U.S. Flash Mobs May Not Be Just a Fad

 | Aug 23, 2011 | 5:00 PM EDT  | Comments
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The Teen Flash Mob phenomenon in the U.S. has increased dramatically over the course of the past year. It is being treated by police and politicians as a nuisance and a fad that will most likely diminish as the novelty wears off. The idea that it may be a symptom of broader socioeconomic tension is not given much attention. And that concerns me because the flash mobs that have arisen in the Middle East over the past year have some similarities to those that are happening throughout the U.S. now.

The flash point for the mobs in the Middle East was a combination of high unemployment rates and increasing food and energy prices. These same issues are present in the U.S. today.

On a broader basis, in my February column, Economies Abide by Maslow's Hierarchy, Too, I addressed the mechanics of what governments must do to prevent social unrest as the Arab crisis was beginning to spread. The most important point with respect to such is that governments must always be preemptive with policies designed to maintain stable prices of staples in order for them to be preventive.

The rate of unemployment among urban minorities in the 18-24 year-old age group is on average between 35% and 40% nationally. This is a crisis. One of the reasons for the high rate of unemployment is obviously the state of the economy in general. The private sector U.S. economy has failed to grow since the 2008 financial crisis.

The only reason the U.S. is not technically in recession now is because government spending since 2008 has offset the anemic private sector activity. But in breaking down the numbers, a few things become apparent. Although it was intended to, the fiscal and monetary stimulus that was directed into the economy on a top-down basis in 2008 never made it to the retail level.

The recipients of both the fiscal and monetary stimulus -- principally the banks and their largest clients -- used the proceeds to make investments in stocks, bonds and commodities. And this has resulted in an increase in the cost of commodities, which is felt at the retail level as food and gasoline prices rising. Increasing living expenses and decreasing opportunities to earn the income necessary to pay for them provides the motive for those who have been most impacted to push back.

The rate at which they are pushing back, as measured by the rate at which flash mob incidence are occurring, should be taken seriously. Of course, it is possible that the flash mobs trend is a fad and not indicative of deeper socioeconomic issues. However, there is also no reason to believe at this moment that the underlying motivators of unemployment and rising costs are going to diminish anytime soon.

As the saying goes, be careful what you wish for -- you just might get it.

The recent budget and debt ceiling debate in Washington has left the current executive administration without the ability to direct a new preventive round of fiscal stimulus toward creating jobs for urban minorities. From the perspective of investors, weapons manufacturers such as Sturm, Ruger (RGR), Smith & Wesson (SWHC), Olin (OLN), Taser (TASR) may offer ways to capitalize on this disturbing trend.

So don't be surprised if the flash mobs do become more vocal and begin to coalesce around bigger and more substantial issues. After all, the current political faction, the Tea Party, was created in much the same way these flash mobs are being formed.

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