Social Events – Part TWO b

Part I: Epidemics, Markets and a Model Crisis

It’s widely believed that epidemics make people fearful,
but as you will see in this report, socionomic causality
better explains the data, which show that fearful people
are more susceptible to epidemics

Socionomics posits that the trends in social mood-widely-shared
feelings including those of optimism and pessimism-unfold
in a hierarchical pattern of similarly-shaped
that are visible in charts of stock prices,
our most sensitive meter of social mood. Major epidemics
occur near lows in social mood-often near significant,
fearful bottoms in stock prices-and can persist well into
the subsequent uptrend.

Our socionomic and Elliott wave analysis suggest that
social mood has completed an upward wave of monumental
size and shifted to the negative at Grand Supercycle degree-which
is one degree larger than the change in mood that created
the Great Depression. This shift is driving rapid changes
for the worse in financial markets, economies, personal
fortunes and the quality of life. The scale of this mood
shift means that the bulk of the largest bear market since
1720 still lies ahead, increasing our risk of an encounter
with one of the grim reapers of major social mood decline, epidemic disease.

The May 2003 Elliott
Wave Theorist
offered perspective on the potential
degree of this downturn:

According to the World Health Organization, the ‘Spanish
flu’ pandemic of 1918 killed between 40 and 50 million
people worldwide ‘and caused the largest number of deaths
in the 20-39 age group, devastating economies at the end
of World War I.’ That was only a Cycle degree bear market.
This one is two degrees larger. People should be preparing
now for greater stresses to come.

Social Mood and Epidemics

The first step toward preparing for the increased
risk of disease is to understand the engine that drives it.
We begin with an observation in the March 1994 EWT, which
notes that epidemic disease correlates with large-degree
episodes of negative social mood:

For whatever reason, disease sometimes plays a prominent
role in major corrective periods, with some Cycle and Supercycle
degree corrections containing epidemics and larger ones

Figure 1 is a chart of inflation-adjusted U.S. stock prices
dating from 1888, the year Louis Pasteur opened his laboratory
and the approximate advent of germ theory, which radically
improved medicine. Prior to this period, epidemic disease
was far more prevalent across the timeline but still occurred
a significant majority of the time during bear markets.
In Figure 1, we have shaded the bear markets and marked
with arrows the three periods of major U.S. epidemics,
which in each case breached human defenses near the ends
of social mood declines that lasted twenty years on average.
We are about ten years into the current bear market. Social
stress is rising as we approach another of these dangerous
junctures, far bigger than the previous three. It should
bring one or more epidemics and, could culminate in a pandemic.

The (Sentimental) Picture of Health

The May 2003 EWT described how historic optimism
about health generated a social attitude of entitlement:

A multi-century social trend change will be related to
human health. Personal health itself is now considered
a natural condition that only incompetent doctors could
disrupt, as reflected in the historically unprecedented
number and size of malpractice awards bestowed upon customers
of doctors by U.S. courts. Whether the causes of a long
term change in attitude ultimately are political or microbial,
the current attitude is not likely to be maintained indefinitely.
The specters of AIDS and roving nuclear weapons are two
concerns that might be taken as foreshadowing, along with
evidence of an extreme in the worldwide financial mania
of the past few years, a major change in today’s historically
high level of human health and social stability.[1]

Our analysis suggests that human health and quality of
life have passed a historic pinnacle, the point from which
major declines begin. Confidence and complacency are hallmarks
of extremes in positive social mood. Recall that in the
late 1960s-near a major peak in inflation-adjusted stock
prices that held for 27 years-Surgeon General William Stewart
famously declared that it was time “to close the book”
on infectious disease. Yet new outbreaks have come steadily,
including: Legionnaire’s disease, hantavirus, West Nile
virus, drug-resistant tuberculosis, AIDS, salmonella, bird
flu and the threat of old diseases returning through drug-resistant
bacteria and viruses.

The breadth of the recent peak in social confidence is
evident in decades of widespread complacent overuse of
antibiotics and the consequent emergence of antimicrobial
drug-resistant organisms. MRSA-methicillin-resistant Staphylococcus
aureus-has spread beyond hospitals to inhabit ocean water
and beach sand. It is now described as a major public health

On March 2, the CDC reported that “Tamiflu-resistant influenza
A viruses are now spreading widely across the USA, imperiling
a pillar of the global pandemic-response stockpile.” Humans
work hard to develop drugs, but it seems that viruses can
effortlessly become resistant. “The evidence also suggests
that Tamiflu resistance resulted from a natural genetic
mutation, not because the ever-changing virus adapted to
survive treatment.” (USA Today)

As recently as 2000, public health officials said measles
had been eradicated from the United States, but in 2008,
cases resurged to their highest level since 1996. The CDC’s
most recent U.S. data (through July 31, 2008) shows a 68%
increase over the number of measles cases reported in all
of 2007. The recent “unprecedented” measles outbreak in
the U.S., along with similar outbreaks in Switzerland,
U.K, Australia, and Vietnam, were fueled by complacency,
reduced funding, and importation via travel and immigration-all
symptoms of the peak in positive social mood that augured
a major trend change.

The popularity of the anti-vaccination movement in the
U.S. and Europe is another indication of social confidence
about the state of human health. Complacency about disease
may be the ultimate expression of overconfidence.

According to medical historian David Morens, “The three
deadliest events in human history were all infectious diseases.
The 1918-1919 flu killed 50 million to 100 million people.
The Black Death killed 25 million people, and AIDS has
killed 25 million or more.”

The May 2003 EWT observed:

The fact is that epidemics and pandemics seem to hit populations
during major negative social mood trends. Perhaps it happens
that way because people’s psychological constitutions are
weaker during bear markets. Perhaps it is because people’s
personal behavior, whether involving hygiene (as in the
time of the plague or in recent years with respect to hypodermic
needles used to inject drugs) or sexual promiscuity, is
more conducive to spreading disease during social mood
retrenchments. Perhaps it is because social mood retrenchment
brings economic contraction, which makes people less able
to afford the creature comforts that ward off disease and
more apt to crowd into smaller, more affordable spaces.

In other words, the mechanisms may be complex, but the
ultimate driver is social-mood change, which in turn leads
to changes in social behavior and perhaps in individuals’

A Brief History of Hard Times

Let’s review a few of history’s most prominent epidemics
and several instructive ones, beginning with the Bubonic
Plague. This bacterial illness originated in China and in
1348 reached Europe, where it found a vulnerable social milieu,
a bear market. Philip Ziegler, in his book The Black
, describes the scene (italics added):

Before the Black Death, most of Europe was in recession
or, at the very least, had ceased to advance. The cloth
trade of Flanders and Brabant stagnated. Colonisation stopped.
The great fairs of the Champagne, indices of the economic
health of a large and flourishing region, significantly
declined. The prices of agricultural produce were falling:
agriculture was no longer the easy road to prosperity which
it had been for the past two hundred years. Put in the
simplest terms, Europe had outgrown its strength and was
now suffering the physical and mental malaise which
inevitably follows so intemperate a progress.

Does this sound familiar? These are precisely the conditions
that socionomists recognize as being causal.

Ziegler writes of how the European plague was preceded
by rumors of environmental calamity in Asia:

Drought, famine, floods, earthquakes, locusts, rains of
frogs, serpents, lizards, scorpions and many venomous beasts
of that sort, lightning, sheets of fire, huge hailstones,
fire from heaven and stinking smoke. The foul blast of
wind. This concept of a corrupted atmosphere, visible in
the form of mist or smoke, drifting across the world and
overwhelming all whom it encountered, was one of the main
assumptions on which the physicians of the Middle Ages
based their efforts to check the plague.

This notion of noxious air, called “miasma,” developed
into a crude disease theory that persisted into the mid-nineteenth
century. Miasma echoes today in a controversial United
Nations report claiming that “atmospheric brown clouds”
generated by Asia are harming the world’s climate, agriculture
and health. In another parallel, Ziegler notes that during
the Black Death, “Europeans were possessed by a conviction
of their guilt,” sure that they had brought the plague
upon themselves. These observations echo today in rumors
of environmental collapse and the broad social fear and
guilt about atmospheric carbon and global warming.

The plague itself was evidence of the weakened condition
of society. It was followed by social hysterias such as
the “dancing manias,” described as frenzied deliriums in
which many people reportedly laughed, wept and danced furiously
to the point of exhaustion or death. Justus Hecker’s Epidemics
of the Middle Ages
(1844) ascribed these “epidemics”
to “morbid sympathy” during the widespread pessimism and
despair that followed the Black Death. Hans Zinsser’s Rats,
Lice and History
(1934) observed the possibility that
these strange behaviors amid rampant disease could have
been partly due to infectious agents:

In great part, no doubt, the outbreaks were hysterical
reactions of a terror-stricken and wretched population,
which had broken down under the stress of almost incredible
hardship and danger. But is seems likely that associated
with these were nervous diseases of infectious origin which
followed the great epidemics of plague, small pox, and
so forth, in the same manner in which neurotropic virus
diseases have followed the widespread and severe epidemics
which accompanied [World War I].

Cholera in London

Cholera epidemics are case studies in social collapse.
An easily preventable and treatable disease, cholera becomes
epidemic when health and sanitation systems fail. Most recently,
Zimbabwe suffered an epidemic that began in August 2008 and
has killed about 3,200 and infected more than 69,000. Following
the bear-market Panic of 1825, London experienced cholera
epidemics in 1832 and 1848. Figure 2 plots the U.K. FTSE
All-Shares Index and locates the epidemics. The quotes are
from R.J. Morris’ 1976 book, Cholera 1832-The Social
Response to an Epidemic
. Morris observed that in 1848
people felt less helpless because they could see the obvious
lessons from the 1832 epidemic:

Cholera had demonstrated the relationship between disease
and the dirty, ill-drained parts of towns and had shown
the need for drainage, sewerage and filtered water supplies.
It ought to have been a spur to sanitary reform. Yet little
action of this sort followed the [1832] epidemic. In the
winter of 1832-3, both government and people seemed to
want to forget cholera as quickly as they could.

In 1849, after the second epidemic, this mindset changed
as social mood reached its nadir, and interest in cholera
sustained until well into 1850 with publications in the Surgical
, Medical Times and the Lancet.
As Supercycle wave (c) bottomed in a low that has not been
broken since, the religious association between sin and
cholera gave way to a more rational mindset. Parliament
passed public health acts that led to sanitary reform.

Figure 2

Figure 3

The 1918 Flu

Figure 3 shows the inflation-adjusted Dow, with
boxes that display the time spans of World War I, the 1918
Spanish Flu pandemic and encephalitis lethargica, a deadly
neurological disease. Although World War I introduced machine
guns and poison gas and caused about 16 million total deaths,
those casualties were dwarfed by the influenza/pneumonia
outbreak that followed, right at the bottom of a collapse
in stock prices that signaled a swift change in social mood
toward the negative. The 1918 Flu was 25 times more deadly
than ordinary influenza, killed as many as a hundred million
people worldwide, and reduced by twelve years the average
American’s lifespan in 1918. Historian Alfred Crosby said
the virus “killed more humans than any other disease in a
period of similar duration in the history of the world.”
It came without warning, killed quickly, and even after excavation
of frozen flu victims and decades of research, it is still
not completely understood.

Despite the devastating blow to the population, Gina Kolata,
author of Flu, The Story of the Great Influenza Pandemic
of 1918
, wrote that she took college microbiology,
virology and history courses in the 1970s that never mentioned
the pandemic. Much like the aftermath of London’s 1832
cholera outbreak, survivors were in denial and sought to
forget the horrific disease. Kolata wrote that the 1918
Flu was largely “obliterated from the consciousness of

Other health threats incubated while society endured the
bear-market stress that preceded World War I. Encephalitis
lethargica-a sleeping sickness that attacks the brain and
leaves some victims speechless and motionless-emerged in
1916, during the war. The disease killed about five million
people in Europe and North America (which may look small
on the chart, but is roughly the combined population of
Chicago and Houston today), then abruptly vanished in 1926,
five years into a bull market. Also in 1916, the U.S. suffered
its first large outbreak of polio, (another neurological
disease) with over 9,000 cases reported in New York City
alone. Future President Franklin D. Roosevelt fell victim
to polio in 1921; a significant outbreak occurred in Los
Angeles in 1934 and large polio epidemics closely followed
World War II, averaging more than 20,000 cases per year
from 1945 to 1949. The epidemic peaked at 58,000 U.S. cases
in 1952, just three years after the 20-year bear market
ended (see the second shaded box in Figure 1). The rate
fell to 5,600 in 1957 and 121 in 1964.

The AIDS Epidemic

Figure 4

Figure 4 shows the U.S. AIDS epidemic beginning right
at the extreme of a period of increasingly negative social
mood and therefore social stress, i.e., at the end of a
bear market in stocks. In 1999, Chapter 18 of The Wave
Principle of Human Social Behavior
 (HSB) commented
on the AIDS epidemic, which, like polio, reached a peak
during a rise in stock prices:

AIDS might appear to be an exception [to the observation
that epidemics occur near lows], as this slow-moving epidemic
has remained in force during the bull market years of the
1980s and 1990s. However, during this advance, the epidemic
has waned significantly, as AIDS today is no longer in
the top ten causes of death in the United States, the rate
halving in 1997 alone.

We might also note that the epidemic peaked near the end
of Primary wave 4, which lasted from 1987 to 1991 and whose
recessionary effects lasted through 1993, as noted in Chapter
1 of Beautiful Pictures:

In the early 1990s, extensive layoffs and the biggest
collapse in S&P earnings since the early 1940s dogged
the economy right through 1993, even though the Bureau
of Economic Research declared the recession ‘officially’
over in 1991.

A Socionomic View of Disease in Asia

Figure 5

Figure 5 is a chart from the April 2008 Global Market
showing outbreaks of influenza and
SARS in relation to the Hang Seng Index. Editor Mark
Galasiewski wrote:

The earliest available Hong Kong stock market data begin
in 1964, when the Hang Seng Index started at 100. Soon
thereafter the index dropped by 50%, finally bottoming
in 1967. By the next summer, the Kong Flu’ broke out and
infected nearly 15% of the population, a good example of
how negative social mood manifestations sometimes lag the
absolute lows of corrections. The ­disease had a low death
rate but ultimately killed a million people worldwide.
Throughout the ordeal and despite the fear, prices rose.
In November 1997, during the initial decline in Primary
wave 4, the nation was shocked by an outbreak of avian
influenza that would claim the lives of six people. In
November 2002, just months from the end of the 2000-2003
correction, another avian viral mutation, Severe Acute
Respiratory Syndrome (SARS), broke out, and Hong Kong suffered
299 of the almost 800 deaths that ultimately resulted from

A Government Managed Epidemic? I’m Already Feeling

Saddled today with a global economic collapse, empire-building
and war operations, historic debt levels and history’s largest
financial bailout, how effectively do you think the United
States and its government would respond to a fast-breaking

In light of how FEMA handled the Katrina disaster, one
would be hard pressed to be optimistic. Kolata-the author
of Flu cited previously-provides an instructive
account of society’s response to the threat of a flu epidemic
in 1976. In February of that year, a young, healthy soldier
at Fort Dix in New Jersey fell ill with flu symptoms and
died within two days. Symptoms began spreading rapidly
among the troops, much as happened in the 1918 flu. It
took the CDC a week to determine that it was a swine-flu
virus closely related to the one that caused the 1918 influenza
pandemic. Officials faced the logistical nightmares of
deciding whether to vaccinate the entire population. The
data were too sparse to tell whether the months of effort
required to develop, produce and distribute the vaccine
was warranted.

Faced with two unsavory potentials-accusations of wasting
money on an unnecessary vaccine or a deadly pandemic-the
CDC sent a memo to President Gerald Ford. Kolata observes
that, in turn, Ford asked Congress to appropriate $135
million to “‘produce sufficient vaccine to inoculate every
man, woman and child in the United States,’ for a disease
that no one could even prove to exist.”

With social mood still sinking in the bear market, critics
erupted immediately, and the press thrived in the social
petri dish of viral controversy. Experts argued that the
immunization program was scientific idiocy. Critics multiplied.
Pig farmers objected to the name “swine flu” and wanted
to rename it “New Jersey flu.” Secretary of Agriculture
Earl Butz reassured Americans that there would be plenty
of fertile hen eggs to grow the vaccine because “the roosters
of America are ready to do their duty.” New Jersey’s chief
epidemiologist voiced his fears of potential side effects,
saying: “We can soberly estimate that approximately fifteen
percent of the entire population will suffer disability
reaction.” The Parke-Davis drug company made millions of
doses of the wrong vaccine. Other countries mostly watched
the show; only a few made vaccines for their own citizens.
Field tests of the completed vaccine showed that it failed
to protect children, a segment of the population critical
to stopping an epidemic. And then, a huge, unanticipated
problem erupted: producers could not get liability
insurance for the vaccine
and would not bottle it
until they were absolved of responsibility. Insurance companies
said the government should bear the legal risk.

The government came to the rescue and insured the vaccine;
inoculations began, and the press started a “body count”
that made martyrs of elderly people who died after being
inoculated, even though they died at their normal mortality
rate. Among many such stories, the New York Post described
the scene at a “Pennsylvania Death Clinic” where an elderly
woman “winced at the sting of the hypodermic [took] a few
feeble steps and dropped dead.” The result: almost a year
after the soldier died at Fort Dix, only about one-third
of American adults had been vaccinated. Then a new problem
appeared: a doctor blamed the vaccine for a neurological
disease called Guillain-Barre syndrome. The lure of compensation
brought numerous diagnoses of Guillain-Barre and a wave
of litigation that lasted for years. Luckily, there was
no influenza epidemic.

Bear in mind that this chaotic drama unfolded within a
long, sideways bear market of only Cycle degree and just after the
Dow rose 75% in two years. Today-more than eight years
into a Grand Supercycle bear market-social mood is growing
more negative and undermining confidence in government.
Should a major epidemic break out now, people will be even
more contentious and skeptical of government-run immunization.
Lawyers will be all the more ready to sue for any perceived
misstep. Government, the experts, the media, pharmaceutical
manufacturers and insurance companies will all be mired
in the fuzzy thinking that is typical of a bear market.
They will likewise dance the discordant waltz that played
out in 1976-but on a larger scale and with greater stakes.
Government efforts to stop an epidemic will probably resemble
the financial bailout: a reactionary, design-as-you-go
tragedy of errors. Unfortunately, medicine is so hamstrung
by laws and regulations that manufacturers, doctors and
patients are essentially barred from coming to their own
conclusions about the proper course to take.

Proceed to A
Socionomics View of Epidemic Disease: Part II
which includes a list of recommendations for protecting
yourself against epidemics.

Leave a comment

Comment Here:

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: