Hitler And The Markets

Nigel Aitkins - Mon 16 May, 2005

"...Why the sudden demand for new editions of Mein Kampf in Turkey, the US, Poland...and what might it portend for investors here in Western Europe?..."

R.N. Elliott discovered and popularised the Elliott Wave Principle in the 1930s to forecast financial markets. He recognised that the Wave Principle could be used to assess social trends, but it was Bob Prechter who offered the most articulate demonstration of this in his 1999 book, ‘The Wave Principle of Human Social Behaviour and the New Science of Socionomics’.

Prechter observed that the stock market records much more than the vicissitudes of stock prices. It records the ups and downs of society’s mood state. More than is generally recognised, speculation in financial markets results from emotional, rather than rational, decisions. Stock market investors can respond almost immediately to social mood changes; investors in the aggregate buy when their emotional state is positive and sell when it is negative. Their transactions are meticulously tabulated and, therefore, provide voluminous insight into the net emotional state of society.

Because social mood determines the character of social events, a rising stock market serves as a leading indicator of positive social events and a falling stock market forewarns of negative social and cultural events. When social mood is negative, dark characters with tragic flaws draw interest. Bob Prechter first called attention to this dynamic in a 1985 study of popular culture and the stock market.

Thus, the secular bear market which began in 2000 helps us understand the rising interest in one of the darkest characters in 20th century history, Adolf Hitler. Despite the corrective rally since March 2003, contemporary mass psychology includes a strong current of simmering displeasure. Now, 80 years after Hitler published the first volume of his autobiography and political manifesto, ‘Mein Kampf’, sales of the book are growing rapidly across the world.

The Financial Times recently reported, “Young Turks discover a sudden interest in ‘Mein Kampf’” (10 March 2005). Bookstore managers in Turkey disclose that mainly students and young men are buying a cheap new edition. Tayfun Atay, an academic at Ankara University, says the book has long enjoyed a “covert popularity among hard-line Turkish nationalists,” but he doubts new readers are attracted to Hitler’s anti-Semitism and fanaticism. He suggests, “They may be curious about Hitler not because he is a hero but because he is an anti-hero.”

This is a global phenomenon. The American teenager in Red Lake, Minnesota, who killed nine people and himself in March had professed admiration for Hitler’s ideas. But Mein Kampf sales are no surprise to those who understand the Wave Principle.

Stock markets rally when social mood is positive and decline when mood turns negative. Stock markets posted what are likely to be generational highs at the turn of the millennium; Europe entered a dark season of mass psychology in 2000 that has much farther to go before running its angry course. This is why Hitler is drawing increased attention.

The German state of Bavaria has held rights to ‘Mein Kampf’ since the end of World War II and attempts to restrict publication to prevent the spread of Nazi beliefs. Nevertheless, the book is widely available. Legal manoeuvres to stop new Polish and Czech editions have been in the news lately. A newspaper editor in Azerbaijan ordered copies of ‘Mein Kampf’ printed “for commercial reasons” and told the Associated Press, “I will probably have more copies of the book published, since there is a public interest in that.”

Several English translations are available, both in print and on the web. An obscure US publisher was to have released a 1957 translation of ‘Mein Kampf’ by a British Intelligence officer in March. This version languished in a closet for nearly 50 years until the secular bear market enhanced its commercial appeal. Currently, the public preoccupation with anti-heroes means a revival of interest in flawed characters from a more negative time in the past. In time, as mass psychology grows darker, it is likely to lead to the election of new anti-heroes to public office.

Socionomics observes that “events do not shape social mood; social mood shapes events,” (The Wave Principle of Human Social Behaviour, page 329). And the metre of social mood is the stock market.

In February 1922, the Austria Wiener Boersekammer Share Index traded as a penny stock at 0.41, which provides a timely indicator of the area’s extremely negative mood state. Other markets were down in this period as well, but the Vienna market was especially low. Eleven years later, the collective mood in the region of Germany and Austria was still so bad that in 1933, the stock market was again at a low. That same year, Germans elected Adolf Hitler as Leader and Chancellor of the Third Reich.

Hitler was aberrant and exercised more than average influence because he held political office. Nonetheless, because social mood is the engine of history, the importance of one individual should not be overestimated. From the socionomic point of view, an angry German electorate was disposed to empower an angry, vindictive leader. If Hitler had never been born, another would have been chosen.

Conventional wisdom, on the other hand, credits Hitler himself with the rise of the Third Reich and the horrors of World War II. A reviewer of Hitler’s autobiography, ‘Mein Kampf’ on Amazon.com demonstrated this view ably by writing, “If you want to learn about why the Holocaust happened, you can’t avoid reading the words of the man who was most responsible for it happening.”

Conventional wisdom also accentuates the domination of Adolf Hitler as the “Übermensch” - or super-man - he claimed to be in ‘Mein Kampf’. Joachim Fest’s 1977 documentary film, ‘Hitler - A Career’, focused on Hitler’s mastery of imagery and crowd psychology and his skill in exploiting others’ weaknesses. In contrast, Oliver Hirschbiegel’s 2004 film ‘Der Untergang’ (“The Downfall”) portrays Adolf Hitler as a lonely, deluded man in his final days.

The psychologically potent corollary to the strongman theory is the concept that all others are weak and impotent. This argument effectively reduces the culpability of ordinary Germans and the rest of the world for the atrocities of World War II. Since there is an emotional payoff in viewing der Führer as the one who was in control, it is disconcerting for people to relate to Adolf Hitler as a human being. That is surely at least part of why ‘Der Untergang’ has generated fierce debates over the legitimacy of portraying Hitler’s human side. Whatever Hitler was, the horrors of World War II could not have occurred apart from the angry society that empowered him. It is important to appreciate this role of society in shaping events, because the true danger to society is not aberrant individuals, but society itself when its mood turns negative.

Because human nature is what it is and because society lacks the capacity for self-awareness, social mood will get as dark as it was in the 1920s and 1930s again. Dramatic declines in the stock market reveal when social mood is negative enough to shape horrible events.

The pessimistic mood that drove declines in stock markets from 2000 until 2003 did not come near the levels of bitterness and frustration that provoked World War II and the Holocaust. But the next leg down may.


Regards,

Tom Denham
for The Daily Reckoning