A couple of years ago Emily Yoffe wrote an article
on narcissism for Slate. Reading it, one
could readily conclude that Alexis de Tocqueville’s and Christopher Lasch’s warnings
had finally come to pass. Then Yoffe appeared on the Colbert Report and made
the argument that narcissistic behaviors had helped ignite the financial
crisis. To which Colbert retorted: “But the economy and the market are really just built up on confidence. Why
don’t we just recapture that narcissism that we had a year ago and just pretend
that everything is OK? And won’t the market just come right back? Won’t we just
rebuild the bubble?”
A
few years later, it seems the strategy for economic revitalization Colbert
suggested has worked quite nicely. An article on the Business Week web site
asks: “In a World Full of Risks, Why Are Investors So Calm?” The author points
to a graph according to which risk aversion in all sorts of speculation – oops,
investment – “is at a record low going
back to 1980. ” As
the article reminds us, “that span
includes the Crash of ’87, the rolling emerging-market contagions of the 1990s,
and the multiple human and financial calamities of the past decade.”
An
analyst gives the following explanation: “The so-called Bernanke
put—or, more accurately, global central bank put—is suppressing most of the
risk and fear gauges. And just about all asset
classes, risky or risk-free, have been bid up.” There may be, though, a more elegant
theory – delusional thinking has now become a lot more common than it was
during previous periods of financial duress. I also heave a theory explaining
why this shift has come to pass, but it’s a bit too depressing to lay out just
before Christmas – for me, not for the investors on whose daring risk-taking it
would shine much needed light.
