Has our economy suffered from bipolar disorder since 1920?
As a watch the pundits in their nice suits on CNBC, when asked whether they think we are heading into a recession or into a depression, respond with: "I can't see any reason why we would go into a recession. The economy is quite strong", I laughed. These are the same people who demanded the Fed slash interest rates only one month ago "before it was too late". How can someone be so excited about something at one point and depressed about the same thing 20 days later? If that "something" is a manically depressed economy and stock market.
Economically, we as a country are absolutely horrified by the idea of a recession let alone a depression. For years now we have been avoiding one like a plague. Our recessions have been shorter and our expansions longer. Intuitively this makes sense. A depression is an awful state to be in, as it is usually accompanied by unemployment, poverty, crime, and despair. The Great Depression in the 1930's was a was a decade of unemployment, low profits, low prices, high poverty and stagnant trade that affected the entire world. Sounds like a disease. It was also followed by great political instability, a World War, and socialist policies - many of which we have today. No wonder the masses are scared.
Likewise, we are also a nation that is afraid and unable to address psychological depression. Many psychologists differentiate between depression, the mood, and depression, the disorder. As a mood depression "refers to any downturn in mood, which may be relatively transitory and perhaps due to something trivial." If this mood tends to last longer than two weeks, many professionals consider it a disorder. Most believe that temporary depression is normal and healthy, while sustained depression is considered a disorder. Causes of depression can include multitude of environmental, internal, and biological factors. This article on clinical depression, the most common depression disorder, explains the symptoms which are well known to most. It also examines other types of depression disorders, one of which is bipolar disorder or manic depression.
Manic Depression
Manic Depression, more commonly known as bi-polar disorder, is a mood disorder characterized by wild swings in emotion between utter depression and full blown mania. There are different phases of the illness as described below:
Depressive Phase:
Signs and symptoms of the depressive phase of bipolar disorder include: persistent feelings of sadness, anxiety, guilt, anger, isolation and/or hopelessness, disturbances in sleep and appetite, fatigue and loss of interest in usually enjoyed activities, problems concentrating, loneliness, self-loathing, apathy or indifference, depersonalization, loss of interest in sexual activity, shyness or social anxiety, irritability, chronic pain (with or without a known cause), lack of motivation, and morbid/suicidal ideation.[11]
Mania is generally characterized by a distinct period of an elevated, expansive or irritable mood state. People commonly experience an increase in energy and a decreased need for sleep. A person's speech may be pressured, with thoughts experienced as racing. Attention span is low and a person in a manic state may be easily distracted. Judgement may become impaired, the sufferer may go on spending sprees or engage in behavior that is quite abnormal for them. They may indulge in substance abuse, particularly alcohol or other depressants, cocaine or other stimulants, or sleeping pills. Their behavior may become aggressive or intrusive. People may feel they have been "chosen", or are "on a special mission", which are considered grandiose or delusional ideas. Sexual drive may increase. At more extreme phases, a person in a manic state can begin to experience psychosis, or a break with reality, where thinking is affected along with mood. [12]
Hypomania
Hypomania is generally a less extreme state than mania, and people in the hypomanic phase generally experience fewer of the symptoms of mania than those in a full-blown manic episode. During an episode of hypomania, one might feel an uncontrollable impulse to laugh at things he or she does not normally find funny. The duration is usually also shorter than in mania. This is often a very "artistic" state of the disorder, where there is a flight of ideas, extremely clever thinking, and an increase in energy.
Mixed State
In the context of bipolar disorder, a mixed state is a condition during which symptoms of mania and clinical depression occur simultaneously (for example, agitation, anxiety, aggressiveness or belligerence, confusion, fatigue, impulsiveness, insomnia, irritability, morbid and/or suicidal ideation, panic, paranoia, persecutory delusions, pressured speech, racing thoughts, restlessness, and rage).[14]
Mixed episodes can be the most volatile of the bipolar states, as moods can easily and quickly be triggered or shifted.[citation needed] Suicide attempts, substance abuse, and self-mutilation may occur during this state.
Rapid cycling
Rapid cycling, defined as having four or more episodes per year, is found in a significant fraction of patients with bipolar disorder. It has been associated with greater disability or a worse prognosis, due to the confusing changeability and difficulty in establishing a stable state. Rapid cycling can be induced or made worse by antidepressants, unless there is adjunctive treatment with a mood stabilizer.[15][16]
Creativity
A number of recent studies have observed a correlation between creativity and bipolar disorder,[2][3][4] although it is unclear in which direction the cause lies, or whether both conditions are caused by some third, unknown, factor. It has been hypothesized that temperament may be one such factor.
The causes for bipolar, as with many types of depression, are relatively unknown. They are thought to be some combination of genetic, or environmental causes. Manic depression is mostly treated through medication which usually acts as a "mood stabilizer". The most common type of mood stabilizer is lithium.
A Manically Depressed Economy
Much like a anatomical or biological system, economies and markets are very complex and subject to similar illnesses. The recent work done in behavioral economics, chaos, and complexity theory have shown this to be more and more apparent. As mentioned earlier the temporary depression is normal and trivial - it is essentially an unpleasant yet unavoidable behavioral state. This mood can manifest into a more severe form of depression if it becomes prolonged. We have examined one form of this illness - manic depression.
Moving from psychological towards economic terms, the mood of depression is akin to an economic recession or downturn. A recession is defined as two consecutive quarters of falling GDP, but is more generally considered more than a few months of poor economic times. Although the causes are up for debate, recessions are for the most part cyclical and even if a recession does not occur in technical terms, every eight to ten years or so an economy begins some sort of economic downturn. There are almost always one or two every decade and as hard as we try to explain them, fight them, and shorten their duration, the constant is that they occur and over time prove trivial as they are followed by an expansion.
As mentioned above, a depression is much more severe. We have had one great depression and do not want to have it again. This is the economic equivalent of a depression disorder. The Great Depression, although it may seem like a standard case of clinical depression was actually much more similar to a manic depression. The mania of the Roaring Twenties was accompanied with the severe depression of the 1930's. It was then treated and stabilized by FDR's New Deal as well as with World War II. These were very primitive ways of dealing with such an illness.
As the children of the Great Depression grew older, they inherited an economy that began to experience the symptoms of a manically depressed system. During the 1950's the economy roared. Just like the one before it is had great times fueled by post-war prosperity and tons of opportunity. In the late 1950's a recession took hold and the economy remembered that a few decades earlier, this turned into something severe and tried to medicate the condition with the familiar combination of war and social reform. The Civil Rights Movement and wars in Korea, Vietnam, and a Cold War with Russia worked to stabilize the moods for some time but as the economy roared forward into the late 1960's, mania began to develop and our medicine was becoming less effective. Instead of one war, we waged two and three and put across great social reform, attempting to stabilize our economy and our disorder, however we found ourselves in a depressed phase in the late 60's and early 70's.
The depression lingered a bit into the 1970's and we needed to other ways to medicate this illness. In 1973 we found a brand new type of medicine, called a pegged rate currency, which was a revolutionary advancement in how our Federal Reserve could create credit, which we believed stabilized our mood by minimizing our depressive phases and greatly enhancing our manic times. This medicine was still experimental, however, and we attempted to combine it with prior medications. The result was a bit of a mixed state, where depression and manic systems occurred simultaneously. Credit was being built up in our economic bloodstream, but wasn't being absorbed by the economy efficiently. We experienced great inflation, a very manic symptom, but slow growth, which usually accompany depression. We were very fragile, and began to drift towards depression as we entered the 1980's.
In 1980, we were a mess, our disorder was getting more and more serious and we needed some new medicine, or else things would get bad. We found out that the pegged currency rate was not a problem, but how it was used. Paul Volcker had a revolutionary idea about how interest rates are targeted. Interest rates effect exchange rates and enable an economy to target how much credit to inject into or extract out of the system. Since credit basically fuels mania, this was a revolutionary way to try to stabilize such an illness. He began by extracting out all the credit that had built up and then adding it in as needed. At the same time the President conducted a supply side fiscal policy that was supposed to add more of this credit into the economy. This resulted in a extended period of Hypomania, where the credit fueled mania was contained to a level that was comfortable, and we felt stable for the first time is a while. As is common with periods of Hypomania, we used this time to explore our artistic and creative side, inventing complex derivative products and modern financial theory. Times were indeed good.
In 1987, Dr. Volcker left and Dr. Greenspan took his place. At the same time we had a huge spell of severe depression, when the stock market dropped sharply. Unlike other depression was not felt by the economy as a whole, but just the stock market - it was a very peculiar occurrence and very similar to an event that occurred nearly 60 years prior. Dr. Greenspan, now in charge started to inject his medicine. He came from a similar Med School as Volcker, but differed in how he thought credit should be administered. Volcker administered credit through targeting inflation, which indirectly provides credit to the economy. Greenspan believe this to be too inexact and caused instability. He saw the events of October 1987 and decided that he would simply administer credit as the economy needed it and applied this medication right away. It worked well, but the mood of the economy became too manic and he had to take some of the credit out of economy, but it was too late - the economy was starting to get hooked and he had to cut it off at about the same time when we also ran out of another medicine we had been using almost regularly for years as a supplement - war, as the Cold War came to a halt. We immediately went out to find another one, this time in the Middle East. This worked to avoid a very severe depressive phase, and we began to slowly remedicate with credit.
During the mid 1990's we found credit working for us properly again. We entered a period of Hypomania as we did 10 years prior and we used our creative talents this time to develop a very innovative technology industry as well as work further on some of the financial innovations of the prior decade. The credit kept our mood stable and we even stopped taking War supplements and found it helpful. Dr. Greenspan was in our minds a great doctor. Then, in 1998 with the collapse of LTCM, our financial innovations once again caused a severe depressive phase to occur that appeared to be only affecting the stock market portion of the economy. Greenspan, aware of what happened in 1987 when he fed such a depressive phase, but also aware of the suicidal tendencies of depressive swings such as this decided it was better to administer medicine and gave a big dose. This time the results were much more severe as a very manic phase followed that was obsessed about the technology innovations that it had developed during its Hypomanic phase. Dr. Greenspan immediately began weening it off credit but that eventually caused the economy to fall into a depressive spiral. He had to almost immediately begin giving it more credit in order to make sure that it did not become suicidal and kill and or severely injur itself. High doses of credit were no longer working as the economy became more and more depressed. Adding to this was the events of 9/11, which couldn't have come at the worst time for such a depressed economy - or could it?
In 2003, the economy was severely depressed and Dr. Greenspan was running out of credit. The aftermath of the 9/11 attacks however was finding him another option that had worked in the past to supplement credit - war. Just as war began, the credit started to take hold, and the economy began a brief period of Hypomania. During this period, its creative pursuits focused around financial innovations in derivatives, securization, hedge funds, private equity, and outsourcing. This Hypomania was short lived and began to teeter into a Mixed State. Inflation was rising, but the economy was beginning to get depressed. Dr. Greenspan had also been replaced by Dr. Bernanke who was more like Dr. Volcker and began targeting inflation and taking away credit. The war was not working like it used to and the mania quickly turned into depression in the spring of 2006. Dr. Bernanke could not handle this alone so the president appointed Dr. Paulson to help him out. Along with Dr. Paulson, they decided to try out a somewhat new medicine for injecting credit, the repo. Bernanke had been trying this out a little already, but Dr. Paulson showed him how to use it properly. They believed that if the economy did not know it was getting credit or even thought that it wasn't, but at the same time it was, it may help stabilize it and promote Hypomania. The repo worked wonders, propelling the market upwards and upwards, fueling a purely Manic phase that was both intense and brief. Then, in February of this year, a severe depressed mood set upon the market as it entered another Mixed State. This time repos did not work as they had prior and they had to go back to Dr. Greenspan's rate cut method of administering credit, but that has not seemed to stabilize it like they hoped it would. Meanwhile, they put the economy on "suicide watch" - enacting a Plunge Protection Team in order to monitor it and make sure it doesn't become suicidal. There have even been talks of upping its dosage of War with a new one in Iran, as that has seemed to help it in the past.
Currently this economy is in a very severe case of Manic Depression at a very unstable point. Mixed States can be the most volatile episodes of such a disorder and moods can be easily shifted and changed.
The Cure?
I have not written this to be cute or tongue-in-cheek although it may appear so. I believe that this may be a very valid and helpful way to look at our current situation. Both the human body and economy are complex systems with many moving parts. An economy is even more complex as it is made up of humans with these emotions, so the two cannot be looked at as independent. In the last decade, the prevalence among youth rose by 40 times. Although some argue this is because of over diagnosis, I argue it doesn't matter. During the same time period we may have over diagnosed and over medicated our own economy with the same illness - causing a manifestation of that illness to come about. I traced this through time to show the genetic characteristic it exhibits - which is listed as one of the main causes of bipolar disorder. Our economic history is the genetic makeup of our economic cycles and we have a genealogy of cycles that seem to date back to the 1920's and the depression of the 1930's. Throughout history we have treated the mood of depression (either a recession or slowdown or stock market blip) as if it were the onset of the Great Depression. This has caused our genetic disposition towards such an illness of mania and depression to surface. Each consecutive cycle has used similar medications in higher dosages, new methods, and in different combinations - but with constant credit and war being the economic lithium for our downturns. Each time this has created a subsequent cycle that is more unstable and more prone to such a disorder with wilder mood swings. Credit and war are also becoming less effective in their current dosages and the economy is spending much more time in a Mixed State, where it is both depressed and manic and must be lied so that it doesn't become depressed and suicidal.
Hopefully our economy is not on a path to suicide but towards counseling and rehab. Hopefully we can still think our way out of this mess, because two decades ago another economy with similar problems, Japan, was not as lucky as it sunk into depression and basically killed itself. Currently, 20 years later, the suicide rate among its youth is flying through the roof. People will probably think its crazy to think the two are related and that an economy could have something like a mental illness, but I will point out that the computer they are using to read this is no different. What is a computer but a device put together by human beings connected to other human beings over a large system of networks? It has McAfee for a reason.
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