Forget the subprime mortgages crisis, every market disaster can be blamed on bad chemicals.

Bad man-chemicals to be specific. New research from the University of Cambridge shows that the economy is ravaged by the whim of the testosterone flowing through traders’ veins.

“The popular view is that experienced traders can control their emotions,” on of the lead researchers, John Coates says, “but in fact their endocrine systems are on fire.”

The scientists discovered that as traders made more money, their testosterone levels rose. So, lots of testosterone equals making lots of money, and it’s good for the economy, right?

Uh, unfortunately, as the honcho-hormones run rampant, this leads to overly aggressive (and bad) decisions. Thence the crash, and this causes elevated levels of cortisol, which causes “shrinkage of the prefrontal cortex and hippocampus, brain regions associated with decision making and factual memory,” the researchers say.

So this is the process:
a) testosterone leads to making money
b) making money generates more testosterone
c) too much testosterone causes bad decision making
d) this causes a crash, and then the brain shrinks, leading to
f) learned helplessness, fear, loathing, rivers of fire and a meltdown of the markets.

So I guess it’s time to let women on the trading floor, eh?

More on this story at the New Scientist. Some of this group are suspected of irrational exuberance.

You humans still have primitive brains, so I will try to be understanding about this need of yours to panic.

One of your wisest humans wrote a book, upon the cover of which was the phrase “DON’T PANIC”. This is excellent advice, and the first thing you must learn if you ever hope to:

• evolve
• dabble in intergalactic travel
• keep your portfolio intact in times of irrational exuberance and abject, lower-primate, the-leopard-is-going-to-eat-me moments of dread.

At this moment of your insignificant planet’s history, you have given a large part of efforts to an institution which (and let’s not gild the lily on this one) runs on the base emotions of greed and fear. So, on occasion, you will have to face the fear. But those of you who rise above it, who listen to the wisdom of your great prophet, will evolve.

But I suspect that not enough of you will get there before my armada arrives with its legions of uber-chimps, armed with hyper-kazoos and tutus.

Then what?

Then it’s time for you to panic.

Next time: What does it mean when your cat beats you at chess? And should he be able to levitate like that?

More reasons not to panic here.

(Photo credit: Marvin (PA))