‘The Angst Machine’
It seems pretty hard to computationally gauge the Zeitgeist, but human beings have devised a proximate benchmark to do just that. It’s called the VIX index, or ‘fear barometer’, and right now it is signalling fucking insane smugness.
The closest numerical proxy of collective nervousness and cultural angst is the VIX index, traded on the Chicago Board Options Exchange. The index, also dubbed the ‘fear gauge’, shows the price people are willing to pay to insure themselves against forthcoming catastrophes, economic paroxyms and episodes of insanity. It’s pretty much the best methodology for hedging risk and measuring humanity’s heebie-jeebies in aggregate. This week it posted a mind-blowing multi-year low. That’s kinda scary.
The critical issue here is the skitzo level of complacency, i.e., the intense suppression of volatility — the ups and downs of life — in the name of “stability.” How can our world — in all its atavistic tics and manic manifestations (think → climate change, market turmoil, military routs, religious pogroms, collective hysteria, techno disruption, etc.) be so chill about what’s over ‘the happy horizon?’ It is basically bananas to sweep inordinate risk under the rug — that is, to push incomprehensible hazards further into the statistical tails of the probability distribution of outcomes and allow these low-likelihood, high-impact events to inevitably propagate. At VIVISXN, we’re fuckin’ scared. Very scared.
What the world is witnessing in North Korea, Syria, China and the US — the abrupt sacking of an intel director last night, for instance; ludic market levitations driven by momentum and ‘risk parity‘ fiends; sequential VIX bottoms, etc. — is simply what happens when highly constrained systems approach the brink. Complex social systems that have suppressed anxiety tend to become extremely feeble, while at the same time exhibiting no obvious risks. In fact, they tend to be too mellow (like now) and exhibit low-key variability as concealed dangers accumulate and metastasize beneath the surface. Surely some sort of cataclysm is lurking. Perhaps the apocalypse.
Our current bottled-up system has become hyper-prone to “Black Swans”— that is, it has become extremely vulnerable to large-scale events that lie far from the statistical norm. Such environments eventually experience massive blow-ups, catching everyone off-guard and undoing years of equilibrium or, in some cases, ending up far worse than they were in their initial iffy state. Indeed, the longer it takes for the blow-up to occur, the worse the resulting harm and subsequent spillover. That’s why we are extremely uncomfortable with a sub-ten VIX, which is signalling something sinister.
Financial wobbles, geopolitical jitters and the current ants in our pants globalization are grounded in the rise of complexity, interdependence, and unpredictability. The sweet state of homeostasis that we are currently experiencing (“a brittle construct, to be sure, and we’re do for a shellacking soon,” said risk guru Nassim Taleb recently), and the false idea that human trepidation has been fundamentally tempered, will engender undesirable outcomes — probably in the form of military conflagrations and economic albatrosses (likely simultaneously) with extreme and protracted grief as a consequence.
Volatility is ultimately the mathematical measurement of human emotion with regard to expected events, either perceived or real. Emotions are by their nature unpredictable, non-linear and hard to navigate. The current VIX — spring-loaded to the max, we believe — is about to explode to the upside. We know human emotions still work (an evolutionary absolute), and therefore volatility will return in a big league way (the benchmark is at it’s lowest since 1993).
As the pseudo-philosopher Michel Foucault once said (probably paraphrasing that hippie philosophe Jean-Jacques Rousseau), “A little bit of agitation gives motivation to the soul, and what really makes the species prosper is not peace so much as freedom and frenetic angst.” With freedom comes some unpredictable flux. This is one of life’s little bundles: there is no freedom without noise — and no stability without the frantic jive of life. Perhaps Nabokov put it best: “Complacency is a state of mind that exists only in retrospective: it has to be shattered before being ascertained.” Expect a full-tilt, parabolic spike in the VIX any time now and a gush of anxiety to follow!
Images via Nanex + Author’s own
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