The Mystery of Money – Beyond Greed and Scarcity | Part 2 – Chapter 4 | Bernard Lietaer (2002)

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Part Two: Exploring Money Systems with Archetypes

“The issue should never be how to get rid of the urge for power, masculine or feminine.
The real issue is how to steward it… into life-giving and world-building activities.”
Moore and Gillette1

“Think forward, but understand backwards”

“Who controls the past controls the future.
Who controls the present controls the past.”
George Orwell

“The icons of old are the codings of tomorrow.
And tomorrow holds the promise of recovery of forgotten wisdom.”
Jean Houston

Plan of Part Two

Part Two explores the consequences on money systems of both repressing and honoring the Great Mother archetype. Historical evidence is the basis for all our social, economic or monetary knowledge. However, most contemporary economic thinking only considers very recent data, on the assumption that experience from the distant past cannot contribute any insights relevant for our contemporary economic structure.

However, we don’t enjoy that possibility in the case of money systems. Indeed, since the money paradigm has not significantly changed at least since the Industrial Revolution, such an approach would simply lock us into that particular type of money system. Furthermore, I will show later (Part Three) that our prevailing worldview, our economy, and our money system are now all undergoing a simultaneous fundamental shift, leaving behind the Industrial Age as a reference. As a consequence, it may be a “distant past” that unexpectedly could reveal some interesting insights into our not-so-distant future…

Core Ideas of Part Two

My claim is that significantly different money systems manifest depending on whether the feminine is honored in society or not. We can of course only verify such a hypothesis in societies that have advanced at least to the point of having developed the concept of money in the first place. But when one classifies such “advanced” societies according to whether they repress the feminine or honor it, suddenly an intriguing pattern in money systems emerges.

  • Whenever the feminine archetype has been repressed, as has been the case in almost all of Western history, a monopoly of currencies that play simultaneously the role of medium of exchange and of store of value tends to emerge. Initially these currencies consisted of scarce and precious commodities of various kinds. They evolved in the case of the Western civilization into gold and silver coins, and finally into our familiar centrally controlled national currencies. The common feature of all these systems is that they tend to actively encourage savings in the form of accumulation of money (for instance by providing an interest income from money savings). This kind of money is apt to be concentrated by a relatively small elite, with the side effect that the available medium of exchange remains scarce for a significant segment of society.Furthermore, the positive interest rates also encourage short-term vision in investments.2 Unsurprisingly, there are many historical instances of this pattern, given that “high civilizations” are almost synonymous with patriarchal societies, which by definition have repressed the feminine. Such currencies are also the ones most familiar to numismatic experts, because they were preferably manufactured in time-resistant materials, and often with great attention to esthetics and symbols to glorify a king, a city, a country, or an empire. They could be called patriarchal currencies. But for reasons that soon will become clear, I will use the old Taoist terminology to describe these currencies as “Yang” currencies.

Photo I.1 (ex. Williams Money A History (full page)

This book will distinguish between two categories of currencies: what oriental philosophy would call “Yin” and “Yang” type currencies. The Yang currencies are by far the most familiar to us today. They are currencies that are used simultaneously as a means of payment and as a store of value. Historically, Yang currencies were typically made in durable, scarce, precious materials such as silver and gold. They are called “Yang” because they correlate with what Taoists described as Yang characteristics such as concentration, hierarchy, control, competition, and scarcity. In patriarchal societies they tend to be granted a monopoly status as official currency. Such currencies have been used everywhere for “long-distance” trade, for payments of tributes to lords, and/or for ransoms to invaders.

This Viking hoard is an example of a “treasure” of such Yang currencies. It was concealed in 905 AD in Cuerdale (Lankashire, UK) and includes silver ingots, rings, jewels, and 7000 coins. Its total of 40 kg of silver bullion makes this the largest Viking treasure found outside of Russia. It was most likely part of ransom money extracted by Viking invaders on the local population.

  • In contrast, in the few cases where the feminine has been honored in an “advanced” civilization, two complementary monetary systems have appeared, and one of these currencies invariably had (what appears to us as) an unusual feature that actively discouraged the accumulation of wealth in the form of that currency. In short, this latter currency operated as a pure means of payment and exchange, and was not used as a store of value. This had as result that this medium of exchange would circulate freely in all levels in society, and always be available even to the lowest economic classes. In turn, this enabled them to engage in transactions that significantly improved their standard of living. It is important to understand that people who would predominantly use these currencies could and would still save, but in the form of investments in productive assets – but not in the form of accumulating this type of money. Even more importantly for us today, a pattern of long-term vision in investments became the norm rather than the exception. These peculiar currencies will be defined as “Yin”Notice that in these civilizations, in addition to these commonly used Yin currencies, Yang currencies similar or even identical to the patriarchal currencies described above were also used in parallel. But here these Yang currencies were used mainly for “long-distance” trading or were hoarded for some exceptional transactions, and less in day-to-day local exchanges. In contrast, in patriarchal civilizations the Yang currencies have enjoyed a de facto monopoly, or were even imposed in all exchanges. This is still the case with our contemporary money, as our conventional national currencies (including the Euro) have been granted a monopoly enforced by law.

It is comparatively rare to find advanced civilizations that honor the feminine. Only two cases about which we have enough evidence on both their money systems and investment patterns to test this hypothesis have been studied so far. Ironically, even in these civilizations we know often more about their long-distance Yang currencies, because the “treasures” discovered by archeologists would almost always consist of the currencies that were hoarded (i.e. by definition Yang currencies, see photo I.1). Furthermore, the “local” Yin currencies were often in perishable materials and more mundane looking so deemed less interesting from a collector’s viewpoint (see photo I.2 and I.3). But when all the available pieces of the puzzle are put together, you will see that the evidence these two case studies provide is strikingly convincing.

By now we have become so familiar with the former case – a monopoly of a Yang currency – that one can understand that many people consider it to be part of human nature. In fact, the entire field of economics has been built on that premise, and most money collections as well.

For example, the remarkable collection at the “HSBC Money Gallery” of the British Museum exhibits exclusively exemplars of Yang money. This is true even in historical societies where dual currency systems are well documented to have existed – also in those cases only examples of the Yang types are actually exhibited. For example, at the British Museum Money Gallery, the precious metal Yang-type money is shown for Egypt, but not the – admittedly more mundane looking – pottery shards with inscriptions about wheat deposits. These ostraka, as they are technically called, were widely used in Egypt as Yin money (as will be explained in the case study on Egypt of chapter 6). Similarly, there is a great color photograph of a Yap Islander with a spectacular 4 meter high stone money (the Yap Island Yang money), but the fact that women in that same island were doing most of the trading and were always using less impressive – but more convenient – strings of mussel shells isn’t mentioned.

I am personally convinced that this exclusion of Yin money is not part of some dark sexist conspiracy, but results from a cumulation of two phenomena. First, there is an understandable temptation for a curator to show off his or her more spectacular pieces (which in currencies are invariably of the Yang variety); and second, there is an unconscious blindness about gender issues that sometimes prevails even among some of the best money historians or archeologists (see sidebar on Gender and Archeology). But, from our perspective, the net result is that much of the literature and exhibitions on the “History of Money” should actually be labeled “History of Yang Money” …

Gender and Archeology: Contesting the Past1

Yin-money is a gender-related cultural phenomenon, and suffers therefore from the same blindness that all gender issues have suffered, for instance, in archeology. The feminist critique of the bias towards masculine interpretations in archeology has started remarkably late compared to most other fields. In politics, feminist critiques dates back at least to the period of the suffrage movement (1880-1920) when women battled for and obtained equal rights in voting and education. In the social sphere, the feminist critique dates back to the 1960s, when personal issues like sexuality, reproductive rights and equal employment arose. But for the first academic article challenging the masculine gender bias in archeology, we have to wait as late as 1984: “We argue that the archeological ‘invisibility’ of females is more the result of a false notion of objectivity and of gender paradigms archeologists employ, than of an inherent invisibility of such data”.2 This is a subtle, but crucial argument.

Gender is indeed not to be confused with sex.Gender is a cultural interpretation of sexual differences that results in placing people or artifacts in specific categories; while sex is a biological condition that is defined by differences in sexual organs, bone structures, and chromosomes. Gender issues are part of the Collective-Interior realm as defined by Ken Wilber’s map of knowledge (lower left corner of Figure I.1 on page 9); therefore by definition about interpretations of meaning. In contrast, sex is in the Individual-Exterior domain (upper right corner) of that same map. So when an archeologist chooses to limit his observations to “objective” descriptions and measurements, by definition he will discover only the sex of the different bones found in the archeological record, and will never even enter the domain of gender as this would require an interpretation of the meaning of his findings. Gender issues are not readily visible in the archeological record, and can therefore more easily be ignored.

Exactly the same preconceptions may prevail when money historians or numismats deal with Yin-money issues.

1 Gilchrist, Roberta Gender and Archeology (London, New York: Routledge, 1999)

2 Conkey, Margaret & Spector, Jane “Archeology and the study of gender” Archeological Method and Theory (New York: Academic Press, 1984, #7, pg 1-38).

In order to compensate for these tendencies, I will focus here on a few of the significant exceptions uncovered so far where Yin-type currencies played a historically proven important role in society. And we will discover in this process that their effects were surprisingly powerful.

The central thesis of this book can now be summarized as follows: whenever local Yin currencies complement the dominant Yang currency they had the four following effects:

  1. They were the unsung heroes of remarkable economic well-being for the ordinary population;
  2. They spontaneously induced investment patterns with unusually long-term perspectives;
  3. They have characteristically appeared in societies only when the feminine archetype was honored, an admittedly rare occurrence in Western history;
  4. They were the precursors of a contemporary local currency movement that could become a key tool to make possible Sustainable Abundance in our own lifetimes.

Photo I.4 ½ page

Kestner Museum Egyptian Dept # 1929.556

This is an “ostracon”, a shard of pottery from 13th century BC Egypt, with a hieroglyphic inscription that made it a receipt for the delivery of a number of jars of wine at a specific place and time. Such receipts for wine, corn or other storable food were used as the most common currency for at least 16 centuries in Egypt. The redemption value of these receipts would “age”, i.e. drop slowly over time to reflect the cost of storage of the commodity involved. For this reason, as in the Central Middle Ages with “bracteaten”, people would not tend to hoard such currencies, but they would use them as a pure medium of exchange.

Photo I.2 and Photo I.3 (get photo??) ½ page each
Examples of bracteaten currencies

Examples of the less familiar “Yin” currencies include these two ‘bracteaten’ currencies from the Central Middle Ages in Northern Germany. The one of the left was issued around 1150 by the Henry the Lion, Duke of Braunschweig, and shows the Duke with scepter and sword surrounded by two towers and two lions. The one on the right represents abbot Johannes I of Hershfeld (1201-1213) holding the Krumstab characteristic of his function.

These currencies tended to be used mostly locally, and were so thin that they could fray (as shown in the latter case), and even easily be broken off for partial payments (as shown in the case of the Duke’s currency). Each currency unit kept the same silver content over time (i.e. there was no “debasement” on these currencies). However, bracteaten would be periodically withdrawn from circulation and new ones issued with a tax payment raised in the process. Therefore these currencies would not tend to be hoarded, but used only as medium of exchange. This in turn would tend to increase the availability of this currency for transactions at all levels of society.

Photo: Helmut Reitz from originals of the Nordhausen Fund and the Ägidienkloster Fund.

What is at stake here is therefore a lot more than obscure monetary issues in dead civilizations.

Indeed, if this hypothesis is proven valid, the implications and the relevance for us today are quite significant. Humanity is facing over the next decades possibly its most important challenges ever. For the first time in history, our short-term thinking may actually threaten the entire biosphere (sidebar).

Scientific Findings on Loss of Biodiversity

1,600 scientists, including a majority of the living Nobel Prize laureates in the sciences warned that “many of our current practices may so put at serious risk the future that we wish for human society and the plant and animal kingdoms, and may so alter the living world, that it will be unable to sustain life in the manner that we know. Fundamental changes are urgent if we are to avoid the collision our present course will bring about.” 3

A 1998 survey by the American Museum of Natural History among professional biologists found that 69% of them have concluded that our exclusive focus on the short-term is in the process of provoking the loss of between 30% and 70% of the planet’s biodiversity within a time span of only 20 to 30 years.

Therefore, insights into what could switch the collective mindset towards longer-term thinking could become of vital importance to us all.

Furthermore, an unprecedented shift can already be observed in our societies towards a new honoring of the feminine archetype. It may be better to describe this as a re-awakening of a “Yin paradigm”, because while it includes “women’s issues” – such as women emancipation and gender equality – it also goes way beyond it. For instance, in Physics, the “hardest” of all sciences, chaos theory offers new non-linear, non-causal interpretations of physical reality. Hierarchical structures are being replaced with unlimited, uncontrollable, infinitely evolving networks of which the Internet is the most notable. The traditional command and control structures in business are giving way to more fluid learning and virtual organizations. Holistic health practices provide less mechanistic interpretations of the human body and its functioning. The growing concern about ecological sustainability is also part of this shift. It will be shown that all these trends – at first sight unconnected – have as common denominator a new emphasis on a Yin perspective.

Seen in this broader context, the hypothesis that a change in the relationship towards feminine archetypes implies a shift in money systems takes its full significance. As the Yin paradigm comes more into focus, people spontaneously seem to want to create a medium of exchange that is compatible with the values embedded in that worldview. As information technology becomes more available, it becomes also more possible to do so. Major changes happen invariably when there is such a convergence between new values and new means. Hence the recent explosion of over 2500 Yin local currency experiments all over the world as was described in detail in The Future of Money, and will be summarized here later.

In addition, the same archetypal map that will be used to unravel the relationship between feminine consciousness and money also provides insights into other important money issues. It will elucidate why “irrational” cycles of boom and busts periodically rip through even the most sophisticated financial markets. These financial manias are known by experience to all seasoned professional operators, brokers, fund managers, and financial experts. But no logical explanation has yet been provided about why they keep happening.

Given the dramatic increase in monetary instability in the world today and its consequences for the economic well-being of entire continents, again this is of more than academic interest. We all have heard about the more spectacular monetary crises of the 1990s: the Asian, Russian and Latin American ones. But even those are only the tip of the iceberg: according to figures cited by the World Bank no fewer than eighty-seven nations have seen runs on their currency since 1975.

Chapter 4: Exploring Booms and Busts with the Magician

“The gods have to do with emotional intensity and distance, preferences for mental acuity,… yearning for ecstatic merger or panoramic understanding, sense of time, and much more. There are gods in Everyman.”
Jean Shinoda Bolen4

“Anyone taken as an individual is tolerably sensible and reasonable.
As a member of a crowd, he at once becomes a blockhead.”

“Financial manias”, also called “bubbles and crashes” and “boom and bust” cycles refer to the episodic “crazes” wherein some market goes into a price frenzy only to collapse as it reaches its paroxysm. They are relatively rare – on the average there is one spectacular crash every 15-20 years somewhere in the world. But they are totally devastating to the people and country affected.

Notwithstanding centuries of fine-tuning regulations and controls, financial manias have proven a remarkable “hardy perennial” in Charles Kindleberger’s words.5 They seem invariably to hit the markets at the moment when they believe they have become impervious to such “primal” irrational problems. Finally, they are also a bafflingly unexplainable process from the perspective of a “rational market” supposedly inhabited by hyper-rational “economic men.”

Many authorities have openly admitted that they don’t understand them, or know how to deal with them (sidebar).

Baffled Authorities

The periodic booms and busts, and the incapacity of the most sophisticated and powerful financial authorities to do something about them, is repeated at every generation. Some quotes illustrate the point.

“At intervals, from causes which are not the present purpose,
money…seeks someone to devour, and there is ‘plethora’;it finds someone, and there is ‘speculation’;
it is devoured, and there is ‘panic’.”
Walter Bagehot (1873)6

“I can feel it coming, S.E.C. or not, a whole new round of disastrous speculation, with all the familiar stages in order – blue-chip boom, then a fad for secondary issues, then an over- the-counter play, then another garbage market in new issues, and finally the inevitable crash. I don’t know when it will come, but I can feel it coming, and damn it, I don’t know what to do about it.”
Bernard J. Lasker
Chairman of the New York Stock Exchange in 19707

“The financial markets are now driven by an irrational exuberance.”8
Alan Greenspan
Chairman of the US Federal Reserve in December 5, 1996

Financial manias are relevant for our study on money from three perspectives:

All bubbles, whether the object is tulips, real estate, shares, Internet high-tech, or anything else is invariably a money disease. The common numerator in all boom and bust cycles is always money. The price expressed in monetary terms goes first through the ceiling, only to collapse back below the basement afterwards.

Foreign exchange markets, the market where the different national currencies are being traded daily, are notoriously vulnerable to wide swings despite sizable interventions in the market by monetary authorities. If something goes seriously wrong with our global money system, it will take the form of a speculative frenzy in currencies.

Finally, we will discover that the mystery of financial manias can be somewhat elucidated by exploring the shadows of the Magician, i.e. the “right leg” of our archetypal human (Figure 3.5).

This chapter will begin by exploring what is common between all financial boom and bust cycles, and see what reactions they typically evoke among both authorities and economists. I will then show that the current theories explain how rather than why some markets go periodically “crazy.” In contrast, the archetypal approach reveals that more than twenty-seven centuries ago the classical Greeks had a perfect explanation why such mysterious manias repeat themselves. I will conclude with extracting the lessons from the archetypal myths that are applicable to our contemporary situation.

The Boom-Bust phenomenon

“Every age has its peculiar folly; some scheme, project, or phantasy into which it plunges, spurred on either by the love of gain, the necessity of excitement, or the mere force of imitation. Failing in these, it has some madness, to which it is goaded by political or religious causes, or both combined.”9 This quote is from Charles Mackay’s classic “Extraordinary Popular Delusions and the Madness of Crowds” published in 1841 and continuously in print ever since. From Crusades to Mississippi share bubbles, MacKay shows that “crowd madness” has existed at every age.

It is interesting that all “crazes” reported by MacKay from the last four centuries (i.e. after the maximum repression of the feminine due to 350 years of witch hunts) were financial ones. Primary products, manufactured goods, land, buildings, stocks and currencies have all succumbed at some point to the fevers of destabilizing financial speculation. After each of the “financial madness” episodes, authorities try to understand what went wrong. They then introduce rules that are supposed to avoid future crashes, typically by regulating the “last kid on the block” financial innovation of the time – from futures markets in 1637 to computer trading in 1987. But the process keeps repeating itself even in the most sophisticated markets.

One could even make the seemingly paradoxical argument that financial manias have a tendency to occur in the most sophisticated markets of their times.

Holland in the 17th century was by far the most important financial market of its time: the Dutch Republic held and traded as much capital as the rest of Europe combined when the tulip mania hit it in 1637. Similarly, England in the 18th century (the South Sea Bubble of 1720); New York, Vienna and Berlin (simultaneously involved in the international panic of 1873); the US stock market in 1929; Japan in 1990; all experienced crashes when these countries and markets were near the top of their financial sophistication and glory. If this observation proves valid, it would also make predictable that the next bubble to burst should be the US stock market, and specifically the Internet and high tech components. Whatever the case, even just relying on history known as of this writing, financial booms and crashes provide those rare “perfect” cases of quantifiable psychological history.

Photo 4.0 1/3 page

One of the most famous boom and bust cycles in history. The Wall Street crash of 1929 had repercussions around the world. This is how a contemporary Italian magazine presented the panic and distress on the New York Stock Exchange on October 24, 1929. This particular crash triggered the Great Depression of the 1930s, which ended only with World War II.

From Illustrazione del Popolo, November 1929.

Given the relative rarity of major boom and bust cycles, the best way to find out what is going on is to take a historical comparison and detect whether there are common patterns. After wading through all the well-documented cases of financial manias of the past three hundred and fifty years10, there is indeed a pattern common to all of them. The illustrative sample in Figure 4.1 includes: the Dutch Tulip Mania of 1637 (with the price evolution of “Witte Croonen” one typical variety of tulips); the South Sea Bubble in Britain in 1720 (price of shares of the South Sea company); the Crash of 1929 (Dow Jones all shares index); and the Real Estate Crash in Japan in 1990.

Figure 4.1 Sample Boom-Bust Cycles 1637-1995

[Editor: Prepare to add US stock market crash of 2000-2001 ??? ]

Full page graph to be added???

Figure 4.2 US Stock Market Crash (1990-2001) ]

As Figure 4.2 illustrates, the US stock market was no exception to this typical pattern.

As can be observed in all graphs, there are four phases in any boom-bust cycle. These four phases are:

  1. The Build-up: a particular market is slowly but surely rising in value. Professionals in the field take notice and buy. After a while, some market pundits start talking about great gain potential. This process can take several years during which those who follow that advice are indeed making a lot of money. This provides the backdrop for the next
  2. The Feeding Frenzy: the market heats up. First professionals, then non-professionals and finally foreigners get involved in growing numbers. For a majority of pundits this has become “the sure thing.” Markets reach “crazy” levels. Anybody not in the market feels left out, and joins the fray just in time for….
  3. The Panic: Without transition, “something” happens that switches the market mood: a true or false rumor, a new piece of information. This information may or may not relate to the product involved, but is perceived at the time to be relevant. The “bubble” that has taken months or years to build up, shatters in a selling frenzy of a few hours or days. Prices plunge.
  4. Picking up the Pieces: Bankruptcies, financial ruin, despair for large numbers of people. The prices settle back into “normalcy” over the next years. Authorities lament the “excesses” and try to find “what went wrong.” Some new “explanation” is discovered, and regulatory measures introduced to ensure “it never happens again.”

Then, the whole cycle stubbornly repeats itself in some other market in some other way.

Typical anecdotes that remain in the popular folklore illustrate the craziness of the times (sidebar).

Mania Anecdotes

Each Mania has left a few anecdotes illustrating the “craziness” of the times.

In 1636 a sailor visits a merchant in Amsterdam who gives him a red herring for lunch. The sailor decides to add to his lunch an “onion” he finds on the desk. The “onion” turns out to be a “Semper Augustus” tulip bulb worth 2,000 guilders, the sailors’ salary for several decades! (Another basis of comparison: Rembrandt at the top of his glory got paid 1,600 guilders in 1642 for painting the famous “Night Watch”)11. In the Spring of 1720, Isaac Newton stated “I can calculate the motions of heavenly bodies, but not the madness of people.” On April 20, accordingly, he sold out his shares in the South Sea Company making 100% profit (7,000 Pounds). By the Summer of 1720, the frenzy had reached such levels that he could not resist getting back in the market. He got his shares just at the top, and ended up losing 20,000 Pounds.

From then on, “South Sea” became taboo words around him for the rest of his life.12

During the frenzy of the Mississippi scheme in Paris, the mobs trying to buy shares were so numerous in the narrow street where they were sold that a hunchback made a fortune by renting out his back as a desk to the jobbers. The “hunchback of the Rue Quinquempois” unfortunately could not resist investing his earnings in the scheme himself…

Some bankers did throw themselves out of their skyscraper offices in New York in 1929, but it never “rained bankers” as Wall Street mythology claims.

During the real-estate bubble in Japan of 1989-90, the grounds of the Imperial Palace in Tokyo were valued at a higher price than all of California, and a circle a few miles around it was worth the real-estate of the entire US.

[Editor: plug in most recent numbers] During the Internet stock bubble of 1999, the stock value of rose tenfold to $yyy billion in xxx months. Even as the company still had to make its first dollar in profits, it was valued at more than Morgan Guarantee and zzzz combined.

Reactions by Authorities

“I permit myself to note in this connection the words said to me by a very high personage of the Republic: ‘I know my country well. It is capable of supporting anything with calm except a financial crisis.”13

Political authorities have good reasons to strongly dislike the bursting of financial bubbles. The simplest is that they will tend to be blamed for “letting it happen” in the first place. From the British government of 1720 to Suharto’s in Indonesia in 1998, many political regimes have paid a hefty price for being in charge when a crash hits. It is therefore quite traditional that immediately after a crash authorities create a “Committee of Wise Men” who will make a thorough investigation into the matter, and find the reason for the mischief. The Brady Commission investigating the 1987 stock market crash in the US was the most recent example of such an exercise.

“Reformers typically have fixed upon the failure of some market or market mechanism for creating a boom and setting up a crash. The most likely candidates are invariably new arrivals whose appearance at the time of the boom makes them suspect. After tulip prices collapsed, authorities in the Netherlands attacked the recently developed futures markets as responsible for the ‘tulipmania’. This may appear silly from our vantage point, yet the futures market in tulips was new, and its appearance coincided with the spectacular rise in tulip prices. After the 1929 crash, the US Congress readily found villains among the investment banking affiliates of commercial banks and investment trusts. The recently developed practices of programmed trading and portfolio insurance received the blame for the 1987 crash. These may be limited or outlawed, yet they represented only a small fraction of the market. Their cardinal sin seems to have been their newness.”14

This “last kid on the block” analysis makes it predictable that the next crash will be blamed on space-age computer applications and/or on Internet trading. I believe that the common denominator of all this is that it fixes the blame on the means rather than on the cause of speculative frenzies. I allege that if today someone made it illegal to use computers and telephones for trading, mail pigeons might mediate the next crash. The “Panic” might take a few days instead of a few hours, but a crash could still come to pass.

Reactions by Economists

It is revelatory that the most important books on the psychology of money invariably are those about “money madness.” It is also to be expected that the community that has had a long-standing fascination with booms and crashes is economists. The reason for this interest is that the permanence of booms and crashes defies the most sacrosanct hypothesis on which economics has been built from the very beginning: that markets are rational, that a totally rational “Economic Man” drives them.

Economic Man

The Mythical “Economic Man”

The psychological assumptions behind the mythical “Economic Man” present substantial problems.

First of all, the definition implies that everyone is the same. Furthermore, it assumes that group behavior is of the same nature as individual behavior. In other words, there is no room for any “group” or “mob” psychology that is qualitatively different from individual ones. This entails the old “fallacy of composition” that forgets that the whole is different from the sum of its parts.

In the domain of booms and crashes, such a fallacy is critical.

Gustave Le Bon, one of the pioneers of group psychology, made the point: “Individual members however like or unlike their mode of life, occupations or intelligence, find themselves overruled by a collective mind set. This way of feeling, thinking and acting directs the individual to behave quite differently from what he would do alone.”15 Notice that Le Bon never uses the word “archetype” that his contemporary Jung was in the process of defining, but his way of defining mob psychology is totally consistent with Jung’s findings about the collective unconscious.

The notion of “Economic Man” is the psychological corner stone in economics. One classical definition describes it as: “A hypothetical man supposed to be free from altruistic sentiments and motives interfering with a purely selfish pursuit of wealth and its enjoyment.”16

In its essence, this definition dates back to the time of Adam Smith in 1785, a century before Sigmund Freud discovered the unconscious. These principles also reflect the absolute supremacy of Reason that had become the dominant conventional wisdom since Descartes (sidebar).

In all fairness, at least since Wesley Clair Mitchell, economists are aware of the oversimplifications built into “Economic Man”. He pointed out that “Economics without input from psychology is similar to doing mechanics while ignoring the laws of physics”17 Others have since deeply questioned the applicability of this simplified view of human economic behavior18. Therefore, most economists today tend to treat Economic Man as nothing more than a “useful hypothesis”, and do not take its assumptions literally. Nevertheless, that hypothesis is still implicitly built-in in many of the equations used in econometric analysis.

This explains why one of the typical reactions by some economists to the issue of financial manias is simply denial.


Given that booms and crashes contradict the sacrosanct “rationality of the market”, it is not surprising that there is a substantial literature by economists who try to prove that financial manias do not exist.19Booms and busts “don’t fit the model.” They are therefore sometimes rejected as “anecdotal anomalies” or because they rely on “irrationalities.”

Charles Kindleberger responds to these criticisms as follows: “The anecdotal charge can be dismissed quickly. Anecdotes are evidence, and what matters is whether the evidence is representative or not… I contend that the historical evidence is sufficiently representative to establish a recurrent pattern in economic life under capitalism…On rationality, the notion that asset markets are made up of, or are always and inevitably dominated by intelligent, well-informed, and well- financed speculators who calculate by rational steps is equally not the case. It may seem to work like that most of the time, but is not the way it is.”

He concludes that “Economic pathology occurs. Most economies are mostly healthy, but on occasion an economy can be infected with one or another economic virus…Dismissing financial crises on the grounds that bubbles and busts cannot take place because they would imply irrationality is to ignore a condition for the sake of a theory.”20

Economic Explanations

There are of course brave economists who have dared to venture into explaining this strange case of “economic pathology.” Among the theories that have best resisted the criticism of both time and colleagues are Kindleberger’s money creation theory, and information flow theory. Just a few words on each will suffice here.

Kindleberger’s Money Creation Theory

Charles Kindleberger has spent most of his life studying economic history. His book on Manias evaluates the aspects common among 42 crises between 1618 and 1990 (including several running in parallel in different countries). His main conclusions are:

  • “The word ‘mania’ connotes a loss of touch with reality or rationality, even something close to mass hysteria or insanity…Rationality is an a priori assumption rather than a description of the world…Manias and panics, I contend, are associated on occasion with general irrationality and mob psychology”21
  • The appearance of the second phase – what I called the “Feeding Frenzy” earlier – is what makes the difference between a normal and a pathological market. According to Kindleberger, that frenzy starts when credit is being created on the basis of the rise in price of the goods under speculation. “Speculative manias gather speed through expansion of money and”22
  • The trigger to a crisis could be just about anything real or unreal that suddenly reverses expectations. Conspiracy theories abound, but when checked usually prove invalid. “A panic ‘a sudden fright without a cause’, from the god Pan, may occur in asset markets or involve a rush from less liquid to more liquid assets…The system is one of positive feedback. A fall in prices reduces the value of collateral and induces banks to call loans or refuse new ones…” causing a chain effect that snowballs into a full-size crash.
Information Flow Theory

The second approach to explain manias breaks up the market players in two different categories: “smart money” and “small investors”, known in Wall Street fauna metaphor respectively as the “wolves” and the “lambs.” (See sidebar for other relevant fauna).

Wall Street Fauna

Everybody has heard of Bulls and Bears of Wall Street (respectively market optimists and pessimists). But fewer people know about the archetypal origin of this colorful fauna.23

  • Bull: masculine solar symbol in Mithraism and other Indo- European traditions. Etymologically comes from the Indo-European verb Bhel meaning to shine, flash, burn. The ancient god Baal has that exact connotation. In Old English the verb Bellan means to bellow, to blow up, to spread a non-sensical rumor. It is from this latter form that the word bullshit obtained its current meaning.
  • Bear: feminine North Pole symbol, which is why the Big and Small Dipper are also known as the Big and Small Bears. From the Indo-European verb Bher meaning to carry, to give birth. In Old English Borian means to bore, to pierce. The “Bear skin jobber” in Wall Street jargon is someone who sells short shares he does not have.
  • Lambs: “innocent” non-professional small investors. Christopher Elias wrote the book Fleecing the Lambs24 with the self-evident meaning.
  • Wolves: the large professional investors who engage in the “fleecing.”

Putting this entire fauna into action provides the full boom-bust cycle as follows: A shiny Bull based on flashy rumor sucks the Lambs into the market. Then comes the Bear who pierces the pregnant bubble. Only the fastest Wolves escape unhurt.

In summary, the Information Flow Theory points out that there is an asymmetry in information availability between the “smart money” and the “small investors.” The professionals get in first, after which the media starts whipping up the enthusiasm of the smaller players. The market takes off and “smart money” unloads gradually its positions onto the smaller players. When the market reaches its paroxysm, most professionals have left it, and the “lambs” end up being fleeced accordingly.

One application of this theory is the anecdote that Joseph Kennedy, the father of President John F. Kennedy, overheard two shoeshine boys on Wall Street exchanging stock tips in 1929. On that basis, he decided it was time to get out of that market, a decision that saved his fortune during the 1930’s.

Photo 4.0 a. Merrill Lynch Bulls

1/4 page

The shiny bull market is represented here by the emblem of Merrill Lynch, the world’s largest brokerage house. The bull is a herding animal, which appears most of the time quite domesticated, but can periodically move in irresistible and senseless stampedes.

Photo 4.0 b. Goddess Artio ¼ page

(ex: Peter Berresford Ellis Celtic Women)

Celtic bronze from the first century BC currently at the British Museum. It represents a gigantic bear mirroring the Goddess Artio (from Art = bear in Celtic) who is bearing a basket of flowers and fruits on her lap.

The bear is the largest hibernating animal. Contrary to other hibernating animals such as woodchucks, hedgehogs or squirrels, it does not drop its body temperature, but retreats into what has been described as a deep meditation-like state. A bear hibernates during five months in a cave, during which time it lives on its own flesh, literally devouring itself. This is followed by a swift rebirth at the next spring. Both the Goddess Artio and the bear symbolize the archetypal cycle of deep descent into the spirit underworld (what we would call today the collective psyche), and sudden springtime re-birth.

The most recent version of this theory is called “Behavior Finance” (see box next page). It provides the theoretical framework for the application of collective psychology to real-life finance that will be described in this chapter.

Behavior Finance as Context

“For a large part of the past 30 years, the discipline of finance has been under the aegis of the efficient market hypothesis. But in recent years, enough anomalies have piled up, cracking its dominance of the field. As a consequence, the arrival of new thinking to explain market behavior has warranted attention, and its name is behavior finance.

Behavior finance proponents believe that markets reflect the thoughts, emotions and actions of normal people as opposed to the idealized economic investor underlying the efficient market school as well as fundamental analysis. Behavioral man may intend to be rational, but that rationality tends to be hampered by cognitive biases, emotional quirks, and social influences. Behavioral finance uses psychology, sociology and other behavioral theories to explain and predict financial markets. In addition, it recognizes the roles that varying attitudes play toward risk, framing of information, cognitive errors, self-control or lack thereof, regret in financial decision-making and the influence of mass psychology.”[notePruden, Henry “Life Cycle Model of Crowd Behavior” Technical Analysis of Stocks and Commodities (San Francisco: January 1999) pg 77, See also “Behavioral Finance: What is it?” (Market Technicians Associations newsletter and MTA Journal, September 1996)[/note]

The modern interpretation of speculative booms is therefore related to the breakdown of the “assumption of common knowledge of rationality”. In other words, booms occur when market participants abandon valuing securities as the present value of the future dividend stream, and instead price securities based on the expectation of capital gain possible when an “irrational” investor purchases the security for a still higher price (also known as the “greater fool” theory). What the archetypal model shows is that this exemplifies a manifestation of group “greed”, the Yang shadow built into our very money system.

Another basis for questioning the adequacy of the prevailing market equilibrium orthodoxy has been formulated by George Soros with his concepts of fallibility and reflexivity. “Fallibility means that our understanding of the world in which we live is inherently imperfect. Reflexivity means that our thinking actively influences the events in which we participate and about which we think.”25 In short, Soros points out that nobody knows the final Truth on anything, which in Archetypal language identifies the dangers of the Apollonian hyper- rationalist shadow. In contrast, classical economic theory is based on the assumption of “perfect knowledge” by all market participants and assumes hyper-rationalism as a given. Furthermore, a key difference between physical sciences and social sciences is that in the former the opinions of the observer do not affect the results, while in finance and economics, changing expectations is often the key force in changing reality.

The archetypal model that is presented in the current chapter explains the psychological dynamic that underlies both Behavior Finance and the combined effects of fallibility and reflexivity in the boom and bust cycles.

The Unanswered Question

All theories that have been proposed to explain the boom-bust phenomenon, including the two best ones that were presented above, have one feature in common. They explain how the bubble is created, and how it bursts.

But there is one type question that remains unanswered: Why does this happen. Why do the lambs never learn? Why is there always the belief that a still greater fool will pick up the asset at a still higher price? Why after centuries of growing sophistication do markets remain vulnerable to such episodic outbursts of “mass hysteria” or “insanity”?

It is to address that question that we will soon embark on an archetypal journey to Ancient Greece.

The Need for a Collective Psychology Approach

“Without due recognition of crowd thinking (which often seems crowd madness) our theories of economics leave much to be desired”26 was Bernard Baruch’s verdict.

Baruch was one of the most successful American investors in the pre-World-War II era. He had lived through the 1929 crash. In another book he made an even stronger appeal. “The prehistoric eruptions from Central Asia, the Crusades, the medieval dance crazes, witch burnings, all these – right down to the Florida Boom and the 1929 madness – were phenomenon of mass action under impulses which no science has explored… Such impulses have power unexpectedly to affect any static condition or so-called normal trend. For that reason, they have a place in the considerations of thoughtful students of economic affairs. It always seemed to me that the periodic madness which afflicts mankind must reflect some deep-rooted trait in human nature a trait akin to the force that motivates the migration of birds or the rush of lemmings to the sea.”27

Had Baruch read his contemporary C. G. Jung, he would have identified the science that explores the “impulses” about which he was so concerned. Indeed, one of Jung’s shortest definition is “Archetypes are to the soul what instincts are to the body.”28

Another hint at how tantalizingly close people have gotten to the approach that will be proposed here comes from Peter Bernstein: “All of these [financial mania] occasions, however, conform to a recognizable sequence of events that, like a Greek drama, plays out with easily recognizable regularities.”29 This sentence was meant as a metaphor; I will show now that it turns out to be much more than that.

An Archetypal Approach

Remember our Archetypal Human (Figure 3.5 on pg.???) We noted at that time that for the past five thousand years we have been “standing” on one archetypal foot, i.e. the Magician. This means that our interpretation of the world around us has been completely dominated by that particular Yang viewpoint.

I will now show that the boom and bust cycles that have been haunting our economic system are none other than a direct consequence of that bias. It turns out that Greek mythology provides a most precise description of the dynamic at hand. But first we should clarify what myths really mean.

The Meaning of Myths

Myths are not untrue, pre-scientific tales about the origin of mankind as is often misunderstood. Instead, myths are valid descriptions of psychic sequences; they are favorite scenarios that illustrate how specific archetypes manifest.

Myths, therefore, should be understood in a collective psychological sense, not as some hero’s or god’s story. They represent “powers that have been common to the human spirit forever, and that represent that wisdom of the species by which man has weathered the millenniums”30 Myths indeed are the dream-thinking of a whole civilization.31

Modern humans have tended systematically to dismiss the value of any such pre-Modern wisdom. But Joseph Campbell warned us that: “Clearly, mythology is no toy for children. Nor is it a matter of archaic, merely scholarly concern, of no moment to the modern man of action. For its symbols (whether in the tangible form of images or in the abstract form of ideas) touch and release the deepest centers of motivation, moving literate and illiterate alike, moving mobs, moving civilizations.”32

It is in this sense that I believe that old Greek myths are useful tools to explore contemporary issues.33

The Apollo-Dionysus Pair

Let me now introduce the pair that I believe has been pulling at our collective leg in every one of our “irrational” boom and bust cycles of the past three hundred years. They were among the most famous and powerful gods of the classical Pantheon, and the fact that we have forgotten about them has not made them any less powerfully operative in our midst.

Apollo and Dionysus have in common being the two favorite sons of Zeus and have always represented the two polarities of the interplay between rationality and irrationality. I will now provide a short overview of each god’s own story34, show how the two interact, and then connect that interaction with the well-established phases of a boom and bust cycle. In each of the descriptions that follow, I will add italics to the features that will end up being most relevant for that ultimate connection with the phenomenon of financial manias.


Apollo was second only to Zeus as the most important Greek god. He was the solar God of prophecy and divination, of the arts (especially music) and of archery. “He was known to Romans and Greeks alike as Apollo with the adjective of “Phoebus” (the “bright” or “shining” one). He was portrayed standing or striding, as a handsome beardless youth with virile strength and flowing, golden hair…”35 He could provoke epidemics in entire countries, but also heal them.

Feminine Relationships

Apollo’s mother, Leto, was persecuted by the jealousy of Hera, the official wife of Zeus. So she had suffered nine days of terrible labor on the island of Delos before she gave birth to Apollo and his older twin sister Artemis, the goddess of the moon and the hunt. Apollo grew to full adulthood in only a few days because Themis (goddess of law and order) fed him pure nectar and ambrosia.

Apollo never had any successful love affairs, and had no feminine partner. He was the worst misogynist of the entire Pantheon. Apollo went as far as claiming in the play of Euripides “Orestia” that the mother of a child is not really a parent, that only the father has that quality. He took over the oracle of Delphi (literally “the Breast”), a site with a long pre-Hellenic history of prophetic divination as a sanctuary to the Gaia Goddess, who was guarded by a giant she-snake named Python. In his mythology he slays Python and thereby gains possession of Delphi. He claimed that his “superior knowledge”, what we would call today the “intellectual high ground”, had given him the power to take over the functions of prophecy and music of the old goddess. Thereafter he was called the Pythian Apollo and male Apollonian priests controlled the priestesses, called Pythia, who were making the most famous prophecies of the Ancient world. A further confirmation is provided by Scully in his study on the Greek sacred architecture: “Apollo’s most important temples tell us that he was usually invoked by the Greeks whenever the most awesome characteristics of the old Goddess of the Earth were made manifest… there the temple of the young god was placed, and generally so oriented as not only to complement but also to oppose the chthonic forces.”36 He was a god of authority in general, and of authority over the feminine in particular, as revealed by some of the precepts inscribed on his temple:

“Keep a reverent tongue.
Fear authority.
Bow before the divine. Glory not in strength.
Keep women under rule.”37

 Apollo’s Instruments

His two instruments were two stringed artifacts: the bow and the lyre. W.F. Otto noted that to the Greeks there was a kinship between the two: “in both they saw a dart speeding to its goal, in one case the unerring arrow, in the other the unerring song.”38 Apollo’s arrow was deadly accurate; his song was precise and clear. One of his Homeric attributes was the “One who destroys from afar”: his arrows kill his victims from a distance, as happened to Achilles, the most famous and favored Greek hero.

Photograph 4.1 (full page)

Apollo is shown in a typical self-assured position and gesture. His traditional attributes are missing here: the bow used to be in his left hand, and his lyre in his right, resting on the tree stump. The giant snake Python he has vanquished has become a harmless little snake visible on the stump. Python was the symbol of the Great Mother. After Apollo took over her temple at Delphi – and her priestesses famous for predicting the future – he became Apol one who sees the future unerringly”. (Apollo of Belvedere, 2d century BC. Vatican Museum, Rome)

Apollo’s Emotional Attributes

Apollo is always emotionally distant, unaffected by the damage he may create. He can live in the future, and keep his objective stance with superb indifference. Apollo rejects whatever comes too near him: he remains remote, unemotional, hyper-rational, and has no introspection whatsoever. His own emotional pain is always handled by distancing himself from feelings through intellectual abstraction.


Dionysus (known as Bacchus to the Romans) was the god of “ecstasy and terror, of wildness and the most blessed deliverance.” He was the youngest of the Olympians, and the only one with a mortal mother. Ginette Paris captures his energy graphically as follows: “It’s Dionysus who makes us [in a sexual urge] tear off our clothes (or at least pop out buttons), messes up our hair, knocks over things, and disturbs the neighbors.”39 Even more specifically, “The face of a man on the edge of orgasm has piercing, enlarged eyes, congested with power, like those of an animal encountered at night. His face darkens, his veins swell, and he goes mad. Sometimes he growls, pants, cries out.

Dionysus lives again!”

Not surprisingly, Dionysus did not fare well under Christian influence. “They couldn’t make sense of a spirituality and an ecstasy attained through the body, so they transformed Dionysus-the-God into Dionysus-the-Devil… The Gods Pan and Priapus, who were part of the Dionysian cult, represented with legs, horns and beard of a goat and an erect phallus pointing toward the sky… became one of the most popular representations of the Devil.”40

Contemporary Western languages have a very narrow range to describe excitement and ecstasy. In contrast, Sanskrit catalogues well over 200 forms of ananda41(“bliss”), and the Greeks still were familiar with several dozen. So translators understandably have trouble finding words for Dionysian energy without falling into the vocabulary used by psychiatrist to describe pathologies.

Photo 4.2 ½ page

Dionysus in ecstatic trance state, surrounded by dancing fauns. He is the “dissolver of all boundaries and restraints.” Plant life and musical clappers are part of the scene.(from a classical Greek ceramic.)

Feminine Relationships

Dionysus was the son of Zeus and the mortal Semele. His mother, like Apollo’s, was pursued by Hera’s jealousy. Hera tricked Semele into making the request to see Zeus in his full majesty. When Zeus transformed himself into the God of Lighting, his power killed Semele but made her unborn son immortal. Zeus rescued Dionysus by sewing him into his thigh with golden clamps. Dionysus was born only two months later. One of his names is “Divine Child”—the Puer Aeternus42—because he’s born straight from the god. He was initially brought up as a girl, and Cybele (the dark moon goddess) taught him her mysteries and initiation rites. As a child under the name of Iakchos, Dionysus played a critical role in the Eleusian mysteries as the guide of the initiates to the temple of the goddesses.43 Dionysus is the only Greek god who rescues and restores women representing goddesses, who had been diminished earlier in Greek mythology. He rescues, for instance, his own mother Semele; and Ariadne who becomes his wife. Paradoxically for a god surrounded by sexual promiscuity, he is also the only god in Greek mythology that remained faithful to his wife Ariadne, the Goddess of vegetation. So he became associated with vegetation, the vineyard, fruit, spring renewal and sexual fertility.

Photo 4.3 ½ page

Dionysus crowned by vine leaves and surrounded by Maenads (“the crazy women”) dancing. The word “mania” derives from these Maenads. Chaotic music and the wildest “no-holds-barred” dances characterize anybody who comes close to Dionysus’ presence. Notice the reed pipe played by the woman on the left, emblem of the god rom where the word “panic” derives. (Original drawing by Moreno Tomasetig from a Classical Greek ceramic)”

The worship of Dionysus was predominantly a women’s cult, and was performed in the wildest part of the mountains. There, the women became Maenads:those who entered ecstatic communion in an emotional and irrational frenzy. Such celebrations were held during the night and were called “Orgia”: wild dances accompanied by wine and other sacramental psychoactive intoxicants as well as frenzied music from drums, cymbals, systrum and reed pipes (the attribute of the god Pan).The climax was the tearing to pieces of a sacrificial animal representing the god himself, eating its raw flesh and wearing its skin. Note that several key contemporary words relevant for our boom-bust cycle have their origin here: “mania” comes from the Maenads, orgy” from these Orgia, and “panic” from Pan. Even modern expressions such as “Black Friday” to identify the day of the Big Crash in 1929 curiously hints back at the “dark, night-mode” of the Dionysian tradition. On a more anecdotal level, the still extant Western tradition of women wearing furs, red lips and nails also stem from these rituals.

Classical Greek tragedy, the first consciously “fictional” literary works ever, was initiated with the first performances organized in Athens in 534 B.C. under the auspices of the Dionysian cult, and the yearly “theater season” would coincide thereafter with the month dedicated to that City’s Dionysia.44

Dionysus’ Attributes

Dionysus’ attributes are not artifacts, but plants. His wife, Ariadne, is the ancient Cretan Goddess of vegetation and fruits, fertility and sexuality. The grape vine, the ivy, and the myrtle are particularly dear to him. His most famous contribution is of course the cultivation of grapes and their fermentation into wine. The popular image of the Roman Bacchus has focused on that attribute exclusively. But in general, all consciousness altering and psychotropic experiences are part of his preserve.

Dionysus’ Emotional Attributes

There are two types of emotional attributes attached to Dionysus: the “eternal child” and the frenzied orgiastic god.

Ovid gives the title of the Puer Aeternus (“eternal child”) to Dionysus in the form of the child-god Iakchos of the Eleusian mysteries.45 As the “divine child”, he carries with him a sense of innocence and destiny. He naively escapes materiality, and “can be swayed and easily persuaded.”46 He can easily engage on “the stairway to the stars.” He is the dreamer and enthusiast without reservations, who gets so completely absorbed in his emotional space that everything else disappears from consciousness. The “flower children” of the 1960’s embodied that aspect of Dionysus.

In his adult form, Dionysus becomes like Pan, the chaotic dissolution of repressions. He forces anybody who holds on too tightly to let go, by choice or by death. It was Dionysus who granted King Midas’ wish to transform anything he touches into gold. Midas ended up dying alone from starvation because everything he would touch, including his daughter or his food, would become gold. In that story like many others, Dionysus is foremost an archetype of extremes, of intense opposites: ecstasy and horror; total union and complete dissolution; exuberant life and horrible death. The adult Dionysus knows no boundaries, no social or other constraints. The traditional shaman is an embodiment of the adult Dionysus.

The Apollo-Dionysus Polarity

Apollo and Dionysus have some significant features in common. They are half-brothers; both sons of Zeus, the most powerful male god. Both also have a “damaged” mother relationship. Apollo because of his long and painful birth; and Dionysus because he has no birth-mother at all. As “mother” and “matter” have the same etymological and archetypal origin, this means in practice that neither has a “grounded materiality.” Apollo takes refuge into abstract rationality while Dionysus is ungrounded by the Maenads who dissolve him into total emotionality. One consequence of this lack of grounding that they share, is that neither has any introspection. This relates to why “Wall Street rarely deals with self analysis” as was noted by Robert Sobel.47

With the exceptions of these common aspects, the two gods are literally at extreme ends of the spectrum as is shown by the following table.

Apollo Dionysus
no childhood eternal childhood
hating, rejecting women loved by, and dissolving into women
excessive boundaries, distancing no boundaries, ecstatic union
order, harmonious music disorder, dissonant noise
sunlight, clarity, dryness night, darkness, wetness
hyper-rationality, no emotionality irrationality, total emotionality

Because of these polarities, Nietsche saw that “Apollo and Dionysus are two sides of the same coin.”48 Gilbert Durand uses the image of night and day to make the same point. He sees Dionysus as part of a “night-mode49 – nocturnal consciousness associated with the moon, moisture, women, sexuality, emotions, the body and the earth; as opposed to a “day-mode” connected to the sun, dryness all that is rational, orderly and Apollonian. Ginette Paris points out “whenever a culture receives only Apollonian sunshine, it dries up and dies; conversely, if it receives too much Dionysian moisture, it rots and becomes crazy. A hyper-technologized, hyper-rationalized society is as crazy, in a way, as is an anti-intellectual rock ‘n roll subculture. We need both Dionysus and Apollo.”50 The intimate relationships between these two polarities become even more apparent when considering the myths about their interactions.

The Apollo-Dionysus Interaction

The mythological connection between Apollo and Dionysus is remarkably explicit. “In the inner sanctuary of Apollo’s temple was the grave of Dionysus. For three winter months, Apollo handed over his temple to Dionysus, while he went far north to the fabled land of the Hyperboreans”51 In addition, the Dionysian festival at Delphi was officially recognizing Dionysus’ turn to run the place every two years. Women would start with the sacred dance reenacting the discovery and awakening of the infant Dionysus in a cradle. The ritual would build up to an orgiastic frenzy, and end with the death by dismemberment of the adult Dionysus who would return to the underworld until the next cycle.

Another revealing episode is reported by Euripides’ famous drama The Bacchae. The storyline of the play starts with the return of Dionysus to Thebes, his place of birth. Pentheus, the Apollonian ruler of the city does not “recognize his divinity” and rejects him. He bans all Dionysian rituals because he is afraid they would disturb public order. A group of women decide to disobey the ruling and take to the mountains to perform the ritual. Among them is Agave, Pentheus’ own mother.

Pentheus hides in a tree to spy on the women, but he is discovered. In their mad frenzy the women mistake Pentheus as the sacrificial animal, and dismember him. Agave, Pentheus’ mother, ends up triumphantly holding Pentheus’ head.

James Hillman comments on the scene as follows: “Dionysus sends his madness, the dark counter- image of the Dionysian, not to his devotees who give themselves to his miracle, but to his enemies who defend themselves against him.”52 In other words, it is those very people who cling to the Apollonian hyper-rationality that will end up victims of a Dionysian mania. In contemporary terms, “contempt of Dionysus” refers to hyper-rational attempts at control; and “Dionysian madness” is the frenzy followed by panic.

We now have in place all the pieces of the myth useful to decode financial boom and bust cycles.

Archetypal Decoding of Financial Manias

Each phase of the traditional boom and bust cycle is identifiable with its corresponding archetypal reality. The map of a classical boom and bust cycle directly can be overlaid on the archetypal myth. The following table summarizes the resulting fit.

Phase Financial Market Story Archetypal Story
1. The Build Up Market pundits start talking about great gain potential. Apollonian hyper-rationality presents prophecies of the future.
2. Feeding Frenzy Small investors, the “lambs”, move into the market. “Stairway to the stars.” The naive child (“Puer Aeternus”) is born. “Stairway to the Stars.”
3. The Panic Buying frenzy suddenly followed by selling frenzy.
The bubble shatters.
Orgiastic frenzy, extremes enacted. Mature Dionysus dismembered.
4. Picking Up the Pieces A “Committee of Wise Men” investigates.
Regulations ensuring “it will never happen again.”
Apollo returns from Hyperborea.
Dionysus returns to the Underground.

By the way, the expression “Stairway to the stars” was actually used by Granville, one of the top speculators in the seventies and the eighties to describe the bubbles in the stock market. It is also the expression used to identify the Puer character.53

Some characteristics of each phase will now be presented in more detail.

Apollonian Trading

Apollo represents in economic terms the hyper-rational mind—the corner stone of economics and the only mode of operation of Economic Man.

The professional trader’s way is remote, detached, indifferent to damage done to others, unemotional, logical, hyper-rational and lacking any introspection. It is well known that professional traders are at their best when not involved in emotions.

I remember on one occasion when I came to visit one of the great and most successful traders in New York. While I was talking with him in his office, he was trading surrounded by computer screens. By the end of our talk, I had absolutely no hint as to whether he might have made a million dollars or lost it during that hour. Perfect unemotional professionalism.

Even though the Cuban crisis brought us closer to nuclear war than we have ever been, the stock market sailed undisturbed through the entire episode even as this might have been the end of civilization. During the entire period of World War II the Amsterdam stock market remained open, totally indifferent to what happened in the rest of the world.

Whenever one listens to stock market analysts, they act as if they know the future. To the extent that they have it all figured out, market pundits are Apollo’s speaking from Delphi.

Puer is born

The advertisement by Incorporated Investors appeared in the Wall Street Journal on August 14, 1929. (See sidebar). It is completely self- explanatory. The Big Crash hit on October 24, 1929.

Apollonian Advertisement appealing to the Puer

Wall Street Journal August 14, 1929

“The richest heritage, the most precious birth right,
is to be an American in this day and age.
For never was a country so happy, so prosperous, and so peaceful as America today.
Never were man’s horizons wider, the opportunities for the finer things greater –
because never was wealth upon which these enjoyments depend, so open
to attainment as in present-day America.
The creation of new wealth in fabulous quantities is America’s special faculty.
The wide diffusion of this wealth is her greatest discovery.
And anyone may participate!
Incorporated Investors provides an ideal method.
Through its one-class, fully participating shares, Incorporated Investors, designed
for this new America, passes on to its stockholders the growth and earnings of the
greatest companies in America’s expanding fields

Bigger and Better Crashes

Charles Kindleberger has assembled an intriguing set of quotes from newspapers, government reports and expert opinions over the past two centuries.54 They provide a perspective across time on how crashes are perceived.

Plus ça change,

Plus c’est la même chose…

Year Place Quote
1772 Britain “One of the fiercest financial storms of the century”
1825 Britain “A panic seized upon the public such had never been witnessed before”
1837 USA “One of the most disastrous [panics] this country has ever experienced.”
1847 Britain “In the last six months more reckless and hazardous speculation than any other known in modern times”
1857 Britain “Crisis of 1857 the most severe that England or any other nation has ever encountered”
1857 Hamburg “So complete and classic a panic has never been seen before as now in Hamburg”
1857 Hamburg “Panic of a violence hitherto unknown”
1866 Britain “Crisis of 1866 most serious in modern times”
1866 Britain “Wilder than any since 1825”
1873 Germany “In 56 years, no such protracted crisis”
1882 France “Never have I seen an equal catastrophe”
1929 USA “The greatest cycle of speculative boom and collapse in modern times – since in fact the South Sea Bubble.”

The Relevance of the Apollo-Dionysus Myth for Today

What can we learn from the wisdom built into age-old myths? What the Greeks were saying twenty- five to thirty centuries ago includes two key lessons from the way the Apollo-Dionysian pair interacts. Both lessons are paradoxes, and the contemporary mind – to the extend it is Apollonian – tends to be very uncomfortable with paradoxes. The real meta-lesson may be that we need to learn to hold paradoxes instead of rejecting them outright.

  1. Manias and crashes are built into the hyper-rational way with which professionals normally approach the market.

Mythologically, the tomb of Dionysus is in the inner sanctuary of Apollo in which he will awaken periodically. The Ancient Greeks would not share our puzzlement about the “sudden irrationality” in supposedly rational markets. After all, they knew that any extended Apollonian period necessarily would be followed by a Dionysian craze, as predictably as night follows day.

Booms and crashes are indeed one more sign that archetypal shadows play through us. Although it may seem quite humiliating to the Apollonian ego, the illusion that we understand market events has been repeatedly proven unfounded. James Hillman put it this way: “Our lives follow mythical figures: we act, think, feel only as permitted by primary patterns established in the imaginal world.”55

  1. The more hyper-rational a market, the more likely it is to get caught in a mania.

Mythologically, as shown in the Bacchae, it is the Apollonian ruler, not those who embrace the “messiness” of the Dionysian space, who end up being dismembered.

In other words, the more we defend ourselves against the Dionysian uncertainty, the more likely that we attract his “madness.” This could explain why the most sophisticated markets are often the ones who get caught in manias. It is because of their very sophistication that the illusion of control is most prevailing. The more tools we accumulate to ensure a permanent Apollonian certainty, the more likely it is that we will attract a Dionysian outburst.

Stanley Passy concluded: “The idea that anyone can see the future with certitude carries within the dark and deadly shadow of panic. Dispassionate portfolio management, technical analysis and computer modeling live in parallel with merger manias, market fads and crashes.”56

Cartoon 4.5

NYSE uncertainty up…anxiety up…

If the findings of this chapter are valid, then we have to deal with the uncomfortable realization that the global foreign exchange market is now widely considered the most sophisticated market in the history of the world. The most sophisticated computerized tools ever available are now standard practice. The global currency market, the first fully integrated twenty-four hour global market ever to exist, is in an unprecedented boom as was explained in “The Future of Money”57.

Supercomputers with rocket-science neuronet models are permanently monitoring the major currencies and trading them on-line. Apollonian certainty shines within both the trading community and among regulators.

Where does this leave us? (See sidebar). My personal view is that we should be aware that in the global monetary domain, we are walking on eggs – and denial may prove irresponsible in the long run.

Relevance for Today

(Extract from New York Times September 6, 1998, pg 4)

What follows are verbatim quotes from people in charge of the official global monetary system. For the first time they are expressing publicly that the system has gotten out of hand (italics added and bullets added)

  • “‘This is an unprecedented situation in a host of respects’ said the Treasury Secretary, who experienced several major market drops in his 26 years on Wall Street as a trader and then co-chairman of Goldman Sachs, the investment banking firm. ‘The number of countries experiencing difficulties at once is something we have not seen before.’ …
  • ‘We are in a situation which is indeed a dangerous one, by far not fully rational’ said Michel Camdessus, the managing director of the International Monetary Fund… ‘The degree of panic going on – that is indeed, clearly exacting an excessive and unfair pressure on a large number of countries.’ For Mr. Camdessus, that is a significant change in tone. In January, he signed an agreement in Indonesia with President Suharto that he claimed would restore confidence – and within weeks he saw the country dissolve in violence, economic chaos and political upheaval. Early this summer he declared that there was no crisis in Russia, and a huge one erupted within weeks.
  • ‘The whole tone has changed, for everyone’ said Jeffrey Garten, the dean of the Yale School of Management, a former top official in the Commerce Department. ‘A few months ago, people were talking about seeing the light at the end of the tunnel. Now the only hope is keeping the world economy from total deterioration. And you get a sense that this is all now truly left to Adam Smith’s invisible hand – it’s beyond any country’s ability, any institution’s ability, to control.”


In contrast with the above, in the next two chapters I will explore what changes in money systems occur when the Great Mother archetype is honored in a society. Empirical historical facts testify that whenever the Great Mother/Provider archetype was honored in a society, money systems very different from our own spontaneously came into being; which in turn led to unusually generalized economic well-being.

In addition, as far as we can ascertain, there were no boom and bust cycles in such societies. As quoted earlier, Kindleberger specifies that booms and busts are “a recurrent pattern in economic life under capitalism”, i.e. only over the past 350 years or so. In contrast, we will see that societies where the Great Mother was honored were characterized by long periods of remarkable economic stability, whose length was measured in centuries!

This is especially relevant today, because later – in Part Three – it will be shown that an on-going change in values in our society points precisely to a re-awakening of feminine energy; and simultaneously to the spontaneous re-appearance of money systems that have some similarity to the ones that characterized the two case studies that follow.


Table of Contents | INTRODUCTION











  1. Moore and Gillette The Warrior Within (New York: William Morrow and Co, 1992) pg. 9.
  2. A whole chapter (chapter 8) is dedicated to this relationship between positive interest rates and its effect of short-term vision in The Future of Money.
  3. Extract from Warning to Humanity
  4. Shinoda Bolen, Jean Gods in Everyman: A new Psychology of Men’s Lives and Loves (San Francisco: Harper & row, 1989) pg 3.
  5. Kindleberger, Charles Manias, Panics and Crashes ( New York: Wiley & Sons, 3d ed. 1996) pg 1.
  6. Bagehot, Walter Essay on Edward Gibbon.
  7. quoted by Brooks, John The Go-Go Years (1972).
  8. This quote was used later as title of a recent book : Shiller, Robert J. Irrational Exuberance (Princeton, NJ: Princeton University Press, 2000) which provides ample statistical evidence of irrational financial behavior today and in the past.
  9. Mackay, Charles: Extraordinary Popular Delusions and the Madness of Crowds (New York: Harmony Books, 1980) pg 354.
  10. Some of the best sources for studies on a variety of crashes include Charles Kindleberger’s “Manias, Panics and Crashes: A history of Financial Crises”; Milton Friedman’s “Money Mischief”; Eugene White’s “Crashes and Panics: the Lessons from History” and Kenneth Galbraith’s “The Crash of 1929.”
  11. Schama, Simon Rembrand’s Eyes (London: Penguin Books, 1999).
  12. Van Vleck, George: The Panic of 1857: An Analystical Study (New York: Columbia University Press, 1953) pg 31.
  13. Philippe, Raymond Un point d’histoire: Le drame financier de 1924-29.
  14. Ibid. Pg 236.
  15. Le Bon, Gustave The Crowd: a Study in the Popular Mind (London: Unwin, 1921) pg 29.
  16. Webster New International Dictionary of the English Language. I like the unconscious humor of the “interfering” part.
  17. Mitchell, Wesley Clair :”Analysis of Economic Theory” American Economic Review 15 (March 1925) pg 1-12.
  18. Just to mention two major ones: both Keynes’ (1936) and Simon (1947/57) laid the foundation for the dismantling of general equilibrium concepts which assumed universal rationality. Keynes’ General Theory offered a new paradigm, which emphasized the intrinsic instability of the markets and made possible periods of prolonged unemployment. Simon’s work took Keynes observations further, embracing a logical analysis of the limited ability of humans to process information and compose optimal strategies in a complex environment.
  19. Among the better quality examples of such attempts at denials are Garber, Peter M. “Who Put the Mania in the Tulipmania?” and Neal, Larry D. “How the South Sea Bubble was Blown Up and Burst: A New Look at Old Data” both in White, Eugene N. Crashes and Panics: the Lessons from History (Homewood, Ill. Dow Jones-Irwin, 1990) pg 3-56.
  20. Kindleberger, Charles: Manias, Panics and Crashes pg 202.
  21. Kindleberger Manias, Panics and Crashes ( New York: John Wiley and Sons, 1996) pg 20, 21, 23.
  22. Kindleberger, Ibid. Pg 44.
  23. This analysis of the origins of the Wall Street fauna comes from Passy, Stanley The Imagination of Wall Street (Unpublished PhD thesis University of Texas, 1987).
  24. Elias, Christopher: Fleecing the Lambs (Chicago: Henry Regnery Co., 1971).
  25. Soros, George The Crisis of Global Capitalism: Open Society Endangered (New York: Public Affairs, 1999) pg 4.
  26. Baruch, Bernard Introduction to Charles Mackay’s Extraordinary Popular Delusions and the Madness of Crowds. Italics added.
  27. Baruch, Bernard The Public Years (New York: Holt, Rinehart and Winston) pg 228. Italics added
  28. Carl Gustav Jung “On the Nature of the Psyche” in Collected Works Volume 8 The Structure and Dynamics of the Psyche pg 408.
  29. Bernstein, Peter in the Foreword of Kindleberger opus cit. Pg xvi Italics added.
  30. Campbell, Joseph Myths to Live By pg 13.
  31. Dodds, E.R. The Greeks and the Irrational (Berkeley: University of California Press, 1951) pg 104.
  32. Campbell, Joseph The Mask of God Volume I pg 12 Italics added.
  33. I am grateful to James Hillman to have drawn my attention to the thesis of Passy, Stanley The Imagination of Wall Street (Unpublished PhD thesis, University of Texas, 1987) which gave me the inspiration of this chapter.
  34. The sources of this mythology (except when indicated with specific additional footnotes) are: Grant, Michael & Hazel, John Dictionnaire de la Mythologie (Paris: Editions Seghers, 1985); Bolen, Jean Shinoda Gods in Everyman: A New Psychology of Men’s Lives and Loves. (San Francisco: Harper & Row, 1989); Guthrie, W.K.C. The Greeks and their Gods (Boston: Beacon Press, 1955); Otto, Walter F. The Homeric Gods: the Spiritual Significance of Greek Religion (London: Thames and Hudson, 1979); Otto, Walter F. Dionysus: Myth and Cult (Dallas, Texas: Spring Publications, 1965); Mayerson, Philip Classical Mythology in Literature, Art and Music (New York: Wiley, 1983); Fontenrose, Joseph Python: A Study of Delphic Myth and Origins (Berkeley: University of California Press, 1980).
  35. Bolen, Jean Shinoda Gods in Everyman: A New Psychology of Men’s Lives and Loves. (San Francisco: Harper & Row, 1989) pg 130. Other features we will use of both Apollo and Dionysus are identified in that same book.
  36. Scully, Vincent The Earth, the Temple and the Gods: Greek Sacred Architecture (New Haven: Yale University Press, 1962) pg 100. Italics added.
  37. Bolen Ibid. Pg 134.
  38. 195 Otto W.F. The Homeric Gods: the Spiritual Significance of Greek Religion (translated Moses Hadas) (London: Thames and Hudson, 1979) pg 76.
  39. Paris, Ginette : Pagan Grace: Dionysus, Hermes and Goddess Memory in Daily Life (Dallas, Texas: Spring Publications, 1991) pg 5 and 8.
  40. Paris, Ginette Pagan Grace pg 6 and 8.
  41. Chaudhury, Haridas provides an extract of these in the paper “Yogic Potentials or Sidhis in Hindu and Buddhist Psychology” (San Francisco, Unpublished Paper communicated to Michael Murphy, 1978).
  42. von Franz, Marie-Louise Puer Aeternus: A Psychology Study of the Adult Struggle with the Paradise of Childhood (Santa Monica, CA: Sigo Press, 1981).
  43. Kerényi, Carl Eleusis: Archetypal Image of Mother and Daughter (Princeton, NJ. Princeton University Press, 1967) pg 63-65.
  44. Otto,Walter F. Dionysus: Myth and Cult (Dallas, Texas: Spring Publications, 1965) pg198-199.
  45. Ovid Metamorphoses IV, 18-20.
  46. Plato quoted by Hillman, James Puer Papers pg 113.
  47. Sobel, Robert Inside Wall Street (New York: Norton, 1977) pg 274.
  48. Nietsche, Friedrich The Birth of Tragedy (New York: Doubleday, Anchor Books, 1956)
  49. Durand,Gilbert Les Structures Anthropologiques de l’Imaginaire: Introduction à l’Archéotypologie Générale (Paris: Bordas, 1979). Durand uses the word “régime nocturne” which Ginette Paris translates as “night-mode.”
  50. Paris, Ginette Ibid. Pg 10.
  51. Bolen Ibid. Pg 134 Italics added.
  52. Kerényi quoted by Hillman, James Facing the Gods (Dallas: Spring Publications, 1980) pg 160 Italics added.
  53. Passy, Stanley The Imagination of Wall Street (Unpublished PhD thesis, University of Texas, 1987)
  54. 211 Kindleberger Manias pg 194-195.
  55. Hillman, James Loose Ends (Zurich: Spring Publications, 1979) pg 50.
  56. Passy, Stanley The Imagination of Wall Street (Unpublished PhD thesis University of Texas, 1987) pg 115
  57. See in particular the Primer of that book.