Stampeding Animals

The mass impulse of a cattle stampede can be triggered by something as innocuous as a blowing tumbleweed.  A sudden startle, or a perceived threat, is all it takes to it set off.  Once the herd collectively begins charging in one direction it will eliminate everything in its path.


bison-herdBetter get out of the way… stampeding bisons

Photo credit: Surface Niusance


The only chance a rancher has is to fire off a pistol with the hope that the shot turns the herd onto itself.  If the rancher is successful, it will stampede in a giant circle.  If the rancher isn’t, it will run off a cliff.

Today’s modern man, a complex species that ranges between homo sapiens and homo neanderthalensis, like bos taurus, is also predisposed to herd behavior.  What’s more, the human animal will take just about anything and everything to the extreme.

Religious pilgrimages, sporting events, music concerts, New Year’s Eve celebrations, and political rallies gone bad have all triggered deadly human stampedes.  Just last year, for instance, over 2,400 people were trampled to death during the Hajj Stampede in Saudi Arabia.


mecca-3The Kaaba in Mecca – every year, several million Muslims gather in Mecca for the Hajj. Stampedes in which hundreds of people are trampled to death happen quite often. It is easy for such a big mass of people to panic – and there is nowhere one can turn if it happens.

Photo credit: Watson Media, via flickr


Moreover, in today’s frenetic society, humans are granted a variety of avenues for a mob dynamic to express itself.  Financial markets and the fear and greed prospects of economic scarcity provide a fertile landscape for remarkable human folly.  Manias, panics, and crashes come to pass with unwavering regularity.

After an abundance of speculations have piled up on one side of a trade, they must eventually reverse course and charge elsewhere.  The precise moment and duration are never clear.  But, when the time comes, those at the back of the pack are often left holding worthless receipts.


Key Lessons from the Past

Social mood and mass collective movements cycle over and under in ways that are only really predictable in hindsight.  The solution to high prices, of course, is high prices.  Unfortunately, the lessons of the past are often the wrong instructions for the future.

For example, key lessons from the 1930s were that one should have no debt; one should keep large stashes of cash outside the banking system; and one should plant a vegetable garden and hoard scraps of aluminum and bags of flour and sugar…and whatever else one could store.


Bank-Holiday-Great-Depression-NYC-3Bank run during the Great Depression – a lot of deposit money went to “money heaven” – it literally disappeared as thousands of fractionally reserved banks became insolvent. In spite of frantically pumping up its balance sheet, the Fed was unable to keep the money supply from contracting (contrary to the myth that the Fed “did nothing”, its holdings of securities grew by more than 400% from late 1929 to early 1933).

Photo via


But those that heeded the lessons of the 1930s and held cash through the 1970s were rewarded with a significant loss of purchasing power.  Their industry and thrift were covertly subtracted from their bank accounts.  The landscape had shifted.

For the key lessons from the 1970s were that one should be borrowing large amounts of money; and that one should not hold a stash of cash. This was especially true if the borrowed money was used to buy a house.  In no time at all, the debt burden was cut in half and house prices ballooned up.

For instance, the median unadjusted home value in 1960 was $11,900.  By 1990, it was $79,100.  Over the course of a 30-year loan, monthly payments on a home bought in 1960 were reduced to pocket change.  At the same time, by 1990 it took $4.42 to purchase what $1 could buy in 1960.  Home values increased at a  rate exceeding the the dollar’s loss of value nearly by a factor of two.

The result is that one generation shuns credit like the black plague.  The next laps it up like pigs eating slop.  What are the correct lessons from yesterday to be applied to tomorrow?

“People still have a memory of what happened during the recession,” remarked IHS economist Chris Christopher, earlier this week. “Millennials, if they have money left after paying their student loans, do put money aside.”

Christopher was commenting on the recent Gallup Poll that concluded that Americans are more likely in the post-2008 world to perceive saving money as more enjoyable than spending it.  And, to a certain extent, their attitudes have reflected this, as the savings rate has increased from 1.9 percent in 2005 to 5.4 percent today.


1-savings rateThe personal savings rate. It should be noted that this is a highly problematic indicator – it certainly does not measure real savings. However, its trend does tell us something about the shift in consumer attitudes toward savings and debt – click to enlarge.


Gold Stampede Imminent?

Yet the lesson from 2008 may not be the correct lesson for tomorrow.  On Wednesday the Fed announced their efforts to normalize rates have stalled out.  Then, yesterday, first quarter GDP growth was reported at an abysmal 0.5 percent.  What to make of it?

The Fed and other central bankers have executed radical policies of mass money debasement for nearly the last 8 years.  This was supposed to “jumpstart” the economy and stimulate an economic boom.  But the new boom has yet to come – instead the economy is flat lining.  Meanwhile, the U.S. stock market is near its all-time high.

No doubt, this is a precarious situation…one that cannot last for much longer.  When the stock market breaks, and the herd rushes out, where will they stampede to?


2-10-year note yieldBuying US treasuries and other developed market government bonds has been very profitable for 35 years running – that need not remain so – click to enlarge.


For the last 35 years, U.S. Treasuries  have been a favorite safe haven destination for wealth.  Many even referred to U.S. Treasuries as the ‘safest investment in the world.’  However, perceptions about government debt securities and the validity of monetary policy have dimmed since 2008. The next crisis, which may be just over the horizon, will likely be a major crisis of confidence.

Under this scenario, when the crisis comes it will come quick and without explicit warning.  Wealth will exit financial markets like cattle stampeding from gunfire in the night.  At the same time, people will quickly realize that stampeding into government bonds is like stampeding off a cliff.  The preferred destination will likely be gold.


3-Gold, dailyAfter a cyclical bear market from 2011 – 2015, gold is waking up – click to enlarge.


Hence, if you haven’t already, go get your hands on some physical gold; make it a small portion of your overall asset allocation.  If you wait until the crisis arrives, it will be too late.

Plus acquiring physical gold is simple enough.  In fact, it is as simple as buying a new pair of shoes.  Save up some cash, take it to your local coin shop, and trade it in for bullion coins.  Alternatively, if you’re short on cash, or have some ambivalence, try starting with silver bullion coins.  See how you like it.  You’ll probably be glad you did.


Charts by: St. Louis Federal Reserve Research, StockCharts, BarChart


Chart and image captions by PT


M N. Gordon is the editor and publisher of the Economic Prism.




Emigrate While You Can... Learn More




Dear Readers!

You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.


Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA


Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Circling the Drain
      Drain, drain, drain...   "Master!", cried the punters, "we urgently need rain! We can no longer bear this unprecedented pain!" "I'm sorry my dear children, you beg for rain in vain. It is I who is in charge now and mine's the put-less reign. The bubble dragon shall be slain, by me, the bubble bane. That rustling sound? That's me... as I drain and drain and drain." [ed note: cue evil laughter with lots of giant cave reverb]   - a public...
  • Washington’s Latest Match Made In Hell
      Almost Predictable One of the more enticing things about financial markets is not that they’re predictable.  Or that they’re not predictable.  It’s that they’re almost predictable... or at least they seem they should be.   For a long time people believed – and from what we read and hear, many still do – that economic cycles move in easily predictable, regular time periods. All you had to do was create a chart of the up and down waves of your favorite cycle model...
  • The Strongest Season for Silver Has Only Just Begun
      Commodities as an Alternative Our readers are presumably following commodity prices. Commodities often provide an alternative to investing in stocks – and they have clearly discernible seasonal characteristics. Thus heating oil tends to be cheaper in the summer than during the heating season in winter, and wheat is typically more expensive before the harvest then thereafter.   Silver: 1,000 ounce good delivery bars [PT]   Precious metals are also subject to...
  • The Real or Imagined Third Fed Mandate - Precious Metals Supply and Demand
      Fundamental Developments – Silver Looking Frisky The price of gold went up four bucks, and the price of silver rose 32 cents. Silver has been going up in gold terms since the middle of last week, when the gold-silver ratio peaked at just under 87. It closed this week at just under 82 (a lower ratio means silver is more valuable).   Silver: more valuable since last week, both in absolute and relative terms. Just avoid dropping it on your toes – it's still just as heavy as...
  • The Downside of Mindless Investing
      Unexpected Inflection Points High inflection points in life, like high inflection points in the stock market, are both humbling and instructive.  One moment you think you’ve got the world by the tail.  The next moment the rug’s yanked right out from under you.   The yanked rug... [PT]   Where the stock market is concerned, several critical factors are revealed following a high inflection point.  These factors are not always obvious at first.  But they become...
  • The Chairman's Curse - Precious Metals Supply and Demand
      Something Odd is Happening The price of gold went up two bucks, while that of silver fell ten pennies. Something’s odd about how the metals have traded. Back when the market thought that the Fed was tightening, the prices of gold and silver were rising. Silver is now about a buck higher than its Oct-Nov trading range.   A timeline of brief bubble trouble followed by bubble restoration via Hedgeye. It starts in early December (upper left corner) when Santa refuses to provide...
  • Kicking Xi Jinping While He’s Down
      One Great Big Difference On a beautiful midsummer day, roughly six months ago, two distinguished men, of distinguished stature, crossed paths under precarious circumstances.  They are very much alike, these two distinguished men.   Let's confuse him...  [PT]   Both are men of enormous ego.  Both are filled with ambitious delusions for the future.  Both are masters of persuasion.  Both offer a cause and conviction people can rally behind. Both deliver frequent...
  • Shifting Reasons to Buy Gold - Precious Metals Supply and Demand
      Intermarket Correlation Dance Monday was Martin Luther King Day in the US. The price of gold dropped six bucks last week. The price of silver fell 26 cents, a greater percentage. The price of gold can sometimes correlate well with the price of stocks. For example, from April 2009 - July 2011. The price of gold went from $892 to $1,626, while in the same time period the S&P went from 841 to 1,289. The percentages are different — gold’s was 82% and the S&P’s 53% — but they...

Support Acting Man

Item Guides

Austrian Theory and Investment


The Review Insider


Dog Blow


THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts


Gold in USD:

[Most Recent Quotes from]



Gold in EUR:

[Most Recent Quotes from]



Silver in USD:

[Most Recent Quotes from]



Platinum in USD:

[Most Recent Quotes from]



USD - Index:

[Most Recent USD from]


Mish Talk

Buy Silver Now!
Buy Gold Now!

Diary of a Rogue Economist