Dei'ah veDibur - Information & Insight

A Window into the Chareidi World

9 Iyar 5761 - May 2, 2001 | Mordecai Plaut, director Published Weekly








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Shema Yisrael Torah Network
Shema Yisrael Torah Network

Opinion & Comment
The Bubble Has Burst

Only a year since the American stock markets were at record highs, they have fallen hard and fast, back to the levels of almost two-and-a-half years ago. The NASDAQ stock average, until recently the leader with huge yearly gains, has so far lost some 60 percent of the value it had only so recently.

The older, more established averages like the Standard and Poor's 500 stocks, and the Dow Jones Industrial stock average, are also down but not as sharply. They never reached the same dizzying heights.

According to analysts, the decline in the American markets wiped out almost $5 trillion in value. The Israeli government could run its budget for more than 50 years with all that money.

The economic system of the world, now that globalization has spread almost everywhere, is based fundamentally on greed to soup everything up, until it gets stronger and stronger and eventually collapses of its own excesses. The collapse has the effect of returning a measure of discipline and sobriety to society as a whole, and eventually laying the groundwork for another cycle of boom and bust.

This time around, many people thought that we would avoid the busts. The world was supposed to be developing a new economy based on technology that would only grow and grow, without ever collapsing. The Internet and the technology that drives it were supposed to be creating new rules, and a new reality that needed new tools and new ways of looking at things. Everything would grow so fast and create so much wealth that the main problem was to get in first and fast to ensure a large piece of the ultimate pie. The future fabulous profits would take care of the costs.

This line of reasoning was heard from almost all of the most respected observers of the economy. The few who were skeptical were brushed aside. For ten years everything did go only up, so that the greedy optimists even had a track record of success to prove that they knew what they were talking about.

The truth is that this kind of reasoning is an essential part of every speculative fever and is heard during every bubble. John Law's Mississippi Scheme in France around 1720, based on the supposedly fabulous wealth to be had in the French Colonies of Louisiana and along the Mississippi River, as well as the South Sea Bubble in England which ended only a few months earlier, were both touted by learned and convincing men who said that they would only grow and grow and earn their holders untold wealth.

In all these and other, similar cases, if one listens carefully one can hear that the arguing voice is the voice of the yetzer hora. It is he who marshals the power of lust for money (ta'avas mammon) in order to distract people and to lead them to speculative excess.

Critical parts of the modern economic system are based on greed. As an exceedingly powerful force, greed pushes people to material accomplishments that would not be possible otherwise. There is no doubt that the world is richer for being driven by greed.

Nonetheless, as one of the prime tools of the yetzer hora, greed will always bring instability. Thus, an economic system that incorporates it cannot be stable and must experience boom and bust.

So we must expect and endure this economic retrenchment as an inevitable part of the way things are set up these days. We must not let it distract us from the important issues of avodas Hashem, and pray that any suffering is minimal.

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