The economy wasn't bad until we were told it was bad. Literally overnight everyone responded to the bad news. It is quite funny hearing people who are well off, and have not had any change in their income say they need to tighten their belts.
My response was to buy a flat screen TV, and a blue-ray player.
My personal economics does not change because of recessions, or boom times. Sound economics is sound economic regardless.
I have seen a minor reduction in my income, but that is offset by all the debt we have paid off in the past couple of years. No car payment, and a drop in monthly obligations every time a debt is paid off has actually made things better for us then they have been for years.
Then again, the fact the Obama has already spent the entire net worth of the 117 richest Americans, based on the Forbes 400 list, is kind of scary. Especially when the next 283 on that list all together are only worth about half of that. (Actually he has spent a lot more, but I am only including the deficit amount.)
If the deficit grows in the 2nd half of this year is it did in the first half, then it will be 3.5% of the entire net worth of all Americans, and non profits. (Based on info I found on Wikipedia for 2007.) Remember, this is not income, this is net worth.
Nope. It became bad as soon as people started going into debt they could not pay back. It became worse when the lenders of last resort thought more debt would fix the problem of lack of spending. It is terminally bad and it will not change until certain fundamental facts change.
Just because someone might choose to ignore their financial situation does not mean they are economically better off living in ignorance.
If you have a bank account with no money in it the economy does not give a wit how manic or depressed you happen to be. You still cannot spend any money you do not have. If you spend credit over and above what you can pay back anyway there will be consequences. The economy does not care how happy anyone is.
Economic law prevails over psychology.
And I never stated economics wasn't a social "science". Though it is not strictly a science. Psychology is neither a science nor social.
Right on. People don't always behave rationally and in their own best interest. Only what they think is their best interest. Which would be fine if their choices made them happy. But I think people are now unhappy buying that house in 2006 for twice the price of 2000.
If you have no money in your bank account, more often then not it means you either did stupid shit, or didn't work. It is a result of your behaviors, and actions.
Your examples are actually great for showing this. People spending more then they make is a bad economic decision. The result is caused by the action that was caused by the personality of the person.
Right now we are experiencing the consequences of idiots buying houses they could not afford, idiot bankers giving loans to people who could not afford them, the idiot government requiring banks to make loans to people who could not afford them, and idiot investors who thought if you took a lot of bad investments and pooled them together, they somehow suddenly became good investments.
The most basic economic rule that everybody has heard is buy low and sell high. When the market dropped, suddenly people were clamoring to get out. I personally pointed out this rule to people who knew it, and still took their money out. Their fear overrode their logic.
I am not saying just being happy or unhappy makes or breaks the economy, but the attitudes, beliefs, fears, and self control of the populous effects the economy, because that controls their economic decisions and actions.
Well the emotional reactions will result in future economic reality. Our current economic reality is a result of everyone's previous emotional reactions.
But fear can cause an almost immediate result. I saw one business have sales drop almost immediately after Bush gave his "The Economy is Imploding" speech. Next thing I knew, people were discussing how bad things were, who just weeks earlier didn't seem to know anything was wrong.
Naturally everything is a little more complicated then it just being peoples emotions that rule the economy, but our emotions and attitudes do underlie the economy.
But not to a real economist. A real economist cannot say why a human does certain things beyond "self interest". He can only say what will happen as a result of many persons acting in "self interest"; however, psychology plays no role in what a real economist does.
Besides, no one can predict human actions -- not even a psychologist!
So, maybe you are right if you say psychology affects human action. Though it is a tautological statement. In other words -- no shit! but we will never learn anything about economics from it.
My $0.02: Economics is affected by psychology - particularly consumer confidence. the disicpline of economics has not been shattered in any way. The US national debt is a HUGE issue. However, the blame for that should be put almost entirely on Bush's shoulders.
No. Our economy is dependent on whether or not we are productive only. To that extend we can feel good when we produce because then we can consume.
You guys really are thinking about it very backwards.
Like I said before...just because you feel good about spending money you don't have doesn't mean the economy will be better of for it.
Have you even been paying attention to what has been going on?
Also, stock prices don't mean dick to the economy as a whole. They are but one means of ownership in a productive enterprise. How I feel doesn't make a particular company productive -- though it can affect the price of their stock. Again, when all is said and done that is not the economy.
If psychology is all their is to the economy then GWB was right to tell everyone to go shopping after 9/11.