Are economic predictions anything more than wishful thinking? We refer to the rosy ones – the type predicting robust growth based on $90 per barrel oil. Sometimes we think the so-called ‘experts’ put these out to see if they can boost confidence and stimulate investment. Since the economy depends so much on how people are feeling, it stands to reason other people would try to influence those feelings.
If we feel good, we spend money. When we spend money, it creates jobs and the companies that make the stuff we spend money on prosper. When we feel nervous, we hoard our money and the economy suffers. So it’s in the best interest of all sorts of folks to try to make us feel confident about the prospects for the future.
If it sounds like it’s all a big game…… it is, except with serious consequences. That’s why governments are willing use billions of taxpayers’ dollars to bail out failing banks. (Italy is the latest example.) Because if the people whose savings those banks are throwing around lose access to their money…. Elected governments are going to lose power.
So things are good! Spend your money! Stimulate the economy! Keep it going!
Then again, there’s not much point in complaining about the system. If the alternative is to let the economy go in the tank and millions lose their savings along with their jobs…. That’s a pretty good argument for massive bailouts.
It may only be pushing off some sort of ‘ultimate reckoning,’ when we come crashing back to reality. When that happens, the winner will be whoever has the biggest vegetable patch.
Have a nice week.