Memories Of Tough Times Get In The Way
Economists expected a brighter picture by now. ?According to our theories, the indicators pointed to more growth because consumers should be spending more. Why aren't they?
Consumer spending constitutes 70% of all spending so, if we don't spend, the economy cannot grow. One of the mistakes social scientists make is not to consult other social scientists. So let us consult psychology.
A banking industry report notes that consumers wounded by the Great Recession now save more and pay down debt "for precautionary reasons." Gallup polling documents income ratios of saving over spending at unprecedented levels.
Now we know that economic crises can traumatize consumers. The Great Depression? did that. In his book Hard Times, Studs Terkel interviewed successful adults troubled by unfounded economic nightmares. Gallup polling consistently registered exaggerated economic fears until 1980, when a majority of Americans no longer had experienced the Great Depression.
If economic hardship can traumatize people and warp their spending patterns, where should we see such behavior? Here? Northern Illinois! Us! Unemployment here topped 21% during the Great Recession.
Look around. Would anyone describe us as confident and thus likely to spend?
I'm Bob Evans, and that's my perspective.