This is reproduced (in parts - I left out passages for my convenience) from The Elliott Wave Principle, Key to Market Behavior (Frost/Prechter), chapter 8 entitled "Elliott Speaks". I am sure the authors would not mind. The following paragraphs were written in 1978:
"Apparently it is one of nature's laws that man at times will refuse to accept the rest of its laws. If this assumption were untrue, the Elliott Wave Principle may never have been discovered because it may have never existed. The Wave Principle exists partly because man refuses to learn from history, because he can always be counted upon to believe that two plus two can and do make five. He can be led to believe that the laws of nature do not exist (or more commonly, "do not apply in this case"), that what is to be consumed need not be first produced, that what is lent need never be paid back, that promises are equal to substance, that paper is gold, that benefits have no costs, that the fears which reason supports will evaporate if they are ignored or derided.
Panics are sudden emotional mass realizations of reality, as are the initial upswings from the bottoms of those panics. At these points, reason suddenly impresses itself upon the mass psyche, saying, "Things have gone too far. The current levels are not justified by reality." To the extent that reason is disregarded, then, will be the extent of the extremes of mass emotional swings and their mirror, the market.
Lord Thomas Babington Macaulay, British historian and statesman, whom we quote in part, correctly ascertained the root of the problem over a hundred years ago in a letter to H.S. Randall of New York dated May 23rd, 1857:
"......I seriously apprehend that you will, in some season of adversity as I have described, do things which will prevent prosperity from returning; that you will act like people who should in a year of scarcity devour all the seedcorn, and thus make the next a year, not of scarcity, but of absolute famine...." Signed, Lord Thomas Babington., May 23rd, 1857.
The function of capital (seedcorn) is to produce more capital as well as income, assuring the well being of future generations. Once squandered through socialist spending policies, capital is gone; man can make jam out of berries, but he can never reconstitute the berries.
As this century progresses, it becomes clearer that in order to satisfy the demands of some individuals and groups for the output of others, man, through the agency of the state, has begun to leech off that which he has created. He has not only mortgaged his present output, but he has mortgaged the output of future generations by eating the capital that took generations to accumulate.
In the name of a right that does not exist within the laws of nature, man has forced acceptance of paper that represents nothing but costs everything, he has bought, spent and promised at an exponential rate, creating in the process the greatest debt pyramid in the history of the world, refusing to acknowledge that these debts must be ultimately repaid in one form or another.
When the fifth wave of the fifth wave tops out [Grand Supercycle III], we need not ask why it has done so. Reality again, will be forced upon us. When the producers who are leeched upon disappear or are consumed, the leeches who remain will have lost their life support system, and the laws of nature will have to be patiently relearned.
The trend of man's progress, as the Wave Principle points out, is ever upward. However, the path of that progress is not a straight line and never will be unless human nature, which is one of the laws of nature, is repealed. Ask any archaeologist. He knows."