiahs, and Markets

Americans had little doubt that they had liberated the desert tribes of Mesopotamia from “Tyranny”, rather than imposed a new tyranny of their own. They managed to support – and applaud – the biggest growth in government spending, debt, and bureaucracy since Franklin Roosevelt, and applaud it, of all things, in the name of liberty…

Success has transformed a modest people whose greatest virtue was once minding their own business into a vainglorious race, who mind everyone’s business but their own. They cannot save a dime themselves, but now they offer to save the entire planet. There was a time when they admired the English for their literature… the Germans for their organisation… the French for their intellect and style… and the Japanese for their industrial discipline. Now they turn their heads to the heavens and see only their own reflection in the clouds. They revere themselves with double the adoration and thrice the fidelity. Old Europe is a museum, they complain. It is rigid, cowardly, and gummed up with social welfare regulation. And Japan? The so-called miracle economy has been stuck in an on-again, off-again recession for more than 16 years, they gibe, because the Japanese lack the guts to restructure their economy along American lines.

This disdain is not based in logic or reason, of course. Few attitudes are. Or, as they say on Wall Street – “Markets make opinions”. That is to say, when stocks have been rising for a long while, investors have opinions about why the bull market will last forever. If stocks are falling, their feelings lead them to believe prices will continue to fall for all eternity. But, of all attitudes, none is so irrationally conceived and so inveterately held as people’s good opinions of themselves. And Americans’ opinions of themselves are no exception. Since they have created their success themselves, surely they must be in charge of it too, they think.
Discounted is the hard work of their fathers and grandfathers who went ahead of them. Dismissed are the virtues of thrift, sound money, limited government, and collective modesty. Flipping with boredom through the back pages of their history, Americans pay no attention to the dead. And the future… the unborn? It is as if they think the book has no sequel…. as if it were the last opus ever… the final word, the Omega Civilisation. We can almost hear the gods snickering. One day, historians will look back at our era and marvel at how George Bush and Tony Blair determined to convert the Iraqis to democracy. To our descendants, it will look like a mad caprice; a quaint, religious gesture; an act of remarkable faith or delusion, like missionaries showing the heathen the correct posture for copulation.

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Dr. Jonathan Dolhenty, Radical Academy, President of the Center for Applied Philosophy, October 2007

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Mobs, Messiahs, and Markets by William Bonner and Lila Rajiva is a fascinating work which considers how people think and behave, privately and collectively, and the effects these different modes have within the public sphere. I haven’t quite decided which specific literary genre this book falls into; maybe that is inconsequential anyway. There’s a lot of history, much economics and politics and, well, almost every other recognized social science comes into play. The main theme, however, seems to be well illustrated in the subtitle of the book: “Surviving the Public Spectacle in Finance and Politics.” This is not, therefore, merely an academic inquiry into group dynamics, but a very practical one as well.

In the interest of full disclosure, I have received Bill Bonner’s “Daily Reckoning” financial newsletter via e-mail for a number of years, so I am somewhat familiar with his writing style and his viewpoint regarding matters economic and political. This is the first time, however, that I have read a book which he has authored or co-authored. Fortunately for the casual reader, this book is not the least bit “dry” or dull, as all too many book dealing with this or similar topics seem to be. In fact, there are many times in this work where the authors relate or allude to something that is downright hilarious. Be that as it may, this is a serious look at an important phenomenon in the human condition.

Mob psychology is one of the most interesting topics to study and reflect upon. Even a brief inquiry into the dynamics of crowd behavior raises all sorts of interesting questions. And then there is the notion of so-called “groupthink,” a term used by Bonner and Rajiva is their book. I particularly liked their colorful way of describing that notion. Referring to it as the “shifting bog of groupthink,” it is “not only completely different from private thinking but is an illusion, piled on top of a fraud, stacked on a foundation of humbug, built in the mud of misconception with the building blocks of lunacy.” Couldn’t have said it better myself! As for me, someone who is just as fearful of a “mobocracy” as of an “autocracy, that description is more than satisfying.

Many insights into crowd psychology are provided during this journey into human thinking and behavior and the historical range of illustrative topics is broad and sweeping. Why do so many otherwise intelligent people jettison their common sense and rational thinking in order to just “follow the crowd”? Why do so-called “do-gooders” go so bad? Why do “witch hunts” occur so often, even in sophisticated and intellectually advanced societies? How do Hitlers and Stalins come to captivate the attention of and accumulate power over otherwise intelligent and rational human beings? How does “groupthink” affect those involved in the financial markets, such as investors and advisers? Moreover, how can one avoid getting caught up in the frenzy of mob psychology, whether in economics or politics or anywhere else?

This book is both an interesting historical adventure and a very practical primer, especially for those involved in the financial markets. As it says inside the dust-cover: “The authors’ cautionary tale of the current bubble economy warns that the gush of credit let loose by Alan Greenspan is fraught with perils for the unwary — but their thoughtful and always entertaining approach also offers some sound investing principles for avoiding the pitfalls of the public spectacle, thinking for yourself, and protecting your money, your sanity, and your soul.” Who could ask for more than that?

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Atim Kabra, Seeking Alpha

I have a confession to make. Twice while reading the book Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics, by William Bonner and Lila Rajiva, I felt a compelling need to refer to the first few pages and refresh my memory on when the book was published. For your information, it was published in the year 2007 (I believe in August) and well before the mega crisis and financial blowup of the second half 2008 unfolded. If not for anything else, then you have to read this book for its clairvoyance alone.

The authors have been bang on target painting what was then a potentially scary scenario which ended up becoming one of the biggest blowups in the financial history of the world as it unfolded. They deserve credit for having faith in their contrarian doomsday vision when everyone else was going all out buying mortgage originator companies and expanding prop desks funded by banks’ leveraged books without any due regard for the inherent risks.

I ended the book wanting some more insights into the future but I guess that even the authors would not have imagined the scale and speed of the ensuing blowup. Besides a bit of Japan and a bit of gold on the long side and the need to stay away from the US Dollar on the short side, I am sure a lot more insight into what might work as an investment or hedge in case their views came true would have been helpful.

That said, this is one witty book which delights in taking the pants off almost everyone. Alan Greenspan is one such obvious target but I enjoyed the authors ripping off the sweeping generalizations made by the likes of Thomas Friedman. The canvas of quotes is indeed wide and travels all the way from ancient philosophers to modern day pundits. It is clear that the author’s value the insights provided by history and he who ignores a historical perspective does so at his own peril and loses his rear view mirror.

In the last 10 years, we have lived through the real estate mania and the internet bubble. Easy money and massive systemic liquidity played a crucial part in creating the irrational exuberance. Even now, to my amazement, I am reading pundits wishing away the fundamental shift that should happen worldwide as profligate US based spenders turn into savers, leading to a slowdown in overall consumption impacting a consumer driven USA to a production driven China to a commodity supply driven Australia, Canada and Indonesia.

Successful money making in the new environment requires, in equal measures, an understanding of the interlinked gears driving a global market place as well as the psychology of the investors financing the mechanics through their participation in various markets. The authors do a yeoman service in baring these correlated and complex processes and highlighting the role played by the politics of decision making.

It is natural to expect the authors take a negative stance towards an inept government which turned a benevolent blind eye to the unbridled speculation and actually ended up promoting and exacerbating the crisis in part by creating excessive liquidity flows. As always it is the public (taxpayers in today’s environment) who are suckered and left holding the bag in the end. A question that is still unanswered is the culpability of the regulators and their accountability for failing to stem the rot in time. Who polices the police is not clear.

I do wish that the book was a bit more structured though. At times I found myself questioning the extension of certain thought processes which kept going in a loop. The canvas of the chosen subjects is so wide that even 424 pages turn out to be inadequate to addresses the issues. I would strongly recommend this book to everyone with an interest in markets and investing and also make it a compulsory read for the regulators in charge of minding these markets.

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Daniel Ryan, Enter Stage Right, September 10, 2007
“Gamma Book”
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It’s a commonplace nowadays in the psychologically hip circuit to divide people up into three categories, as based on a well-known experiment with rats: alphas, betas and gammas. Alphas are leaders; betas are followers; gammas are independent-minded dominant loners. Members of the last group often become alphas at some point in their lives, but discover that they don’t like leadership that much, and return to the dominant lonerhood that they prefer. Gamma leadership tends to be of the “gang’s all here” type.

Each group has its own mindset. Alphas tend to see betas as docile, as good-enough sheep, who need to be led for their own good; gammas are seen by alphas as oddballs, but as ones that might rate respect based upon their accomplishments.

The beta mindset is the one that’s generally misunderstood in our competitive society. The idea that betas look up to alphas is a conceit generally shared by would-be alphas. If you want to find out the real attitude of the typical beta, there’s no better place to do so than at work. Try being friendly to the middle-aged person that’s unpromotable but well-liked. His or her views of alphas and gammas will give you an idea of what the typical beta point of view is. Chances are, you’ll find out that betas tend to size up alphas as people of use: a “good” leader is a useful leader. If a leader isn’t sufficiently attentive to the needs of the followers, then he or she isn’t a “good” leader. (If you’re interested, the eye-opening business book Neanderthals at Work by Albert J. Bernstein and Sydney Craft Rozen, divvys up alphas, betas and gammas as Competitors, Believers and Rebels, respectively.) The beta view of gammas is easier to guess. Gammas, from the point of view of the beta, are largely pitiable deviants unless they have some extraordinary talent worth noting. Sad to say, but the typical gamma fits into the beta world as part of the entertainment. No wonder that so many gammas get into the bash-the-alpha racket.

The gamma mindset is utterly cynical regarding general society. It’s in the gamma circuit where you find the maxims about the “sheeple” being asserted as fact. The typical gamma view of the alpha is that the latter is a huckster, or “humbug;” unlike frightened or disillusioned betas, the gamma sees an alpha as largely clownish or incompetent – as a Sorcerer’s Apprentice. The damage that the alphas do is the result of their limitations catching up with them. Given the amount of gamma-coined slogans about the “deluded masses,” it’s not that necessary to elaborate upon the gamma’s view of the typical beta. The gamma’s view of the alpha is the crucial mindset to remember. In a nutshell, alphas are sized up as tragic figures – impractical pragmatics whose loose moorings wind up getting the better of them. In the gamma world, alphas are often perceived as unruly slaves.

Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics is a thoroughly gamma book. Even the organization of it gives the authors’ mindsets away. Both Mr. Bonner and Ms. Rajiva are goldbugs; both are regular columnists at LewRockwell.com, the well-known libertarian Website. Had they been alphas, they could have gotten the message across to the general public through a Goldwateresque approach: first, by reviewing the horrors caused by Communist and leftist humbuggery; and then, by showing what damage has been wrought by American delusion-chasing. Instead, the reader gets the opposite. In the part that deals with politics gone wrong, “Militant Messiahs,” the three chapters therein discuss: the damage wrought by war; the blunderings of United States foreign policy, particularly in the area of nation-building; and, the horrors wrought by left-wing politicos – in that order. Further proof of the gammaeque nature of this book seems superfluous.

There is a devil figure in this book. It’s none other than the alpha that genuinely cares what the betas think of him or her. This kind of alpha inevitably winds up being a “do-gooder” – the type of person who, according to the authors, causes the most trouble in this oft-saddened modern world.

If you’re the alpha type, you’ll undergo something rarely experienced in this day and age, despite the number of Mencken imitators currently around: you’ll actually feel the same way that a good, worthy, successful U.S. burgher felt in the 1920s when reading one of Mencken’s works when it was hot off the presses. The two authors are that good at being intellectually detached from all parts of the popularity-and-leadership game.

Some may find it roundly offensive, but it would be tragic if the reader, through umbrage, expels him- or herself from the Bonner/Rajiva School for Creative Cynics. After reading this book, you will re-evaluate some of your more cherished ideas. Some will find grist for self-reflection in its material.

There’s actually little investment advice in Mobs, Messiahs and Markets, largely because the authors are attacking the underlying mindset that leads to recurrent and poor investment choices. If you graduate from the Bonner/Rajiva School in good standing, then you’ll have the mental equipment to come up with good investment ideas of your own and/or the recognition of which commonplace ideas are the good ones. It’s actually debatable whether or not this book has its prime value as an investment manual.

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Ron May, Business Pundit, November 2007

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I recently finished Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics. Where do I begin with a book that takes a shot at pretty much anybody and everybody, including the authors themselves? To say that this book is skeptical or contrarian is like saying Warren Buffett has money. This book could set the standard for skeptical writing. That said, it’s part of the reason I enjoyed the book so much.

The general premise is this: we don’t realize how difficult and complex some things are, but we undertake speculative endeavors in an attempt to get ahead because we want to impress the opposite sex (it’s in our genes), and when you add all that together for the masses, you get really stupid behavior.

In an attempt to make sure everybody is equally offended, the authors first poke fun at liberals by claiming that their policies aren’t really designed to make things better, but instead are designed to “discomfort those who don’t agree… it is merely another way of bossing other people around, under the cover of a ‘good purpose.'” Next they lash out at conservatives (or, at least, the current administration) by saying that “success has transformed a modest people whose greatest virtue was once minding their own business into a vainglorious race, who mind everyone’s business but their own” and quoting Issac Asimov that “violence is the last refuge of the incompetent.”

This book creates cognitive dissonance that slaps you in the face very couple of pages. The authors seem to enjoy setting up critiques of the left or right, then flipping sides and using the same arguments on the other side. You nod in agreement as the authors tear down the people you don’t like, then feel guilty when they turn their firepower on your ideas too. It exposes the subtle complexity that is important in so many situations, but that we often ignore so that we can feed our desire for simplistic absolutist views.

Here are some of the more interesting quotes from the book.

Ignorance increases by the square of the distance from a given event.

The truth is — popular politics and bubbles are almost always frauds that flatter our sense of vanity.

Why is there a $700 billion trade deficit? Because Americans want to buy things they can’t afford. Why do they want to buy things they can’t afford? To pretend to be richer than they are. Why do they want to appear richer than they are? Because it gives them higher social status. Why do they want higher social status? So they will have better access to the opposite sex.

Studies show that people are more likely to accept the opinion of a confident con man than the cautious view of someone who actually knows what he is talking about.

The professionals may explain that derivatives help globalized information-drenched markets disperse risk, but this is wishful thinking. They don’t really disperse risk at all; they aggregate it. Fund managers all learn the same theories. They all read the same papers and attend the same conferences. And now they all trade the same things, using more or less the same strategies and formulas.

After 300 pages of entertaining criticism of anything and everything, the authors finally tell you how to get rich. Mostly, it doesn’t involve what you do, but rather, what you avoid. It’s the stuff you have probably heard before: buy and hold, minimize taxes and transaction costs, stick to what you know, analyze the risk that you don’t know you don’t know, and of course try hard to think for yourself and not pay much attention to other people.

I loved this book and I read the full 400 pages in just a few days. But I won’t recommend it to everyone. Francis Scott wrote that “The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.” I do not think most people have this capacity, but if you do, I highly recommend this book. For everyone else, it will just be offensive.

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David Shvartsman at Seeking Alpha, February 27, 2008

Atim Kabra at Seeking Alpha, January, 2009

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Abram Bergen, BlogCritics, reprinted in The Huffington Post, January 2008

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Bill Bonner and Lila Rajiva team up, in Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics, to peel the layers of glittering wool from our eyes so that we may see the world of politics and financial markets for what they are. They show us the poor players upon the stage, to paraphrase Macbeth for a moment, as they strut and fret their hour upon the stage, telling tales full of sound and fury, signifying nothing. And what a show it is! Cocks, with their long bright tail feathers, strutting down the runway. Big-horned deer duking it out on stage. That’s what it all comes down to, the authors observe. In the end,

it’s all sex and lies. Everything: Romance. Cars. Jobs. The debt bubble. The real estate bubble. The trade deficit bubble. The American Empire. They are useful only as evidence of conspicuous consumption; they wink to the opposite sex that the animal is fit for procreation and game for a little hanky-panky. If he can carry around all that extra baggage and still survive, he must be tough.

Mobs, Messiahs, and Markets is a tragi-comedy, full of sharp observations, delivered with equally sharp wit. This book’s dark and disturbing revelations could leave one depressed and disillusioned, were it not so damn funny.But Mobs, Messiahs, and Markets isn’t merely about sitting back in our seats to laugh at the poor saps on stage. They aren’t blaming the actors either. Well, not entirely. Most of them are otherwise intelligent, responsible, rational individuals who have simply been caught up in the public spectacle and the irrationality of mass mentality. So along with the sharp observations and disturbing revelations are some pointers for the thinking individual — individual is key — to use the knowledge gleaned from the show to avoid getting caught up in the public spectacle and maybe even make some money to secure his or her future.

Bill Bonner is the founder and president of Agora Inc., a consumer newsletter and book publishing company and is the creator of The Daily Reckoning, a contrarian financial newsletter delivered via e-mail. Bonner has also written, with Addison Wiggin, Empire of Debt: The Rise of An Epic Financial Crisis and Financial Reckoning Day: Surviving the Soft Depression of the 21st Century.

Lila Rajiva is a contributing writer and editor at Agora, and her work can also be found at Lew Rockwell, Counterpunch, Money Week, Dissident Voice, Himal South Asian, and Rational Review, among others. She is the author of The Language of Empire: Abu Ghraib and the American Media, and blogs at the Mind-Body Politic.

The first chapter, “Do-Gooders Gone Bad,” is perhaps the lightest, but its opening paragraph hints at the central problem with which the book is concerned, whether in politics or in finance, and its dark humour sets the tone for the rest of the book.

It is a shame that the world improvers don’t set off some signal before they go bad, like a fire alarm that is running out of juice. Maybe some adjustment could be made. Instead, the most successful of them — such as Benito Mussolini and Adolf Hitler — actually gain market share as they get worse. Their delusions are self-reinforcing, like the delusions of a stock market bubble; the higher the prices go, the more people come to believe they make sense.

Bonner and Rajiva don’t put much stock in do-gooders and world improvers, nor in the over-bloated and fickle financial markets.But how can you talk about figures like Mussolini and Hitler, some people may rightly ask, and crack jokes? The answer, I suspect, is that humour is a useful distancing tool. They are not making light of the suffering caused by these figures, but they think about things most people prefer not to. In the context of the inevitable and very devastating U.S. housing bust on the horizon they remark that they make it their business “to think about precisely what most people can’t bear thinking about.” And to think about these things to understand why they happen again and again and again, and why the masses inevitably get caught up in the momentum no matter how nasty things get, one must “get close enough to see how things work — like a prairie dog peering into a hay bailer — but not so close that you get caught up in it yourself.”

The authors cover a lot of ground in Mobs, Messiahs, and Markets. They discuss modern world-improvers-cum-dictators like Mussolini, Hitler, Mao, Stalin, and Pol Pot. Empires intent on improving the world — Greek, Arab, Assyrian, Frankish, British and now American. Terrorism in the eleventh, twelfth, and thirteenth centuries created in large part by European Crusaders who decided to “bring the blessings of Christian governance to the desert tribes” to terrorism today inspired by America’s attempt at bringing “freedom and democracy” to the Muslim world. They cover mass hysteria and paranoia from the witch hunts in the late Middle Ages to the McMartin Satanic child abuse trials across America in the 1980s. They discuss the players in the financial world, from incompetent and grossly overpaid CEOs, to multinational corporations sucking the land dry in far-off countries, to advocates of globalization and the flat earth, to the IMF, World Bank, and the Federal Reserve, as well as the debt, real estate, and trade deficit bubbles. And then, of course, there is the role of propaganda and the media, from Germany to Britain to China and once again to America.

“So many humbugs, dear reader, and so little time,” the authors remark at one point. And as for all the efforts of world improvement, they have this to say: “[t]he negative consequences at the end of an effort at world improvement are roughly equal and opposite to the positive aspirations at the beginning.” The problem is that otherwise reasonable, intelligent individuals, be they “[i]mperialists, anti-imperialists, capitalists, communists — as soon as they get a grand scheme into their heads, a pet project for world improvement, they all seem to end up in the same place — bungling, botching, and butchering.” If you “put them at a head of a country or an army, then they are off on some fool mission — bringing civilization to the barbarians, making the world safe for democracy, or ushering in the proletarian revolution.”

To get at an answer for why this happens, the authors turn to the work of the British anthropologist Robin Dunbar. Dunbar has studied the human animal, as also other primates like monkeys, chimpanzees, and baboons, and has come to the conclusion that there is a “maximum number of people and things with which the human brain can cope effectively.” Though humans are very social animals, being in possession of a well-developed neocortex to deal with complex reasoning, we really have the capacity to effectively deal with only about 150 people. Dunbar has studied 21 different hunter-gatherer cultures and found the average number of people in their villages to be 148.4. And groups in modern societies seem to have picked up on this as well, from communal groups like the Hutterites to cohesive fighting units in militaries from the classical Roman army to the modern army company.

This is one of the most interesting parts of the book, and crucial to the central argument. “Human beings, according to the sociobiologists, cannot understand much more than the things about which they are concerned for their daily existence.” Yet in our modern society individuals are put in positions in which they are asked to plan for millions of people and deal with dollar figures in the billions and even trillions. Dealing with all manner of things outside of their immediate circle, people are liable to accept inadequate or wrong explanations. “The human brain,” the authors argue, “is just not big enough for the big world. In order to think, people are forced to start simplifying and eliminating a lot of detail. They have to abstract … theorize … generalize.” And that’s how mob mentality begins. And the problem with the mob, with crowds, is that “[t]hey can only feel and act. They can’t think, because they have no set of facts solid enough on which to build.” And at that point, the authors warn, “[s]logans replace reason. And the private world of right and wrong has been replaced by the public spectacle, which knows no moral authority beyond its own desires.”

Mobs, Messiahs, and Markets returns again and again to the public spectacle. The thinking individual, whether engaged in politics or finances, must avoid being caught up in it. The last two chapters of the book attempt to help the thinking individual steer clear of the public spectacle. Reading closely, there are some very helpful tips. The most important lesson, of course, is that independent thought will get you much further than following the masses, believing everything you read in the newspapers, or even looking for specific investment advice to follow in this book.

Mobs, Messiahs, and Markets is a great read for the independent thinker with a well-developed, and perhaps somewhat morbid, sense of humour. Readers looking for easy answers without being willing to work hard and think independently will likely get little or nothing out of it. And readers without the sense of humour to sit back and laugh at the public spectacle as it unfolds, and as it is reported in the media, will likely be offended and put the book down. The sharp wit and dark humour, as much as some of us may enjoy it, is perhaps the greatest potential drawback of this book. For readers who are willing to think independently, but don’t share the sense of humour, a more serious approach might be necessary. For the rest of us, Mobs, Messiahs, and Markets is a serious and hilarious guide to surviving the public spectacle in finance and politics.
******************************************************************************************************************** Donald Mitchell, founder of The 400 Year Project, December 18, 2007

“History Rewritten to Demonstrate Lessons for Today,

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A quote you’ll often read is that history is written by the victors. Many people think that observation is limited to histories of battles and wars. But the same can be said of those who win political and appointed offices, CEOs, and write the daily stories in the press. These victors are almost always impressed with themselves and what just happened while failing to cast any perspective on what might actually be going on. Others hear the same story so often they don’t even bother to notice that contrary evidence to the common delusion is all around them.

William Bonner and Lila Rajiva are deeply skeptical of the consensus and provide lots of evidence to the contrary. The book’s main weakness is that sometimes their evidence is too superficial to capture the underlying causes of what they describe.

What are some of the key lessons the book develops?

1. World improvers using force and funds can do a lot more harm than good. Was invading Iraq to eliminate weapons of mass destruction really necessary?

2. People would rather treat an issue through a story someone tells them rather than think matters through. A failed leader may tell an untrue success story so often that everyone comes to remember only the story, rather than what the leader accomplished.

3. People can easily become fearful of something that’s not happening. Witness the political success in the U.S. of “fighting terrorism” when there have been no significant domestic events of this since early 2002.

4. The authors argue that democracy isn’t so good for economic growth. I found this analysis incomplete because it failed to separate out the effects of lender-mandated “reforms” by the World Bank and IMF that created depressions in most new democracies in the last few decades.

5. Out of hysteria bred by publicity can come actual harm to the accused. The original witch hunts and the more recent convictions of child care workers based on the “aided” testimony of five-year-olds are cited as evidence.

6. Wars are always associated with false reports of atrocities that no one bothers to question.

7. Many countries enter wars when they would have accomplished more by not doing so (such as the United States in World War I).

8. Most “heroes” were actually bumblers. Che Guevara and Alan Greenspan are cited as examples of the left and right.

9. Booms are rarely created by top-down efforts of governments. True improvements come from the efforts of people working independent of governments.

10. Investors discount unlikely events, underestimating their potential occurrence and impact.

11. The U.S. Federal Reserve has been sponsoring one bubble after another around the world by inflating the U.S. currency in circulation in conjunction with the Japanese Central Bank by offering bargain basement interest rates to borrowers who want to buy into the bubbles.

12. Almost all markets are over priced right now, but investors are unconcerned as they march to the edge of the cliff.

13. To make money in investments, don’t do what others do . . . and don’t look for problems where there are none.

14. If you decide to sit out the housing and financial markets, gold is a safer bet than money market funds or short-term bonds.

15. Use a historical perspective over a couple of cycles of up and down to see where the markets are at any given time.

Some will find the book maddening because it’s oblique in making its points. Others will be charmed by the stories and thought-provoking historical examples.

I suggest that this not be your first book on manias. Extraordinary Popular Delusions and the Madness of Crowds by Charles MacKay would be a better choice to begin. Without that context for this book, you’ll find yourself gobbling caviar without knowing what it is . . . and you may not like the taste without preparation.

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Alan Caruba, Book Views, December 2007

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“At the top of the stack is Mobs, Messiahs and Markets: Surviving the Public Spectacle in Finance and Politics by William Bonner and Lila Rajiva ($27.95, John Wiley & Sons). Anyone paying any attention whatever to the stock market or, for example, the sudden rise in the price of gold, knows that a mass phenomenon occurs with regularity, if not daily, when it comes to the way people think collectively as opposed to individually when it comes to investing or protecting their finances. We have seen dot-com manias and, more recently, the fallout from sub-prime lending that has impacted the housing market nationwide. This book examines what happens when ordinary people turn their money over to brokers and mutual fund managers, believing that strangers will give them back even more. This is a cautionary tale that anyone exploring investment options needs to read. The authors have excellent credentials and have written a fascinating book”

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SAMPLE PRESS RELEASE

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Married to the Mob: Nine Truths about How “Group Think” Makes Us Suffer…Financially and Otherwise

Going with the crowd is rarely a good idea, but we do it anyway and suffer the negative consequences together. Best selling author Bill Bonner and political journalist Lila Rajiva explain how the mob mentality ruins our financial and personal well being—and why we’d all be much richer and happier if we’d just think for ourselves.

Remember explaining to your mother why you’d taken some (ill-advised) action because all your friends were doing it? And remember her stock response? If all of your friends jumped off of a bridge, would you do it too? she would ask, hands on hips and voice rapidly escalating to tones of incredulity. Well, according to William Bonner and Lila Rajiva—and unfortunately for you and your mother—the answer would probably have been yes. What’s more, it would probably still be. It seems we humans never outgrow the powerful urge to go along with the crowd, even when the crowd’s decision will result in financial loss, humiliation, physical injury, or in extreme cases, death.

“Just think about this common scene on the evening news,” says Rajiva, co-author along with Bill Bonner of Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics (Wiley, 2007, 978-0-470-11232-8, $27.95). “A sports team has just won a big game, and to celebrate it a group of otherwise sane and responsible people have collectively determined that it’s a good idea to set cars ablaze, clamber up telephone poles and street lamps, and jump over bonfires. Why? Because they’re no longer thinking as individuals but have given in to the ‘mob instinct’—which rarely results in anything but catastrophe.”

To support their contention the authors cite scientific studies that show that your brain is hard-wired to work best in smaller groups—a phenomenon that is true even in the organization of the military. In smaller groups, people cooperate with mutual trust, according to simple rules of conduct, and easily understood hierarchies. In larger groups, however, everything changes. The crowd mentality takes over.

In the course of an iconoclastic frolic through economics, politics, and history, the authors explore that mentality and its devastating effects on human behavior. Their intriguing insights help explain why we blindly follow leaders who are clearly wrong, succumb to witch hunts stirred up by pundits, and buy ridiculously overpriced stocks just at the moment when we should be selling them. The secret to understanding politics, markets, wars, fads, and manias, they write, is understanding the problem that arises when human beings make decisions as part of a big group even though they are wired to operate best in small groups. This kind of “public thinking,” as they call it, is a set up for disaster.

Documenting their argument, Bonner and Rajiva describe the absurd and sometimes frightening ways in which the herd instinct drives us as individuals, as a nation and as world citizens. Here are a few samples from the book:

What’s the real reason behind the $700 billion trade deficit? Sex! Here’s why. There’s a $700 billion trade deficit, right? Well, why is that? Isn’t it ultimately because Americans want to buy things they can’t afford? Think about it and you’ll see that when Americans spend more than they have in order to follow the rise and fall of all sorts of fads and trends, they do it only so they can look richer than they actually are. And that turns out to be a competitive strategy in the mating game. Why? Because if you look like you belong to a higher social class, members of the opposite sex are more likely to be impressed by you. Flashy clothes, oversized houses, cosmetic surgery—they are all ways to seduce the opposite sex.

“But then again, it’s all relative,” says Rajiva. “If everybody on the block buys a Hummer and puts in a swimming pool, the man who has those things is bound to quickly lose his edge. Then an arms race in consumption begins. A man has to spend even more—bringing himself even closer to bankruptcy—in order to show off. And the women he is trying to attract must wear the most expensive clothes, drive the most expensive car, live at an expensive address, and sport the most expensive jewelry. She must also appear as physically attractive as possible.

Remember, it’s all about sex, and a nation of individuals living beyond their means inevitably leads to a nation living beyond its means. For each gaudy trinket that adds to your allure, you’re taking on more debt. While the Chinese save and manufacture the baubles they sell us, Americans pile on debt to buy what we don’t need with money we don’t have. Ergo, sex ultimately drives the US trade deficit.”

Your personal vote actually doesn’t count at all. We’re told how important every vote is to the country. But, if you think about it, elections have become simply a ritual of modern government. They serve roughly the same purpose as used to be served by crowning the king or bowing to the tyrant. They are all equally actions that are merely emblems of submission and adherence. Individually, none of them has any effect whatever on the outcome. “Voters might as well be the home crowd at a ball game,” says Rajiva. “The real odds that your vote will decide the outcome of an election are something on the order of 1 chance out of 10 raised to the 8th power. For comparison, the number of seconds since time began is something like 4.3 times 10 to the power of 17. In other words, you could be shipwrecked on an island with Paris Hilton and win the lottery every day before your one vote would be decisive.”

World “do-gooders” are deadly dangerous. The trouble with the big wide world is that it is never quite good enough for some people. They keep trying to improve it. No harm in that, of course. In theory, making your world a better place is a noble concept. But the world improvers are rarely content with private acts of kindness; instead, they want gas chambers….. and social security—vast changes almost always brought about at the point of a gun. One example the authors like to cite is the Middle East, where “do-gooders” have recently set about to “help” Iraqis “reform” their government—when what they really mean is that they want to make it more like theirs.

“Private acts of charity or innovation that might actually make the world better are of little interest to the world improvers,” says Rajiva. “They propose a ban on world hunger—without planting a single turnip. They take up the cause of ‘freedom’ in other countries—and force the liquor store next door to close on Sunday. They insist so strongly on better treatment for women in the Islamic world, they forget to kiss their own wives. Of course, ideals do matter. Honesty, integrity, honor, love, service, dignity, frugality, industry, self-discipline, charity—these are the qualities that make the world a better place. And most importantly, no one’s home has to be bombed in order to make any of this happen.”

You’re not imagining it: both presidential candidates really are losers. Here’s why. Presidential candidates are do-gooders looking to spread their good doing further than their state governorship or congressional seat will allow them. Like any do-gooder, the bigger fools they are, the more they seem to be able to get other fools to fall in behind them—so long as the other fools are confident enough. And the reason is that while all public spectacles may found themselves on insincerity, the perpetrators of the fraud (in this case our dear candidates), are often the most defrauded of all.

“They actually believe what they are doing is for the betterment of the world—no matter how disagreeable it may be to the people being bettered,” says Rajiva. “Their thoughts contain such a tangle of deception and misconception that there is never the slightest hope they will extricate themselves from their assumption of unadulterated virtue. The words wrap around their feet, the ideas clutch their throats and squeeze their hearts, but they’re convinced that all of their lip service is for the public good.”

We’re all about to pay for the housing boom bust. As the housing boom grew and grew, many real estate agents, lenders, and members of the media hyped houses as if they were stocks. Suddenly many homeowners came to believe they had an ATM machine in their bedroom. They could now regularly withdraw from the Bank of Four Walls and a Roof. A house appreciating $40,000 a year could easily provide $10,000 through refinancing or in mortgage equity withdrawal, they reckoned, and went out and borrowed—in 2004 and 2005, more than $1 trillion. And lucky for them at the time, there was no end to the number and variety of nontraditional mortgages flourishing, the most popular being subprime adjustable-rate mortgages (ARMs).

“And now the monthly payments on about $600 billion of subprime mortgages are increasing by as much as 50 percent because the two-year teaser periods are up,” says Rajiva. “And as we’ve seen after the last couple of weeks of subprime hysteria, many of the recipients of these loans aren’t able to make their payments so loans are defaulting and mortgage lenders are declaring bankruptcy. Now they’re failing and not only is the U.S. market suffering but so are markets around the world. The end is certainly near, and soon we won’t be able to refinance ourselves out of our problems.”

Don’t swallow political, financial, or social slogans. Every vote counts. Stocks for the Long Run. The War Against Terror—most of what people think they know is really only a catchy slogan, the glitz thrown up by the public spectacle of the modern state. It is only a confused melee of half-understood ideas, misconceptions, prejudices, hype, humbug, and downright lies. And the worst part is that the deceivers are also the most deceived.

“Often, we are so deeply immersed in public thinking that we start believing it,” says Rajiva. “We start accepting slogans that are dangerously misleading; we reduce complex ideas and contradictory information into one-sentence-explains-all snippets that the masses then understand as reasons. One rusty simplification is connected to the next until the crowd gets to where it wants to go. And when it does, it becomes thoroughly logical…and completely unreasonable.”

The world may be getting flatter, true; but it’s also getting steeper. Take Thomas Friedman’s book The World is Flat, a runaway best seller about technology and communication leveling the playing field for all the world’s peoples. Trouble is, Friedman only tells half the story. He explains how the world is leveling out. The part he doesn’t get to is how the world is also getting steeper at the same time. American low-level earners are competing with a billion workers in Asia willing to do the same work for less than one-tenth the salary. And in China there is growing income inequality between those who have joined the global economy and those who have not. While the Chinese cities grow richer, the poor in China are left behind—just like America’s industrial workers.

“In short, the world is getting flatter in some areas, and steeper in others,”says Rajiva. “There is less difference between China’s industrial workers and those in America, but the difference between the globalized employees and the capitalists who employ them is growing. Beneath the surface of Friedman’s flat earth, the pressure is growing. Sooner or later, it is bound to explode.”

Money problems are just around the corner for practically everyone. We appear to have reached the end of the biggest bubble of debt and credit in history. At this very moment, the public markets are teetering on the brink of a major change of direction. Five hundred trillion dollars in derivatives could be ready to explode. Fifteen trillion dollars in worldwide stock-market capitalization could disappear. And the average American house will lose 20% to 40% of its value as five million families are forced into bankruptcy. And practically everyone is in debt—debt that is stuffed into hedge fund portfolios as an investment, debt that is laid away at insurance companies and pension funds as an asset, and debt that is traded, extended, extruded pressed, bolted, wrung out, and wadded up. It is debt for all seasons, all people, all times, and all places. All that excess is bound to catch up with us.

And finally, here is how all this talk about mob mentality relates to your money and your economic well being. As a contrarian observer of the financial scene, Bill Bonner has long been well known for arguing against the dilution of the value of money by excess printing.

Now in this book, he points out that the value of the dollar since it was cut loose from gold in 1971 has been controlled not just by the bankers, or by the printing presses, or even by economic fundamentals, but, like nearly everything else in public life, by crowd dynamics! In other words, the fundamental building block of American wealth is now beholden to the same mass-sentiments that are at work in the rest of the markets. That is a fatal sign, because if history has shown us anything, it is that currencies rise and fall alongside the empires that create them.

“Over the next few years, many people are going to be ruined; fortunes will be wiped out,” says Rajiva. “New groups of people will acquire wealth and power, while some of today’s economic elites will be destroyed. But with your new understanding of crowd psychology, you can anticipate what crowds will do and can avoid being victims of history. You can be among the few whose investments go up when the great mass of people lose money. And as a result, you will not only be able to safeguard your wealth, you will enhance your well being and save your sanity.”

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SAMPLE CUSTOMER REVIEW
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Retta Fontana, September 2007

Bonner and Rajiva have hit a home run with the bases loaded on this collaboration.I used to think that anything which came under the category of “economics” was meant be used as a remedy for insomnia. Writers like Rajiva and Bonner changed all that. They are both technically gifted writers. Beyond that, their passion for truth telling, no matter how unpleasant the medicine may be, comes through as always.

My home schooled daughter recently asked about a new history book to study. I recommended this one and she is now at it feverishly. I only wish there’d been something so entertaining and educational when I was 14. I would have been much better informed about life if it had.

In “Mob’s Messiahs, and Markets” the reader is entertained while being given insider, little-known historical anecdotes to drive home clear economic principles. “Mobs, Messiahs and Markets” has all the fun of enjoying a gourmet meal without the expensive tab, the hit to your health or the hang over.

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ABOUT THE AUTHORS
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William Bonner is President and CEO of Agora Inc., one of the world’s largest financial newsletter companies. He is the creator of the Daily Reckoning, a contrarian financial newsletter (www.dailyreckoning.com). Bonner is previously the author, with Addison Wiggin, of the international bestsellers, Financial Reckoning Day and Empire of Debt.

Lila Rajiva is a political journalist, an editor at Agora Publishing Group, and the author of The Language of Empire, a groundbreaking study of the Abu Ghraib prison scandal. She blogs at www.mindbodypolitic.com.

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AVAILABILITY
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Mobs, Messiahs, and Markets: Surviving the Public Spectacle in Finance and Politics (Wiley, 2007, 978-0-470-11232-8, $27.95) is available at bookstores nationwide, major online booksellers, or direct from the publisher by calling 800-225-5945. In Canada, call 800-567-4797.