Recessions and Role of Psychology

The media constantly overlook the role of psychology.

Poor psychology is primarily what gets us into recessions once the basic excesses take hold, and eventually, it gets us out. Certainly, psychology gets us into those excesses, which produce booms that cause busts. It helps foster those ever-downward economic spirals.

There was certainly a subprime mortgage mess. But that was accentuated by a jittery market that affected the pricing of those assets. (I have often commented on this.)

With the downturn, political psychological efforts succeeded, especially aggravated when banking asset values dropped, by forced mark-to-market pricing.

Much of what happens is our perceived outlook on the economy’s future. The lack of proper media explanation adds to this. ( See the Earl J Weinreb NewsHole® comments.)