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Recession plays mind games with nation

Posted February 23, 2009
Updated March 9, 2009

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— Capitalism runs on psychology as much as money, and almost daily doses of bad news about job losses and home foreclosures have battered the nation's psyche into a negative feedback loop, experts say.

The recession has instilled such fear into Americans that even those with jobs and money to spend are cutting back, causing the economy to contract even more.

NC Sales Tax Economic fear quickly turns to panic

"Right now, it's just about panic and fear in the market, and this is just feeding on itself," said Dan Ariely, a behavioral economist at Duke University and author of "Predictably Irrational," a book about how we make decisions. "The psychology is going to influence the reality."

Ariely said that even he recently hesitated before splurging to take his first vacation in 10 years.

"It felt bad spending a certain amount of money going on vacation," he said.

Raleigh investment adviser Gerald Townsend said he sees similar behavior in the stock market and among his clients. Fear turns overvalued stocks into undervalued ones and investors panic, he said.

"When it's the fever pitch is when we want to totally abandon things, and history has shown that's a bad time to make a new decision," Townsend said. "Ultimately, if we think the economy's going down, we'll help it go down."

Retiree Beverly Honeycutt said the grim headlines have worried her so much that she watches more closely what her family spends.

"I feel like the future looks a little bleak right now," Honeycutt said. "You can only take so much, and it can be devastating."

Ariely and Townsend said planning is a better road to a solution than panic is. Injecting hope into the nation's economic outlook could result in a different self-fulfilling prophecy, they said.

"We owe it to ourselves to try and understand and figure out what is going on, where we stand and be active in this process of getting out of this trouble," Ariely said.


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  • Rolling Along Feb 24, 2009

    "Feelings are exactly what makes people spend money or not spend money"

    And therein (IMHO) lies the problem. Money is a tool, it can be used properly to bring physical comforts and necessities. But no amount is going to do beans for the psyche. This country's economy has been based on excessive consumption for too long. It wouldn't be so bad if we were actually making some of what we were consuming. But that went away a long time ago. Now is the time for adjustment and to pay the piper, so to speak.

  • DeathRow-IFeelYourPain-NOT Feb 24, 2009

    A recession doesn't play mind games. You're either in a recession or you're not. But the president IS playing mind games by continuing the fear and worsening the recession.

    arroyofly: "Ignore the problem and it will just go away? Is that what some of you think this is, merely a psychological recession?"

    To answer your question, Yes we do. Feelings are exactly what makes people spend money or not spend money. Money not being spent is exactly what drives a recession. The country's residents still have the same amount of money before, during, and after a recession. Yes some have more and some have less. But the total money in the US doesn't change much. The only thing that changes is how much of that money they spend. Its simply a cycle of confidence that will rebound in time. You can throw all kinds of money at it. But if confidence isn't there, the recession will continue. We don't need Obama constantly telling everyone how bad it is. We need his confidence and leadership.

  • arroyofly Feb 23, 2009

    Ignore the problem and it will just go away? Is that what some of you think this is, merely a psychological recession? How about the fact that the private federal reserve has orchestrated this collapse to usher in Usurper Obama's socialism? They are collapsing our economy through printing fake money, spending it, and increasing our debt. Soon there will be hyperinflation as our monopoly money grows increasingly worthless. Wake up people! We are being taken over by evil and ushered into the new world order - heck, the media is now openly throwing around this term. If you honestly believe that this will just go away if we "think positively", you are nuts.

  • doyoubwn Feb 23, 2009

    Rolling Along, you are correct. I see several folks contributing here are too focused on the short term. This 'crisis' (to borrow the gloomers' term) was sparked before the previous administration and has snowballed into it's present form.

    Same to be said for the fix for this 'crisis', it will not occur overnight. The present administration has seen that this will have LONG lasting effects. One could deduce that the blame game will point toward a lame duck with little retort, which would sway the political non-thinkers (yes, that means voters) to cast future votes toward the gloomers' agenda.

  • scjabr Feb 23, 2009

    Rolling along - you got that right. To all those of you who are crying about the stimulus...Do you think that Obama is talking of difficult times because the last eight years were all roses? Yes it is bad now, but if we ALL give it some time, and stop casting negativity into the ring all the time, that goes for the media as well as US citizens too, than perhaps something good will come of the stimulus. Don't worry, Obama doesn't want to take away your toys. He just wants to make sure you play fairly!

  • Rolling Along Feb 23, 2009

    anneonymousone...only thing I have seen Obama create is a huge mortgage on this country's future.

  • anneonymousone Feb 23, 2009

    Wow! President Obama is being said to create all this in just four weeks and six days?

    Whew! That's some serious power, y'all!

  • Rolling Along Feb 23, 2009

    I am living the same way I always do. I only buy what I really need and pay cash. So what if I drive a 13 year old truck, have a 7 year old television? They work and work fine. AND I have enough money in the bank that I don't have to worry for quite a while if I get laid off. BTW house is paid off too. THAT is what you do, rather than spending every dollar you make and then some to support a lifestyle you can't really afford.

  • foetine Feb 23, 2009

    George W Bush ain't worried.

  • busyb97 Feb 23, 2009

    "When the president of the United States goes on national TV and tells us our economy is the worst in decades, then signs bill after bill throwing TRILLIONS of dollars we don't have at the problem, and all we see are things getting worse..... WHAT DOES THE MEDIA EXPECT?"

    - AMEN! And what does the media do? They just keep reporting the doom and gloom, instead of trying to focus on positives. They are out there- if they are willing to look for them. Yes, we need to be aware and not stick our head in the sand about the situation (so we don't spend TOO much and then things blow up and we are left with nothing), but at the same time...stop screaming "FIRE FIRE!!" at the same time you throw gasoline on the flames.

    People are reacting (least I am), not just to the job losses and foreclosure news, but to the government fingers creeping deeper and deeper into our pockets and lives. That is what has me being extra cautious right now.