Will UFOs Destroy Our Stock Markets?
Flying saucers, usually the cheesy props of comics and weirdos, are suddenly worth serious reporting. UFO videos taken by Army pilots in 2004 and 2015 were recently posted on YouTube with official US Navy endorsement; fighter pilots spoke in a neutral tone of their UFO sightings on prime-time television; and former heads of US intelligence agencies and even ex-President Barack Obama have confirmed that there are images and recordings of objects in the sky that we dont know exactly what they are. We cannot explain how they move, their trajectory. Later this month, the United States Congress will listen to presentations by senior military and intelligence officials on the UAP (Unidentified Aerial Phenomena, as flying saucers are now called upon to rid them of the stigma of the hazelnut) to discuss the implications for U.S. security. I have to admit: I dont care. The little green women of space on their glittering contraption of time and space would have had ample opportunity to smash us to pieces if that was their intention. There are a lot of things we cant explain closer to Earth that deserve our attention, and a lot of things we can explain but have chosen to do nothing about it, like wars, poverty, and change. galloping climate. What interests me most is how the UFO story will spread and how it may impact our economic behavior. In 2019, on the eve of the Sars-Cov-2 pandemic, economist and Nobel Laureate Robert Schiller published Narrative Economics, claiming that common beliefs and shared stories would move markets more than anything. Narratives, Schiller thinks, can proliferate and mutate like viruses into epidemics of conviction that force the very outcomes we fear or hope for. The story of flying saucers can take off, or die out quickly. According to Schiller, the infection rate of collective beliefs is determined by shared experiences and the news feed; maximum sentences can be reached quickly or slowly, their contagiousness is only slowed down and quenched by collective immunity  a sudden shift in public interest as other infectious subjects enter the public arena. We cannot say if the PAN story will ever go viral. If so, the reaction of consumers and producers of goods and services could either stifle growth in a wave of end-time pessimism, or, on the contrary, cause a desperate boom, celebrating the last days on earth. . We worry about another mutation of the virus, but seem unaware that the entire financial system is increasingly tied to the crypto narrative  If such scenarios seem far-fetched, they are. But the same goes for all our panics and exuberance. We ourselves cause booms and busts, obsessed with a dominant narrative. The stock markets since March 2020 justify Schillers theory. One of those contagious tales highlighted by Schiller was the story of Bitcoin, enriched with all the essential ingredients of a story: a mysterious founder, a steadfast and sworn brotherhood of followers persecuted by the establishment, glittering celebrities stand by. convert and a cornucopia of riches. rain on the poor. Schiller offered this example in 2019, when Bitcoin changed hands for just $ 8,000. Today, even after their dramatic fall two months ago, Bitcoins are still worth $ 36,000 (at the time of writing). There has been a lot of talk about cryptocurrencies and I dont want to comment on whether it is a valid asset class, a means of payment, or virtual commodities like loot boxes. offered by gaming companies. Whatever a coin, many people who signed up early enough are now relying on massive payouts  a fact heartily acknowledged by disdainful former fund managers and now embraced by leading financial firms. who take advantage of the momentum of the play. with feigned piety. Its a bit like denim with man-made holes, or the worn crotch between the knees: insane perhaps and ridiculous, but a display of youthfulness and angry resistance cleverly exploited by the establishment. Betting on coins and tokens is neither a lottery nor a Ponzi scheme, no matter how much we silverbacks may be. Its like trading cards. No fraud involved. As long as the excitement lasts, everyone will have a winning ticket. Neither regulators, nor tax authorities, nor central banks nor governments can stop the train while it is on the move. Iranian and Chinese authorities  not meticulous in choosing their weapons of repression  have so far failed to curb the game. The Chinese are exploiting and trading regardless, hiding behind virtual networks while the Iranians go off and on. power cuts. After all, it consumes a lot of energy to mine, trade, mint, or eliminate all of those coins. Setbacks and losses do not deter the movement. Like the proverbial shoe-shiners in New York City offering stock advice until the Great Depression, cryptocurrency holders will sit on their losses hoping for the next recovery. They have little to lose in societies where all the cards are against them. It is anarchic, but apolitical: no one seems to question the validity of the capitalist system in its entirety. The real question for us retail investors, whether its joining the crypto bandwagon or ignoring it, is how the whole economy could be troubled by a sudden rout. We worry about stock valuations, alarming signs of inflation, another deadly mutation of the virus, but seem unaware that the entire financial system is increasingly tied to the crypto narrative. Professional investors, exchange-traded funds, banks and brokers providing anchor-less credit for this craze are fueling instability. Margin trading is offered serenely in the hope of hearing in time when the music stops. In the recent crash of Bitcoin, Ethereum, and Dogecoin  a crypto joke that no one, not even its creators, takes seriously, but still worth US $ 90 billion  our financial system would have shown great resilience. Stocks havent wavered except for the crypto exchange Coinbase with its earnings firmly tied to the value of transactions. I dont think thats the way we should see it. Wild volatility is caused by what is essentially a very thin trade. No more than five percent of the total trillion cryptocurrency market is traded daily. This means that for loyal young people  many of whom are still sitting on big wins  selling is not on the agenda. They see this as an intergenerational struggle that will last for many years into the future and they are willing to ignore it. In other words, we have no idea what a true market rout will look like once the narrative changes for good  neither financially nor politically. Sufficient asset managers riding this bull do so at their own risk. Fads come and go, and UFOs will keep coming too. Still, they are quite benevolent of a lightning shift in the cultural significance of cryptocurrencies. The purpose of this column is to expand the general financial knowledge of readers and should not be construed as offering investment advice, or advice on buying and selling financial products. [email protected]  Andreas Weitzer, freelance journalist based in Malta