http://www.brotherjohnf.com/
http://news.goldseek.com/GoldSeek/1342184400.php
Why haven’t they been shamed by all of the disclosures about their behavior, and chastised by the destruction their actions are causing?
Why do we keep falling for the same shenanigans over and over?
We’ll answer each of these questions one at a time.
and a great piece by kirby discussing how deep the financial hijinks go ...
-- Posted Friday, 13 July 2012 | | Source: GoldSeek.com By Rob Kirby 
GATA was born in the late 1990’s - primarily on the back of fundamental research by Frank Veneroso regarding Central Bank Gold Leasing. Veneroso’s intellectual curiosity was aroused after being fed detailed data re: gold leasing by the Bank of England’s Terry Smeeton.
The fact that gold prices and interest rates were so highly “inter-related” was first publicized in the alternative media by Reg Howe in 2001. Howe alerted the world to academic accounts of the special relationship between gold and interest rates. He highlighted the body of economic law and observation associated with “Gibson's Paradox” – something Lawrence Summers [later, U.S. Treasury Secretary and current senior economic advisor to Obama] wrote about with Robert Barsky while he was a professor at Harvard in the 1980’s.
The upshot of this Gibson’s Paradox economic theory goes something like this: real interest rates and the gold price are causal and inter-related with each other.
This is why Professor Lawrence Summers was summoned to Washington as assistant Secretary of Treasury under Robert Rubin [Clinton Admin. / 1993]. It was to implement HIS THEORETICAL WORKunder the auspices of Treasury Secretary Robert Rubin’s mythical “Strong Dollar Policy”.
Conclusion: since 1994, the mythical Strong Dollar Policy had necessitated a two prong strategy: that of keeping rates low because weak currencies are typified by high interest rates; and the price of gold must be suppressed as it stands as an historical alternative settlement currency – and they don’t want the alternative to appear “strong”.
The interrelatedness of the gold price and interest rates helps to explain why – According to the Office of the Comptroller of the Currency - of the 302 Trillion in aggregate derivatives held by American Bank Holding Cos – 81 % of this is composed of interest rate products. This is due to the symbiosis that exists between gold and interest rates.
Libor – or the London Inter-Bank Offered Rate - is one of the lynch pins in setting [rigging] global U.S. Dollar interest rates. This is why a larger discussion needs to be had about the Libor rigging – it is not a London or Barclay’s centric story. It has EVERYTHING to do with making the American Dollar look viable as the world’s reserve currency.
When The Libor Story First Broke
It was Q3 2007 – post [Mar. 2007] Bear Stearns collapse – when credit markets “seized up” in response to the [Aug. 2007] sub-prime crisis, where triple-A-rated mortgaged bonded failed – stories first began circulating the mainstream financial press that “Libor” was “broken”.
The “tell-tale” that things were not right was A] the widening of the TED Spread [3 month Eurodollar future vs. 3 month U.S. T-Bill] – expressed in basis points, and B] the growing spread between Libor and the Eurodollar future – again, expressed in basis points:
Historically, a widening TED Spread has been referred to in credit terms as a “flight to quality”. It demonstrates how investors are more willing to buy sovereign 3 month government T-bills at ever decreasing yield relative to higher yielding products that do not carry sovereign guarantees. It is reasoned in cases like this that return of capital becomes more important to investors than return on capital.
But there are some problems with this conventional thinking.
With the U.S. Dollar Index collapsing, taking out major support levels and the dollar being abandoned – there was no “flight to quality”.
So what was really happening???
We get our clue from the widening disparity [in basis points] between the 3 month Eurodollar Futures contract and 3 month Libor. These two measures are proxies for one another and typically they trade virtually tic-for-tic with each other in terms of yield. Notice how the spread widened at the beginning of Q3/07 and then contracted at the conclusion of Q4/07:
The aberration first manifested itself as a Q3/07 trading phenomena. We get a clue as to what the underlying is when we examine the composition of J.P. Morgan’s derivatives book from a control period – Q2/07 – through to Q4/07:
  
Here we see the less than 1 year Swap component of Morgan’s book grow from 25.2 Trillion in Q2/07 to 32.8 Trillion in Q3/07 before reverting back to 24.7 Trillion in Q4/07. The 7.5 Trillion “bloat” in Morgan’s book – coupled with the plunge in rates and failing U.S. Dollar Index - in Q3/07 tells us the J.P. Morgan was a MASSIVE PLAYER in the very “short end” of the curve [centered on 3 month credit space]. We can discern that Morgan was an ENORMOUS purchaser of 3 month U.S. T-bills [likely as hedges for trades being conducted with the ESF brokered through the N.Y. Fed trading desk] – this is what caused the “blow-out” in the TED Spread as well as the Eurodollar Future/Libor spread and put the brakes on a major break down of the U.S. Dollar Index. Their book “re-coiled” 3 months later when these positions matured.
At the onset, commercial Banks – fearing a financial market meltdown – immediately became extremely risk averse and actually started to raise rates:
But the “Free Markets” were overwhelmed by J.P. Morgan’s rate rigging / defense of the dollar.
Ladies and gentlemen, 7.5 Trillion dollar interventions into the 3 month credit markets are not and never will be the work of Commercial Banks or Bank Holding Companies. Interventions of this kind are EXCLUSIVELY the work of National Treasuries / Central Banks.
The late 2007 dichotomy between Libor [Eurodollar Futures] and 3 month U.S. T-bills was brought on – not because Libor was “broken” – but by the U.S. Treasury’s Exchange Stabilization Fund [ESF] pursuing/inflicting Imperialist U.S. monetary policy – brokered through the N.Y. Federal Reserve - on the world through the trading desk of J.P. Morgan Chase.
Moving Forward to the Barclays Libor Rigging Scandal
Much of the recent guffaw about Libor fixing has centered on London based, Barclays Bank Plc. The gist of the allegations against Barclays being – in the aftermath of Lehman Bros. collapse in the fall of 2008 – Barclays consistently posted higher Libor rates than competing banks who are also polled daily by the British Bankers Association [BBA] for their Libor rates. It has been said by some, like Zerohedge, that Barclays was attempting to influence [rig] rates higher than they otherwise should have been:
Source: Zerohedge
Perhaps it is true that Barclays began setting their “Libor” rates higher in the aftermath of Lehman’s collapse – but that’s not the whole story – not by a long shot.
If you look closely at the Zerohedge chart above – you will notice that Barclays actually began posting higher Libor rates “BEFORE” the collapse at Lehman.
Reason: Barclays was the last bank to see the books of Lehman as they were at one point – in the late stages of the 2008 financial crisis - figured to be a likely acquirer of Lehman. When Barclays saw the state of Lehman’s books – they acted intuitively CORRECT – one might argue – and began raising rates, not wanting to lend, to preserve their capital.
Additionally, in the wake of the failed Barclays/Lehman arranged marriage – there was a “small issue” with a $138 Billion Post-Bankruptcy JP Morgan Advance to Lehman; At Least $87 B Repaid by Fed:
“Lehman Brothers Holdings Inc., the securities firm that filed the biggest bankruptcy in history yesterday, was advanced $138 billion this week by JPMorgan Chase & Co. to settle Lehman trades and keep financial markets stable, according to a court filing.
One advance of $87 billion was made on Sept. 15 after the pre-dawn filing, and another of $51 billion was made the following day, according to a bankruptcy court documents posted today. Both were made to settle securities transactions with customers of Lehman and its clearance parties, the filings said.
The advances were necessary “to avoid a disruption of the financial markets,” Lehman said in the filing.
The first advance was repaid by the Federal Reserve Bank of New York, Lehman said. The bank didn’t say if the second amount was repaid. Both advances were “guaranteed by Lehman” through collateral of the firm’s holding company, the filing said. The advances were made at the request of Lehman and the Federal Reserve, according to the filing.
Lehman disclosed the advances in a motion seeking court permission to give JPMorgan’s claims special status in its attempts to recover any advances. Lehman said that if that status isn’t granted, JPMorgan may not be able to make future advances needed to clear and settle trades.
“The granting of the relief requested is in the best interests of the estate and its stakeholders and the public markets,” Lehman said, adding the advances would be “essential to Lehman’s customers.”
JPMorgan may make future advances at its sole discretion, all of which would be guaranteed by Lehman under its agreement to pledge collateral, Lehman said.
JPMorgan said in a statement in court documents that it has had a clearing agreement with Lehman since June 2000, and had pledged its collateral under an Aug. 26 guarantee.”
While no in-depth reason has ever been offered to explain the “advance” outlined above, a degree in rocket science is not needed to figure out what trades were being done to “keep markets stable [err, rigged]”. From the looks of J.P. Morgan’s derivatives book over the 2 quarters Q4/08 through Q1/09 we see ANOTHER 8 TRILLION dipsy-doodle in the less than 1 year swap constituent of J.P. Morgan’s derivatives book – this time in Q1/09, post Lehman collapse – where the inflated J.P. Morgan short term swap positions have since remained elevated. It should be noted that the less than 1 yr. swaps component of J.P. Morgue grew from 23.9 Trillion to 32.0 Trillion [Q4/08-Q1/09] while their overall book contracted from 87.4 Trillion to 81.2 Trillion in the same time period:
 
So, while Lehman was in the death-throws of collapsing – after Barclays couldn’t be induced to touch them with a “barge pole” - J.P. Morgan “advanced” 138 billion [collateral perhaps?] to Lehman so they could “perform/settle trades” –– mostly, if not all reimbursed/paid for by the Fed. While this “stabilizing trade” was being instituted – short term rates simultaneously careened down to zero from 200 basis points [2 %]. Then, in the immediate aftermath of the collapse – J.P. Morgan’s less than 1 yr. component of their swap book grows by 8 Trillion in one quarter while their overall book was contracting by more than 6 Trillion in notional???
I hope I haven’t lost anyone here because these facts are MUCH STRANGER AND HARDER TO BELIEVE THAN FICTION.
What appears to have happened here: J.P. Morgan did not want to be identifiable as the originator of 8 Trillion worth of less than 1 yr. Swap instruments – so they pre-funded Lehman to strap these positions on - positions they KNEW IN ADVANCE they would inherit once Lehman’s collapse was official. This way – no more unwanted attention would be drawn to J.P. Morgan [the Fed / U.S. Treasury in drag].
Barclays clearly knew how bad the whole situation was – being the last ones to see the horror that was Lehman’s books - and were likely the only counterparty in the proceedings who acted in an informed, financially responsible manner.
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http://www.ritholtz.com/blog/2012/07/scandal-after-scandal-lie-upon-lie-whats-going-on/?utm_source=dlvr.it&utm_medium=twitter
Scandal After Scandal, Lie Upon Lie … What’s Going On?
By Washingtons Blog - July 14th, 2012, 7:02AM
Why Don’t the Corrupt Players On Wall Street and In D.C. Show Remorse for Their Destructive Actions … And Why Don’t We Stop Them?
Many bankers, regulators and politicians have been caught in lie after lie and scandal after scandal.
Why haven’t they been shamed by all of the disclosures about their behavior, and chastised by the destruction their actions are causing?
Why do we keep falling for the same shenanigans over and over?
We’ll answer each of these questions one at a time.
Many of the People Running Wall Street and D.C. Are – LITERALLY – Psycopaths
According to psychologists and sociologists – many on Wall Street and D.C. are not like you and me. They are literally psychopaths.
Reuters reported Tuesday:
The March/April issues of CFA Magazine notes that the rates of psychopaths in Wall Street is much higher than the general population, and reports:
(Indeed, contrary to common American stereotypes – and while wealth does not necessarily indicate whether someone is a good or a bad person – studies show that the super-wealthy tend to be less empathic and more likely to cheat than those with more modest wealth.)
Unless we learn to spot “wolves in sheep’s clothing”, we will continue to fall prey to their scams.
Anyone who knows Jamie Dimon, Lloyd Blankfein or the other Wall Street “leaders” can tell you that they haven’t changed a bit since 2008. They are not repentent for their role in the financial crisis. They don’t feel bad that the taxpayers have had to bail them out again and again … and that they have used that money to enrich themselves and stick it to the little guy.
As the Independent notes:
If a tribe member dressed up and pretended he was from another tribe, we would see it in a heart-beat. It would be like seeing your father in a costume: you would recognize him pretty quickly, wouldn’t you.
As the celebrity example shows, our brains can easily be fooled by people in our large modern society when we incorrectly ascribe to them the role of being someone we should trust.
The opposite is true as well. The parts of our brain that are hard-wired to quickly recognize “outside enemies” can be fooled in our huge modern society, when it is really people we know dressed up like the “other team”.
While our brains have many built-in hardwired ways of thinking and processing information, they are also amazingly “plastic“. We can learn and evolve and overcome our hardwiring – or at least compensate for our blind spots.
We are not condemned to being led astray by Madison Avenue advertisers and ruthless dictators and scientific frauds and fundamentalists.
We can choose to grow up as a species and reclaim our power to decide our own future.
As Dr. Zafirides writes:
In a survey of 500 senior executives in the United States and the UK, 26 percent of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24 percent said they believed financial services professionals may need to engage in unethical or illegal conduct to be successful.A number of commentators think the numbers are low, because of self-reporting. For example, Richard Eskowwrites:
Sixteen percent of respondents said they would commit insider trading if they could get away with it, according to Labaton Sucharow. And 30 percent said their compensation plans created pressure to compromise ethical standards or violate the law.
I discussed the survey with a few other people familiar with the banking industry, and they had the same reaction I did: If anything, those numbers sound low. That makes sense. Admitting your criminal inclinations to a total stranger isn’t as easy as telling a them your favorite color or what kind of music you like.As we’ve repeatedly noted, psychopaths caused the financial crisis … and they will do it again and again unless they are removed from power.
The March/April issues of CFA Magazine notes that the rates of psychopaths in Wall Street is much higher than the general population, and reports:
These “financial psychopaths” generally lack empathy and interest in what other people feel or think. At the same time, they display an abundance of charm, charisma, intelligence, credentials, an unparalleled capacity for lying, fabrication, and manipulation, and a drive for thrill seeking.
A financial psychopath can present as a perfect well-rounded job candidate, CEO, manager, co-worker, and team member because their destructive characteristics are practically invisible. They flourish in fast-paced industries and are experts in taking advantage of company systems and processes as well as exploiting communication weaknesses and promoting interpersonal conflicts.
Bloomberg notes:
The “corporate psychopaths” at the helm of our financial institutions are to blame [for the financial crisis].
Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.”
As a result, Boddy argues in a recent issue of the Journal of Business Ethics, such people are “extraordinarily cold, much more calculating and ruthless towards others than most people are and therefore a menace to the companies they work for and to society.”
How do people with such obvious personality flaws make it to the top of seemingly successful corporations? Boddy says psychopaths take advantage of the “relative chaotic nature of the modern corporation,” including “rapid change, constant renewal” and high turnover of “key personnel.” Such circumstances allow them to ascend through a combination of “charm” and “charisma,” which makes “their behaviour invisible” and “makes them appear normal and even to be ideal leaders.”
***
They “largely caused the crisis” because their “single- minded pursuit of their own self-enrichment and self- aggrandizement to the exclusion of all other considerations has led to an abandonment of the old-fashioned concept of noblesse oblige, equality, fairness, or of any real notion of corporate social responsibility.”
***
He says the unnamed “they” seem “to be unaffected” by the corporate collapses they cause. These psychopaths “present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings and investments, and as lacking any regrets about what they have done. They cheerfully lie about their involvement in events, are very convincing in blaming others for what has happened and have no doubts about their own worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.”
The Independent reports:
Mr Boddy is not alone. In Jon Ronson’s widely acclaimed book The Psychopath Test, Professor Robert Hare [the world's leading expert on psychopathy] told the author: “I should have spent some time inside the Stock Exchange as well. Serial killer psychopaths ruin families. Corporate and political and religious psychopaths ruin economies. They ruin societies.”
***
A senior UK investment banker and I [were] discussing the most successful banking types we know and what makes them tick. I argue that they often conform to the characteristics displayed by social psychopaths. To my surprise, my friend agrees.
He then makes an astonishing confession: “At one major investment bank for which I worked, we used psychometric testing to recruit social psychopaths because their characteristics exactly suited them to senior corporate finance roles.”
Here was one of the biggest investment banks in the world seeking psychopaths as recruits.
***
A 2,200-page report by Anton Valukas, the Chicago-based lawyer hired by a US court to investigate Lehman’s failure … revealed systemic chicanery within the bank; he described management failures and a destructive, internal culture of reckless risk-taking worthy of any psychopath.
So why wasn’t Mr Fuld spotted and stopped? I’ve concluded it’s the good old question of nature and nurture but with a new interpretation. As I see it, in its search for never-ending growth, the financial services sector has actively sought out monsters with natures like Mr Fuld and nurtured them with bonuses and praise.
***
Take Sir Fred Goodwin of RBS, for example. Before he racked up a corporate loss of £24.1bn, the highest in UK history, he was idolised by the City. In recognition of his work in ruthlessly cutting costs at Clydesdale Bank he got the nickname “Fred the Shred”, and he played that for all it was worth. He was later described as “a corporate Attila”, a title of which any psychopath would be proud.We’ve previously observed that researchers have found that the brains of psychopaths have a dopamine abnormality which creates a drive for rewards at any cost, and causes them to ignore risks.
As PhysOrg writes:
Abnormalities in how the [brain] processes dopamine have been found in individuals with psychopathic traits and may be linked to violent, criminal behavior.
***
The brains of psychopaths appear to be wired to keep seeking a reward at any cost, new research from Vanderbilt University finds. The research uncovers the role of the brain’s reward system in psychopathy and opens a new area of study for understanding what drives these individuals.
***
The results were published March 14, 2010, in Nature Neuroscience.
“Psychopaths are often thought of as cold-blooded criminals who take what they want without thinking about consequences,” Joshua Buckholtz, a graduate student in the Department of Psychology and lead author of the new study, said. “We found that a hyper-reactive dopamine reward system may be the foundation for some of the most problematic behaviors associated with psychopathy, such as violent crime, recidivism and substance abuse.”
***
To examine the relationship between dopamine and psychopathy, the researchers used positron emission tomography, or PET, imaging of the brain to measure dopamine release, in concert with a functional magnetic imaging, or fMRI, probe of the brain’s reward system.
***Experts also tell us that many politicians also share traits with serial killers. Specifically, the Los Angeles Times noted in 2009:
The researchers found in those individuals with elevated psychopathic traits the dopamine reward area of the brain … was much more active while they were anticipating the monetary reward than in the other volunteers.
Using his law enforcement experience and data drawn from the FBI’s behavioral analysis unit, Jim Kouri has collected a series of personality traits common to a couple of professions.
Kouri, who’s a vice president of the National Assn. of Chiefs of Police, has assembled traits such as superficial charm, an exaggerated sense of self-worth, glibness, lying, lack of remorse and manipulation of others.
These traits, Kouri points out in his analysis, are common to psychopathic serial killers.
But — and here’s the part that may spark some controversy and defensive discussion — these traits are also common to American politicians. (Maybe you already suspected.)
Yup. Violent homicide aside, our elected officials often show many of the exact same character traits as criminal nut-jobs, who run from police but not for office.
Kouri notes that these criminals are psychologically capable of committing their dirty deeds free of any concern for social, moral or legal consequences and with absolutely no remorse.
“This allows them to do what they want, whenever they want,” he wrote. “Ironically, these same traits exist in men and women who are drawn to high-profile and powerful positions in society including political officeholders.”
***
”While many political leaders will deny the assessment regarding their similarities with serial killers and other career criminals, it is part of a psychopathic profile that may be used in assessing the behaviors of many officials and lawmakers at all levels of government.”We will therefore remain disempowered if we assume that the super-elites are “like us”.
(Indeed, contrary to common American stereotypes – and while wealth does not necessarily indicate whether someone is a good or a bad person – studies show that the super-wealthy tend to be less empathic and more likely to cheat than those with more modest wealth.)
Unless we learn to spot “wolves in sheep’s clothing”, we will continue to fall prey to their scams.
Unless We Remove the Psychopaths from Power, They Will Cause More and More Destruction
The inmates are still running the asylum.Anyone who knows Jamie Dimon, Lloyd Blankfein or the other Wall Street “leaders” can tell you that they haven’t changed a bit since 2008. They are not repentent for their role in the financial crisis. They don’t feel bad that the taxpayers have had to bail them out again and again … and that they have used that money to enrich themselves and stick it to the little guy.
As the Independent notes:
Mr Ronson reports: “Justice departments and parole boards all over the world have accepted Hare’s contention that psychopaths are quite simply incurable and everyone should concentrate their energies instead on learning how to root them out.”I’ve been saying the same thing since 2008:
But, far from being rooted out, they are still in place and often in positions of even greater power.
As Mr Boddy warns: “The very same corporate psychopaths, who probably caused the crisis by their self-seeking greed and avarice, are now advising governments on how to get out of the crisis. Further, if the corporate psychopaths theory of the global financial crisis is correct, then we are now far from the end of the crisis. Indeed, it is only the end of the beginning.”
Ralph Waldo Emerson said:I noted in October:
“Who you are speaks so loudly I can’t hear what you’re saying.”Its like a thief who has been arrested 5 times for burglary. Even though he says all the right things to the judge at sentencing, the judge is still going to throw the book at him.
If the thief is appointed to head a government commission on corruption, do you think people will have confidence in the commission or its proposed actions?
***
[Those in power] may be saying nice things about fixing the economy, shoring up the financial system and helping American citizens, but people don’t believe them anymore. They’ve been proven liars one too many times.
***
The only thing that can restore confidence in the economy and the financial system is to replace the whole lot of them (tar and feather them) with honest leaders who will do what’s best for the people.
Forget the “toxic debt” that the talking heads keep referring to. The only way to restore confidence is to get rid of the “toxic leaders” who caused the mess.
The main demand of the Egyptian protesters was that Hosni Mubarak and his cronies leave power.
Why should the demands of the American protesters be held to a higher standard?
As former IMF chief economist Simon Johnson notes, the American finance industry has effectively captured our government in a “quiet coup”, a state of affairs that is at the center of many emerging-market crises, and that recovery will fail unless we break the financial oligarchy that is blocking essential reform.
***
The U.S. has become a kleptocracy, an oligarchy, a banana republic, a socialist or fascist state … which acts without the consent of the governed. There is a malignant symbiotic relationship between the governmental leaders and their cronies, which makes a handful rich at the public trough (in the same way that the Mubarak family raked in between U.S. $40 and $70 billion dollarsthrough bribes and cronyism).
Remember, Mubarak pretended that he was going to offer concessions or negotiate several times. But the protesters would have none of it. They demanded Mubarak leave.
The same government despots (Bernanke and the rest of the knuckleheads at the Fed, Geithner, and various other Goldman alums and proteges of Robert Rubin) and the same Wall Street manipulators (Blankfein, Dimon, etc.) are still on their thrones causing mischief. Nothing will change while these guys are still in charge.
Why can’t Americans – like the Egyptians – demand that the bums be thrown out?
While America’s protesters don’t need to give any list of official demands (see this, this and this), breaking up the unholy alliance which is destroying our country and removing vampires from both government and Wall Street who are most responsible for blocking reform is a perfectly good demand all by itself. As Gordon Duff – senior editor at Veterans Today – says, it’s “time for regime change” in the U.S.
Why Don’t We Stop Them?
We’ve previously noted:Biologists and sociologists tell us that our brains evolved in small groups or tribes.
As one example of how profoundly the small-group environment affected our brains, Daily Galaxypoints out:
Research shows that one of the most powerful ways to stimulate more buying iscelebrity endorsement. Neurologists at Erasmus University in Rotterdam report thatour ability to weigh desirability and value doesn’t function normally if an item is endorsed by a well-known face. This lights up the brain’s dorsal claudate nucleus, which is involved in trust and learning. Areas linked to longer-term memory storage also fire up. Our minds overidentify with celebrities because we evolved in small tribes. If you knew someone, then they knew you. If you didn’t attack each other, you were probably pals.In small groups, we knew everyone extremely well. No one could really fool us about what type of person they were, because we had grown up interacting with them for our whole lives.
Our minds still work this way, giving us the idea that the celebs we keep seeing are our acquaintances. And we want to be like them, because we’ve evolved to hate being out of the in-crowd. Brain scans show that social rejection activates brain areas that generate physical pain, probably because in prehistory tribal exclusion was tantamount to a death sentence. And scans by the National Institute of Mental Health show that when we feel socially inferior, two brain regions become more active: the insula and the ventral striatum. The insula is involved with the gut-sinking sensation you get when you feel that small. The ventral striatum is linked to motivation and reward.
If a tribe member dressed up and pretended he was from another tribe, we would see it in a heart-beat. It would be like seeing your father in a costume: you would recognize him pretty quickly, wouldn’t you.
As the celebrity example shows, our brains can easily be fooled by people in our large modern society when we incorrectly ascribe to them the role of being someone we should trust.
The opposite is true as well. The parts of our brain that are hard-wired to quickly recognize “outside enemies” can be fooled in our huge modern society, when it is really people we know dressed up like the “other team”.
***Bloomberg notes that this dynamic has played out on Wall Street as well:
Our brains assume that we can tell truth from fiction, because they evolved in very small groups where we knew everyone extremely well, and usually could see for ourselves what was true.
On the other side of the coin, a tribal leader who talked a good game but constantly stole from and abused his group would immediately be kicked out or killed. No matter how nicely he talked, the members of the tribe would immediately see what he was doing.
But in a country of hundreds of millions of people, where the political class is shielded from the rest of the country, people don’t really know what our leaders are doing with most of the time. We only see them for a couple of minutes when they are giving speeches, or appearing in photo ops, or being interviewed. It is therefore much easier for a wolf in sheep’s clothing to succeed than in a small group setting.
Indeed, sociopaths would have been discovered very quickly in a small group. But in huge societies like our’s, they can rise to positions of power and influence.
As with the celebrity endorsement example, our brains are running programs which were developed for an environment (a small group) we no longer live in, and so lead us astray.
Like the blind spot in our rear view mirror, we have to learn to compensate and adapt for our imperfections, or we may get clobbered.
Until the last third of the 20th century, he writes, companies were mostly stable and slow to change. Lifetime employment was a reasonable expectation and people rose through the ranks.
This stable environment meant corporate psychopaths “would be noticeable and identifiable as undesirable managers because of their selfish egotistical personalities and other ethical defects.”
For Wall Street — a rapidly changing and highly dynamic corporate environment if there ever was one, especially when the firms transformed themselves from private partnerships into public companies with quarterly reporting requirements — the trouble started when these charmers made their way to corner offices of important financial institutions.
Then, according to Boddy’s “Corporate Psychopaths Theory of the Global Financial Crisis,” these men were “able to influence the moral climate of the whole organization” to wield “considerable power.”
As Adolph Hitler wrote in Mein Kampf:
All this was inspired by the principle–which is quite true in itself–that in the big lie there is always a certain force of credibility; because the broad masses of a nation are always more easily corrupted in the deeper strata of their emotional nature than consciously or voluntarily; and thus in the primitive simplicity of their minds they more readily fall victims to the big lie than the small lie, since they themselves often tell small lies in little matters but would be ashamed to resort to large-scale falsehoods. It would never come into their heads to fabricate colossal untruths, and they would not believe that others could have the impudence to distort the truth so infamously. Even though the facts which prove this to be so may be brought clearly to their minds, they will still doubt and waver and will continue to think that there may be some other explanation. For the grossly impudent lie always leaves traces behind it, even after it has been nailed down, a fact which is known to all expert liars in this world and to all who conspire together in the art of lying.Similarly, Hitler’s propaganda minister, Joseph Goebbels, wrote:
The English follow the principle that when one lies, one should lie big, and stick to it. They keep up their lies, even at the risk of looking ridiculous.Science has now helped to explain why the big lie is effective.
As I’ve previously pointed out in another context:
Psychologists and sociologists show us that people will rationalize what their leaders are doing, even when it makes no sense ….
Psychiatrist Peter Zafirides, M.D sent me an excellent article explaining why good people defend bad systems:*** The big lie appears to be as effective in financial [matters] as in military warfare.Sociologists from four major research institutions investigated why so many Americans believed that Saddam Hussein was behind 9/11, years after it became obvious that Iraq had nothing to do with 9/11.
The researchers found, as described in an article in the journal Sociological Inquiry (and re-printed by Newsweek):
- Many Americans felt an urgent need to seek justification for a war already in progress
- *** “We refer to this as ‘inferred justification, because for these voters, the sheer fact that we were engaged in war led to a post-hoc search for a justification for that war.
- “People were basically making up justifications for the fact that we were at war”
- “They wanted to believe in the link [between 9/11 and Iraq] because it helped them make sense of a current reality. So voters’ ability to develop elaborate rationalizations based on faulty information, whether we think that is good or bad for democratic practice, does at least demonstrate an impressive form of creativity.
From the bust of the housing bubble and mortgage meltdown to Bernie Madoff andJerry Sandusky, to political candidates and campaigns, it seems not a week goes by before another story of corruption and scandal breaks. And very predictably, the following questions always seem to follow:
“How could they get away with this?”
- or -
“Why didn’t someone say or do anything about it?”
***
Why do we stick up for a system or institution we live in—a government, company, or marriage—even when anyone else can see it is failing miserably? Why do we resist change even when the system is corrupt or unjust? A new article in Current Directions in Psychological Science, reveals the conditions under which we’re motivated to defend the status quo—a psychological process called “system justification.” [Even good people often fall into the trap of trying to defend bad systems.]
We Can Choose to Reclaim Our Power
The good news is that we can grow up and evolve.While our brains have many built-in hardwired ways of thinking and processing information, they are also amazingly “plastic“. We can learn and evolve and overcome our hardwiring – or at least compensate for our blind spots.
We are not condemned to being led astray by Madison Avenue advertisers and ruthless dictators and scientific frauds and fundamentalists.
We can choose to grow up as a species and reclaim our power to decide our own future.
As Dr. Zafirides writes:
The research on our [default psychological blind spots] should not be overwhelming or demoralizing. If anything it can really help to enlighten those who are frustrated when people don’t rise up in what would seem their own best interests. The awareness of this psychological tendency in all of us is the first step in trying to minimize its impact. Awareness is critical if one hopes to meaningfully change systems.
According to Dr. Kay, “If you want to understand how to get social change to happen, you need to understand the conditions that make people resist change and what makes them open to acknowledging that change might be a necessity.” This is true whether the change one desires is individual or societal.
But do not despair! Whether on an individual or societal level, change absolutely happen. Awareness and knowledge is the first part of the process.
Never give up the fight.
Never doubt how truly powerful you are.
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