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Selling the recession and the lie of the authority

National Mortgage Professional
Mar 24, 2014

Selling the recession and the lie of the authorityBob Daviesgross domestic product, National Bureau of Economic Research, real income, employment, industrial production

You don't have to participate, it's your choice
You have the choice to take on whatever mindset you decide. You can be a victim and play into the hands of the authority, or you can be the source of all that you experience. It's just as easy to make that choice as it is to be a victim; it's up to you.

What is a recession, anyway? In macroeconomics, a recession is a decline in a country's gross domestic product (GDP) or a negative real economic growth for two or more successive quarters of a year.

The National Bureau of Economic Research (NBER) has a more general framework for declaring recessions. They claim: "A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough."

The prospect of a recession is the talk of Washington, D.C. It's also the talk of every major newspaper across the country. Look at a recent report from Bloomberg News:

"There is a growing economic consensus that U.S. home price declines will be larger than previously forecast and that the slump in the U.S. housing market will last longer than previously anticipated. The real estate slump has taken its toll, with more than 31,000 jobs eliminated last year in the sub-prime mortgage industry by California-based companies, including 12,000 positions at Countrywide Financial in Calabasas, [Ca.] and 3,200 at New Century in Irvine, [Ca.]

Let's look to the experts, the authorities who should know.

Alan Greenspan, former chairman of the Federal Reserve, recently estimated the likelihood of entering a recession in 2008 at 50 percent. He recently stated that the current financial crisis in the U.S. is likely to be judged as the most wrenching since the time that followed World War II.

Other noted authorities are sounding alarms, too. Harvard professor Martin Feldstein, former head of NBER, recently said that he believes the country is in a recession, and it could be a severe one. He has also stated that the Federal Reserve needs to be more aggressive in responding to the credit crunch if a serious economic slump is to be averted.

Treasury Secretary Henry Paulson said that the housing correction will take time to work out and that it continues to cause the biggest downside risk to the economy.

For those who have predicted a mild slump, the credit crisis that erupted last August and claimed its biggest victim with the forced sale of Bear Stearns Companies Inc. is raising doubts that this will be mild.

"Bear Stearns was a clear wake-up call. It resonates with everybody and highlights the severity of the stresses in the financial system," said Mark Zandi, chief economist at MoodysEconomy.com.

So I say, why live? Why not just throw up your hands and surrender to being miserable, having financial difficulties and blaming the politicians whose policies, or lack thereof, have put us in this no-win predicament?

To put it simply, because it's a lie! It's a mindset. It's the same old submission to authority that has happened before. The recession is not real. It's a perceptual choice.

It's the lie of authority that creates what is called perceptual bias. In other words, the authority states something as being true, and then you and I are set up to see a world that establishes that truth.

This affects an area of the brain called the reticular activating system, which dictates what you pay attention to in your environment. The statements of authority effect your perception.

Many times in my live presentations, I'll have an audience member come up on stage after I ask: "Who's afraid of snakes?" I'll give this person an envelope with a picture of a rattlesnake on the front and ask him to open the envelope. I'll tell him: "Trust me—it's safe!" He opens the envelope to a popping sound and movement, and he will usually scream and jump away!

Then, I show him what he actually responded to. It wasn't real. It was his perception. He expected danger, so the slightest evidence to support his expectations was exactly what he paid attention to. What he responded to was a u-shaped wire with a rubber band stretched across it and a washer in the middle. The washer was wound tight so that when the envelope was opened it unwound and made a popping sound. This is called perceptual bias.

After the individual sees this, I wind it up again and ask him to open the envelope one more time. Of course, this time, there is no scream. What was different? His expectations were different. His perception was different. His mindset is the only thing that was different.

The mindset the authorities are creating is one of doom and gloom. You better not put that new flooring in your office right now, because that's non-essential spending; and with today's uncertain economy, the failing stock market, uncertain world status and rising gas prices, you better spend as little as possible. You better not make that new hire or that acquisition to gain market share in this uncertain market. You better not implement that training program now. You better wait to live!

What about these authorities? Who are they, anyway? Are they right? If they are, then how do you explain the real estate agent in New Jersey who is selling residential properties and having the best year of her life? How do you explain the financial advisor and the estate planning, asset protection attorney who are having the greatest years in their businesses and are taking a 2008 Mercedes for a test-drive as they upgrade their personal vehicles? How about the small business owner that just signed two major agreements with clients and is now buying a new Bonanza airplane just for fun? What about the doom and gloom?

Let's take a closer look at how humans respond to authority. Up until about five years ago, it was thought to be impossible to grow new nerve tissue—that is, until it was done! The mindset that nerve tissue could not regenerate was destroyed when the protein oncomodulin was discovered to generate this process. The old mindset was destroyed by doing what was thought to be impossible.

Consider the now famous experiments of Yale psychologist Stanley Milgram. This experiment measured the willingness of study participants to obey an authority figure that instructed them to perform acts that conflicted with their personal conscience. He described his findings in detail in his 1974 book titled: "Obedience to Authority: An Experimental View."

Obedience is a basic element in the structure of social life. Some system of authority is a requirement of all living. For many of us, obedience is a deeply ingrained behavioral tendency and overrides ethics, sympathy and common sense.

Milgram set up an experiment to test how much pain an ordinary citizen would inflict on another person simply because he was ordered to by an experimental scientist.

Milgram wrote: "Stark authority was pitted against the subjects' strongest moral imperatives against hurting others, and with the subjects' ears ringing with the screams of the victims, authority won more often than not."

Milgram elaborated two theories explaining the results. The first is the theory of conformism, describing the relationship between the group of reference and the individual person. A subject, who has neither ability nor expertise to make decisions, especially in a crisis, will leave decision-making to the group and its hierarchy. The group is the person's behavioral model. This is also referred to as "group think."

The second is the agentic state theory, wherein, per Milgram, the essence of obedience consists in the fact that a person comes to view himself as the instrument for carrying out another person's wishes, and therefore, he no longer sees himself as responsible for his actions. Once this critical shift of mindset has occurred in the person, all of the essential features of obedience follow.

What you see here is the common theme that obedience to an authority is anchored in forfeiting your responsibility over to that person. You may not be an expert on the economy, so you forfeit that over to authorities and you behave accordingly.

That's the key. You can participate in the recession of 2008 and obey the authorities, or you can take responsibility for your choices and for your actions. You can take the necessary steps to generate the successes that you demand for yourself in 2008 or you can suffer, because after all, it's a recession! Reality is in the mind of the observer. What will you pay attention to in 2008? It's your choice.

Bob Davies is a motivational speaker, author, trainer and coach. He may be reached at (949) 830-9192, e-mail [email protected] or through his Web site at www.bobdavies.com.

Published
Mar 24, 2014