The world is following economic developments with bated breath, looking for some sign of whether we are headed for a double-dip recession. A Swiss asset manager recently joined the debate: “No, there will be no double dip. It will be a lot worse. The world economy will soon go into an accelerated and precipitous decline which will make the 2007 to early 2009 downturn seem like a walk in the park.” The author claims that this correction could ultimately drag on for 100 years or more, swallowing up all the wealth generated since the industrial revolution. His conclusion: the situation is so dire that gold will become important “for wealth preservation purposes.”
These are truly unsettling predictions. The aftermath of the financial crisis sending us all the way back to where we were before the invention of the steam engine? But why stop there, perhaps we'll find ourselves at a point before the discovery of America, or before the fall of the Roman Empire. And with such a dark view, how do we know gold would be up to the task of buffering this destruction? A cattle ranch in Wyoming – with lots of guns – sounds like a safer alternative.
Moreover, 100 years is quite a long horizon for such uncertain claims. Even if this scenario comes to pass, the asset manager that conjured it up might not be around anymore to celebrate its prescience. I can't recall hearing about any medieval asset managers – with the exception of the Medici, of course. All joking aside, it seems far more likely that this dire warning will turn out to be wrong, just like every apocalyptic prophecy so far.
Why is it that these end-of-the-world stories continue to find such a strong foothold in the collective imagination? From John the Apostle to Robert Malthus, from Nostradamus to Oswald Spengler, from the ancient Mayas to the Club of Rome – doom and gloom simply fascinate us. Yet our contrary tendencies toward unwarranted optimism and overconfidence make clear answers elusive. Newlyweds expect their marriage to last a lifetime even though they are aware of the divorce statistics.
But overconfidence and excessive pessimism spring from the same source, although on the surface they certainly seem antithetical. Both draw their strength from the deadly sin that brought down the devil himself: pride. By a strange psychological twist, our fondness for apocalypse might be embedded in our vanity just as much as our inherent optimism. After all, what could make us more special than being part of the generation that sees the end of the world as we know it?
Whether we want to or not, at some point we all fall prey to this sense that we are special, standing out from the crowd. Unfortunately for our end-of-the-world scenario, these predictions have been around since the dawn of civilization and won't disappear anytime soon. Even from one generation to the next, we are inclined to complain that everything was better in the past and that young people have no respect – something Plato was already saying almost 2,500 years ago.
The post-financial crisis world is forcing us to sober conclusions indeed, but what we need now is careful analysis based on facts. Our current circumstances present challenges that may seem insurmountable at times – there is really no need to spread apocalyptic visions.
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