Monday, April 27, 2009

The psychology of it all

John McCain did himself no favors by calling this a "psychological recession" during his failed presidential bid. And as a PR statement, it does not feel like a psychological recession at all.

Of course, that's not what he meant, and we all know that. What he meant was that the recession was in part because of a failure in confidence. And that part is true. Two years ago, things were much the same, but the economy was roaring along happily - even if unsustainably.

Things will not get better until BOTH the psychology of it, AND the underlying fundamentals of it are righted. I expect the fundamentals to be the first to get fixed - that's my vibe. I expect that ppl will hope for a bottom, call for a bottom, get excited on every two days of stock market gains only to be let down, or at best meet with a weak plateau, until they finally give up the hope that this will be taken care of easily. At that point, folks will buckle down, we will be a couple years into folks living with some sense of austerity. Without actually realizing it happening, the foundations for a healthy economy will be laid. So I only expect the psychology of it to turn out well after ppl give up hope, and simply get on with living in this new reality. I don't know how long such a thing might take, but I would be surprised to see things turn around as quickly as the TV people are hoping.

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