Things That Make You Go Hmmm...

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homer screamingThe list of human phobias is comprehensive to say the least. Over the centuries the human race has managed to find a way to be afraid of just about everything around it. Some of the fears are familiar ones such as the fear of confined spaces—‘claustrophobia’, or that of open spaces—‘agrophobia’, and some are a little more—how can I put this so as not to upset any katagelophobes out there?—‘eccentric’.

Did you know, for example that Gephydrophobia is the fear of crossing bridges? Or that Dextrophobia is a fear of objects at the right side of the body? Having Consecotaleophobia (an innate fear of chopsticks) is certainly a handicap if you happen to live in this part of the world and if you suffer from Bolshephobia, your fear of Bolsheviks would have made Octobers pretty rough growing up in Russia.

You think those are strange? How about the specificity of these phobias (which I think we can safely file under ‘irrational’):

Arachibutyrophobia - Fear of peanut butter sticking to the roof of the mouth.

Zemmiphobia - Fear of the great mole rat.

Rhabdophobia - Fear of being severely punished or beaten by a rod, or of being severely criticized. Also fear of a magic wand

Pteronophobia - Fear of being tickled by feathers

Peladophobia - Fear of bald people

I could go on for a long, long time with these, but that would only upset the thaasophobes amongst you so let’s get back to business.

The reason I bring this up is that each and every human phobia is a learned response that a few (in the case of kyphophobia, the fear of stooping) or indeed many (in the case of thanatophobia, the fear of death) develop over the course of their lives, and yet each and every one of us came into this world with the same two identical fears; loud noises (ligyrophobia) and falling (bathophobia).

This innate fear of falling, common to all human beings, may go some way towards explaining the obsession the world seems to have with preventing recessions and avoiding deflation. Recessions are always seen as a bad thing for the economy and, since the days when Alan Greenspan’s bony fingers were wrapped around the Federal Reserve’s monetary levers, there has been a war waged on the downward half of the business cycle in an attempt to literally abolish it as though that were a) possible or b) desirable.

Just as a world filled with only sunshine would eventually be uninhabitable or a forest without the occasional fire would ultimately stifle itself, the business cycle needs the occasional bust to counteract the booms that cause overheating and excess. That’s just the way it is I’m afraid. We may not like it. We may be afraid of falling, but nature need take its course.

By far the biggest fear of the past several years has been that of deflation.

(Investopedia): Deflation: A general decline fall in prices, often caused by a reduction fall in the supply of money or credit. Deflation can be caused also by a decrease fall in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower fall in the level of demand in the economy, which can lead to an economic depression. Central banks attempt to stop severe deflation, along with severe inflation, in an attempt to keep the excessive drop fall in prices to a minimum.

The decline fall in prices of assets, is often known as Asset Deflation.

Scary stuff. All that falling.

The word ‘Depression’, when used in an economic context, seems to spark the kind of fear amongst the citizens of developed economies that can only be borne of a phobia.

Grainy photos of long lines of men clad in greatcoats and homburg hats lining up for either jobs or soup are etched in the collective conscious and the fear that we could fall back there again is enough to keep even the most sanguine of men awake at night. For central bank heads it is the pure embodiment of terror.

Collective bathophobia amongst central planners has led in recent years to an extraordinary set of measures which have been enacted—we are constantly told—with the explicit purpose of ‘avoiding a Depression’.

None other than Ben Bernanke explained this recently to a group of students at George Washington University in one of a series of lectures designed to explain just what an amazing job Benny and the Feds had done over the past several years in avoiding another you-know-what:

(Politico): The subtext in Ben Bernanke’s third college lecture was clear: his Fed helped stop a second Great Depression.

Appearing before students at George Washington University on Tuesday, the Federal Reserve chairman contrasted his academic expertise—the depression—against his personal experiences.

“The Great Depression was much worse than the recent recession,” the former Princeton University professor said. “Without a forceful policy response, we would have had a much worse outcome.”...

If the Fed had not leapt into the crisis as the lender of last resort, Bernanke said Tuesday, the entire global economy would have melted down as was the case in 1929. “Suddenly, there was no trust whatsoever, even among the largest financial institutions,” he said.

This emotive term is always used in the context of what they are trying to stave off, but interestingly enough, whenever the possibility of a ‘Depression’ is discussed in real terms as opposed to it being something that must be defeated, the possibility of one occurring is quickly dismissed in soothing tones—we can’t have people frightened now, can we?

But what are the origins of this quest to avoid such falls and why is there such a huge desire to immediately put a stop to recessions of any kind? After all, they are just nature’s way of healing a broken economy. The fact that they sometimes break to the upside is no less dangerous than when they break to the downside and yet nobody seems to have any great desire to pop bubbles while they are inflating.

If the economy wasn’t allowed to get ahead of itself in the first place, any recessions would be far less dramatic—but of course, in such a scenario, neither would the expansions and that we just can’t have now, can we?

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About Grant Williams