Business isn’t Cyclical
The Death of Virtuosity Part III: Stupidity is Cyclical, not business.
Introduction
Normally we talk about healthcare and health insurance, but today is a little different. This is the third part in our series “The Death of Virtuosity.” By virtuosity, we really mean critical thinking. People have more access to information than at any other time in history. One would suspect that this would presage the dawn of a new renaissance, a new golden age of learning, knowledge and study, leading to happier, wealthier, healthier people. What we get instead is a new way to share risqué “content,” and the promulgation of conspiracy theories. We think this is because while information is more readily available than it has ever been, we haven't taken advantage of the ability to think. Worse, we aren't teaching our children to think. We will show that this leads to anarchy and economic collapse.
Thank you to History Collection for compiling the basis for this article.
Business isn’t Cyclical, Stupidity is.
To prove that business isn’t cyclical we are going to examine 14 recent economic disasters, what caused them and what we can learn from the mistakes that were made.
The Great Depression (1929)
The Great Depression stands as one of the most devastating economic downturns in modern history. Originating in the United States after the stock market crash of October 1929, this economic disaster quickly spread across the globe. The resultant financial chaos led to the collapse of banks, mass unemployment, and severe deflation. With industrial production plummeting and international trade grinding to a halt, countless families were plunged into poverty.
The reasons for The Great Depression: Greed and stupidity. Financial people speculated on things they did not understand and borrowed money to do it. When they got over extended and were called to pay back the borrowed money, they couldn’t, causing the collapse of the stock market. Everything else followed from that stupidity.
The 1973 Oil Crisis
In 1973, the world faced a severe energy crisis when the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed an oil embargo targeting nations that supported Israel during the Yom Kippur War. This strategic move led to a quadrupling of oil prices, creating widespread economic disruptions. Industries reliant on oil suffered immensely, leading to inflation and recession in many countries. The crisis highlighted the global economy’s vulnerability to energy supply shocks and prompted a shift towards energy conservation and the exploration of alternative energy sources, reshaping international economic policies and strategies.
The reasons for The 1973 Oil Crisis: Religion and sticking your nose in where it doesn’t belong. If you read that quickly it sounds like stupidity. The U. S. Government should have known that backing Israel would not go over well with the Arabs.
The Asian Financial Crisis (1997)
The Asian Financial Crisis of 1997 was a period of economic turmoil that affected much of East Asia, starting with the collapse of the Thai baht. This triggered a domino effect, leading to currency devaluations and severe financial instability across the region. Countries like Indonesia, South Korea, and Malaysia faced massive capital flight and spiraling debt. The crisis highlighted the risks of over-reliance on foreign capital and insufficient financial regulation. While international interventions helped stabilize the economies, the crisis underscored the vulnerabilities of emerging markets and prompted significant reforms in financial systems worldwide.
The reasons for The Asian Financial Crisis: Stupidity. Borrowing too much and overextending caused the lenders to quit lending to a region with an insatiable appetite for capital. That region has never fully recovered.
The Dot-Com Bubble Burst (2000)
The early 2000s witnessed the dramatic collapse of the dot-com bubble, a speculative frenzy driven by the rapid rise of internet-based companies. Fueled by exuberant investments and inflated valuations, many tech startups went public without viable business models. When reality set in, stock values plummeted, wiping out trillions of dollars in market capitalization. This collapse not only affected investors but also led to a broader economic slowdown. The aftermath served as a cautionary tale about the dangers of speculative bubbles, emphasizing the need for sound financial fundamentals in the tech industry and beyond.
The reasons for The Dot-Com Bubble Burst: Greed and stupidity. Financial people gambled on things they didn’t understand and that weren’t making and never would make money.
The Argentine Economic Crisis (1999-2002)
The Argentine Economic Crisis at the turn of the millennium was a severe financial disaster characterized by a deep recession and debt default. Triggered by a combination of overvalued currency, fiscal mismanagement, and mounting debt, Argentina’s economy spiraled into chaos. By 2001, the government defaulted on $93 billion of its sovereign debt—the largest default in history at the time. This crisis led to skyrocketing unemployment and poverty rates, causing widespread social unrest. The economic collapse forced Argentina to abandon its currency peg with the US dollar, prompting extensive reforms aimed at stabilizing the economy and restoring investor confidence.
The reason for The Argentine Economic Crisis: Stupidity. The Argentine government didn’t understand enough about economics to control their economy and it collapsed.
The 2008 Global Financial Crisis
The 2008 Global Financial Crisis, rooted in the U.S. housing market collapse, was a catastrophic event that sent shockwaves through the world’s economies. Triggered by the proliferation of subprime mortgages and complex financial derivatives, the crisis led to massive bank failures and a severe credit crunch. As financial institutions teetered on the brink, global markets tumbled, resulting in widespread economic downturns. Governments and central banks intervened with unprecedented measures to stabilize the financial system. The crisis underscored the interconnectivity of global finance, prompting reforms aimed at enhancing transparency and reducing systemic risks.
The reasons for the 2008 Global Financial Crisis: Stupidity and greed. The financial guys were dealing in subprime mortgages and simply loaning money to people who could not pay it back. Trading in ‘derivatives’ was thought to make this irrelevant, since they could be packaged with performing loans and resold as a ‘tranche’ or a packaged slice of business. Clearly, they were wrong and did not have the first clue what they were doing and cost us all dearly.
The European Sovereign Debt Crisis
The European Sovereign Debt Crisis, emerging in the aftermath of the 2008 financial turmoil, shook the foundations of the Eurozone. Countries such as Greece, Ireland, and Portugal found themselves engulfed in debt, struggling with high deficits and unsustainable borrowing costs. Greece, in particular, faced severe austerity measures as conditions for international bailouts, leading to significant political and social unrest. The crisis tested the resilience of the euro, highlighting critical flaws in the monetary union’s structure. It prompted the European Union to implement fiscal and banking reforms to strengthen economic governance and prevent future crises.
The reason for the European Sovereign Debt Crisis: Stupidity and too much government. The governments of these countries spend every penny they can skin out of the populace. After the Finance Bros crashed the economy, they were spending more than they were taking in and they had to borrow until they were overextended and their governments collapsed. The populace in a democracy will vote itself raises and benefits until the system literally collapses.
The Russian Financial Crisis (1998)
In 1998, Russia faced a severe financial crisis marked by the devaluation of the ruble and an unexpected government default on its debt. This crisis was fueled by a combination of declining oil prices, a burgeoning budget deficit, and an unstable banking sector. As investor confidence evaporated, capital flight ensued, leading to a collapse in the stock market and severe economic contraction. The crisis exposed the vulnerabilities of Russia’s transition economy and led to significant political and economic reforms. International assistance and restructuring efforts eventually stabilized the economy, paving the way for recovery in subsequent years.
The reason for The Russian Financial Crisis: Stupidity. Exactly like the Eurozone, the Russians spent every penny they could tax until there was a downturn and then they borrowed, got overextended and crashed. The only difference is that they were spending on big government initiatives, military and research programs. The Russian government has rarely to never cared about the peasants. Ask Napoleon about his trip to Moscow in 1812.
The Mexican Peso Crisis (1994)
The Mexican Peso Crisis of 1994, also known as the “Tequila Crisis,” was a sudden financial upheaval that followed the unexpected devaluation of the peso. Triggered by political instability and dwindling foreign reserves, this decision led to a rapid loss of investor confidence. The crisis prompted a sharp economic contraction and increased inflation, triggering financial instability across Latin America. The United States and the International Monetary Fund intervened with a substantial bailout package to restore stability. This crisis served as a stark reminder of the vulnerabilities faced by emerging markets and the importance of transparent economic policies.
The reason for the Mexican Peso Crisis: Stupidity. Government didn’t see the unintended consequences of the action of devaluing the peso, and the Finance Bros pulled all their money out of Latin America. It was a perfect storm started by short sighted government and exacerbated by flighty, scared Finance Bros.
The 1980s Latin American Debt Crisis
The 1980s Latin American Debt Crisis was a significant financial disaster, with many countries in the region defaulting on their loans. The crisis emerged from excessive borrowing during the 1970s, combined with rising interest rates and declining commodity prices. Nations such as Brazil, Argentina, and Mexico found themselves unable to service their debt, leading to economic stagnation and social unrest. The crisis necessitated extensive restructuring of debt and economic policies under the guidance of the International Monetary Fund and World Bank. This period, known as the “Lost Decade,” underscored the need for sustainable fiscal management in developing economies.
The reason for The 1980s Latin American Debt Crisis: Stupidity. Once again, government can’t understand the consequences of their actions. You can’t spend more than you make and you certainly can’t borrow unsustainably to continue to spend.
The Icelandic Financial Crisis (2008)
In 2008, Iceland faced a severe financial crisis, marked by the collapse of its major banks. The rapid expansion of the banking sector, fueled by foreign currency loans and risky investments, led to an unsustainable financial bubble. When global credit markets froze, Iceland’s banks were unable to refinance their debts, resulting in a banking collapse. The crisis caused the national currency to plummet and led to a deep recession, drastically affecting the country’s economy. In response, Iceland implemented significant economic reforms and received international assistance, eventually stabilizing its financial system and setting a precedent for recovery strategies.
The reason for The Icelandic Financial Crisis: Stupidity. Dumb Finance Bros in Iceland making risky investments got screwed by dumb Finance Bros in the U. S. gambling on tranches of loans in the mortgage industry. The dumb Finance Bros in Iceland probably would have been fine if they could have continued borrowing as they expected.
The Turkish Currency and Debt Crisis (2018)
In 2018, Turkey faced a severe economic crisis, characterized by the dramatic plummeting of the Turkish lira. Triggered by geopolitical tensions, high inflation, and a substantial foreign debt burden, the currency’s devaluation led to an economic downturn. The crisis eroded investor confidence and increased borrowing costs, further straining the financial system. The Turkish government responded with measures to stabilize the lira and strengthen economic policies. This crisis highlighted the vulnerabilities of emerging markets to external shocks and underscored the need for sound fiscal management and diversified economic strategies to mitigate such impacts.
The reason for the Turkish Currency and Debt Crisis: Stupidity. If you don’t know how to run an economy of that magnitude, hire someone to figure it out. Again, borrowing money to continue dumb policies is a sure way to collapse your economy as sure as a 40 year old hairstylist with a 400,000 mile Altima, four kids who ‘come first’ and 40 pounds overweight will drain your bank account.
The Zimbabwe Hyperinflation (2008)
Zimbabwe’s hyperinflation in 2008 was a catastrophic economic event that led to the collapse of its currency. The crisis was driven by rampant money printing to finance government expenses amidst declining agricultural output and international sanctions. Inflation soared to an unfathomable rate, rendering the Zimbabwean dollar practically worthless. Daily life was severely disrupted as basic goods became unaffordable, leading to widespread poverty and economic instability. In response, Zimbabwe abandoned its currency in favor of foreign currencies to stabilize its economy. This hyperinflation episode serves as a stark warning about the dangers of unchecked monetary policy and fiscal mismanagement.
The reason for Zimbabwe Hyperinflation: Stupidity. In addition to Zimbabwe also getting screwed by the bizdiot U. S. Finance Bros with their idiotic mortgage schemes, you can’t just print money to pay your debts. It makes the money not worth the paper it is printed on. As an aside, the progressive movement is literally advocating printing more money in the U. S. as a way to finance their liberal agenda. They call this Modern Monetary Theory (MMT). Do they not study history at all?
The Venezuelan Economic Crisis
Venezuela’s ongoing economic crisis is marked by severe hyperinflation and crippling shortages of basic necessities. Once a prosperous oil-rich nation, Venezuela’s economy has been decimated by political mismanagement, corruption, and declining oil revenues. Inflation rates have soared to unprecedented levels, rendering the national currency nearly worthless and plunging millions into poverty. This crisis has resulted in widespread food and medicine shortages, leading to a humanitarian catastrophe. Efforts to stabilize the economy have been largely ineffective, and the situation remains dire, illustrating the devastating impact of prolonged economic mismanagement and the urgent need for reform.
The reason for The Venezuelan Economic Crisis: Corruption and stupidity. Well, overspending and mismanagement too. Mostly just dumb domestic economic policy.
Conclusions
What conclusions can we draw from the preceding 14 economic disasters? They were caused by either stupid government, stupid Finance Bros or both. Research, education, understanding of the consequences of actions, both intended and unintended would have avoided each and every one of these.
We did not include the COVID-19 Pandemic Economic Impact. That was an unavoidable occurrence that the CDC had been warning us about for decades. The inflation caused by President Joe Biden just pumping too much money into a completely stalled and barely breathing economy, was completely avoidable, however. We understand that he can't just stop the stimulus package of a sitting republican president. That makes Biden's approval rating more important than crashing the economy for the next five or more years. Before you think that we are right leaning, we think Trump's tariff wars are just as idiotic. At least the interest rates will come down as the unemployment rate goes up. We probably should have included that as a stupid move on par with Zimbabwe trying to print money to pay their debts.
Knowledge of history, public policy and virtuosity in general would have avoided each and every one of these disasters. Yes, We already said that. It bears repeating.
We have shown that business and therefore the economy is not cyclical. The big economic downturns are caused by stupidity and bad decision making.
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