Thinking About the Economy: Is Pessimism Preventing Economic Recovery?

This is an excerpt from a really interesting article on the economy I found in a very unlikely place. Namely, The Washington Post:

Americans see themselves as go-getters and risk-takers. Our optimism will ultimately rescue us. So it’s said. But the folklore increasingly collides with reality. The 2008-09 financial crisis traumatized millions. It swelled the ranks of risk-avoiders, worrywarts and victims. Of course, this was mainly a reaction to overborrowing, inflated home values and lost jobs. But now the fear factor is feeding on itself — and it’s smothering the recovery.

We are prisoners of our rotten mood. Everywhere, the bias is to spend less and wait to see how things turn out. Just as optimism sustained the boom, pessimism prolongs the bust. This is the reverse of “irrational exuberance,” because as long as most people feel this way, the psychology is self-fulfilling. Unfortunately, that’s how they feel.

Admittedly, I am still in the very early stages of figuring out how the economy works in this country. I find it very obvious, however, that the country is going through a doom-and-gloom period where predictions of imminent disasters are more welcome than good news. Grievances and meticulously inventoried while timid suggestions that things might not be all that horrible are greeted with derision.

“Why are you in such a good mood?” people ask incredulously when they meet a content and smiling person. As if happiness needed justification while misery were completely normal and required no analysis.

I’m not qualified to analyze whether there is a link between this culture of misery and doom-saying and the economy. I can say, however, that the fascination with unhappiness does exist and its influence is only growing.

6 thoughts on “Thinking About the Economy: Is Pessimism Preventing Economic Recovery?

  1. A couple years back, I was browsing Cagle.com’s political cartoons. The comics are grouped by themes (ie. you can look at cartoons just about hurricane Katrina if you want). And I looked at the End-Of-The-Year themed comics from late December of various years.

    They’re all the same. Every year all the cartoonists draw a strip where the Old Year is looking beat-up and miserable, while the New Year is looking scared. The message is always the same: last year sucked, and next year isn’t looking to good either. This same message, year in, year out. It always feels like we’re living in particularly bad year.

    “In times like these, it helps to recall that there have always been times like these.” -Paul Harvey

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    1. Yes, people have worried about the imminent end of humanity for millennia. This betrays a deep-seated fear of one’s own mortality. It is somehow comforting to believe that the world would end right after we do. God forbid anybody could have a better time and enjoy existence more than we ever did. 🙂

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      1. Hmmm. You know SNL had a segment which basically was a political spoof–featuring Sarah Palin 2012. It depicted end of the world scenario’s which mimicked scenes from catastrophic movies–hardly optimistic, but creative and funny.

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  2. Not that I imagine it is any different/more promising for other age groups, but for me, it has been a bit rough to be a young person during this type of collective pessimistic outlook.
    I’m not sure which is worse, the apologetic older people telling me they are sorry I inherited (or will eventually inherit) the unfixable mess they helped create, or the older ones who tell me that my generation is an all around disaster lacking in the brains/skills/discipline to fix what went wrong, but neither are very encouraging. I believe that this too shall pass, I just wish I could say it without my optimism being derided as nothing but a youthful delusion, or any sign of worry being ultimate proof that my age group is hapless and defeated before we even started fighting.

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    1. The article is very interesting bit I just asked a resident hedge fund specialist 🙂 who says that if there was any actual value to this strategy, it would have never been allowed to become public, especially at Daily Mail.

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