Crisp explanation of current economic psychology

This CNBC article is an excellent, if brief, overview of current American psychology regarding the economy and their own spending choices. CNBC article – Why we’re not spending

Americans are simply less optimistic, and that view is (justifiably) reinforced by what they read and hear every day in the media.

Even if you have some savings, or credit available to you, you are simply less likely to spend and more likely to save what you have if you are concerned about your future spending power.

Most people might relate with their early experiences with gambling. In the beginning, you might just put your toe in the water. But then, once you have a handle on the basics, you want to get “a little” more aggressive. You still have almost all your money in your pocket, and you know –after all– it takes money to make money. Then, within minutes, you realize you have burned half your money on wild betting where your confidence has completely overwhelmed your mental odds calculator. Then, angered by your own actions, and the “system” that’s clearly cheating you out of your money, you go back to betting small and even then, you don’t take advantage of betting opportunities with chances in your favor, finally draining the rest of your money bit by bit.

Many Americans today are in that latter part of the cycle outlined above. Even for those that didn’t participate in the so-called evils of the last decade with big home equity lines or perhaps investing heavily in tech stocks in the early part of the last decade, they can still see how painful losses are, and how hard it is to get – and stay – ahead. They also see huge national debts, talk of higher taxes, talk of hyperinflation down the road, soaring unemployment, soaring healthcare, and on and on…and they just aren’t going to be as likely to make spending decisions based on rosy future expectations.

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