Recession‏ Psychology


Many market securities analysts say we are already in a recession. The news media is also carrying on the drumbeat of recession. And, you’ll see consumer confidence declining and investors exiting from opportunities. When they are asked you’ll find that many people respond with gloomy forecasts of future economic prospects.

Is It All in Your Head?

There is some evidence that indicates that many prolonged economic downturns, or recessions, happen because they become a self-fulfilling prophecy. If pundits, who are believed by the general public, say that there is a downturn this often transforms into negative retail and durable goods results. When this occurs simple collective consumer behavior can cause a recession. In the old days before heavy government control of banking they called this a panic. Because people are fearful of perceived major losses, they will postpone major purchases, stop projects that are in progress and generally cut back. The ripple effect takes a toll on the economy.

Having been through several recessions myself, I am concerned not only in that some businesses unnecessarily wreak upon themselves by taking a sky is falling attitude but that some might ignore the real dangers of a recession by writing it all off as hype.

Fear and Foolishness.

Of course, fear of the unknown is natural as is ignoring a problem and hoping it will go away. The problem is tow fold. When there are freezes in hiring or downsizing, budgets, particularly R&D budgets, being slashed and a heavy emphasis on cash reserves major opportunities can start sliding by. Likewise, ignoring the fact that there is a real economic downturn can be disastrous as well.

First of all, if you were to consult any strategic planning expert you’ll discover that they will tell you that making and executing fear-based decisions does not cause a company to prosper. However, most will also tell you that the high energy prices, a very weak housing market and unstable food and consumer good costs means that a real recession is currently underway. But they’ll also tell you that you can’t give into fear nor can you foolishly ignore what is happening in the economic realm.

Use Intelligent Concern

Of course, one should use the proper level of concern about the economy. However, let’s not engage in self-indulgent, self-fulfilling, recessionary prophecies. Just use your common sense to handle the recession without panicking. Cut where you need to cut but invest where you need to invest. Be wise, not fearful or foolish.

This entry was posted on Monday, November 27th, 2017 at 8:43 pm and is filed under Recession. You can follow any responses to this entry through the RSS 2.0 feed.

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