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Fear Itself

It’s been a busy week on the economic front.  Congress got its act together, sort of, and passed a debt ceiling raiser that a solid majority of Americans considered “ridiculous”.  The Dow Jones Industrial Average dropped 500 points in response to this, a new salvo in the currency war, and uncertainly about jobs.  Today it may gain some of that back now that the July jobs report shows solid gains, however.

If stock traders and reporters alike seem to be hopping around like scared bunnies, there’s a reason for it – uncertainty induced fear.  If you are afraid for your own future, you’re clearly not alone.

That may sound like small comfort, but it shouldn’t be.  Confronting our fears will be the first step to recovery.  You can read that as either pop psychology or economics.  The source of the fear, however, will take us some time to work out because it’s a major feature of the world we live in.

None of the news stories that drive uncertainty are new in any way.  The currency war has been going on for more than a year, heating up sporadically.  Anyone who reads Barataria would have expected a decent jobs report because Initial Claims have dropped about 30k per week – about the net number of jobs created last month.  Congress’ behavior is … well, you had to see that coming.  Concerns over sovereign debt in the Eurozone has been brewing for even longer.
Yet it all seemed like a big surprise.  That means that stock traders are either ignoring the news or are incapable of processing it.  Given that risk management is the key to a credit based economy, we’re clearly in trouble.

So what causes fear, other than raw uncertainty?

A few years of denial catching up with us is part of the issue.  But a bigger problem is that there is simply too much news to be interpreted by ordinary people who aren’t trained in the art.  That was true in good times as well, but it didn’t seem to make a big difference because faith in our leaders and our popular prognosticators got us through without a problem.

The real stories this week?  Congress looks stupid and the media has stopped guessing what’s going to happen.  The systems that keep everything keepin’ on have failed nearly completely.  The public is turning against the “experts” that they came to rely on far too much in the first place.

That’s not as scary as it might sound at first.  What it means is that everyone has to educate themselves and learn how to interpret what’s going down.  If that sounds difficult, it isn’t.  We can do it socially, working things out together.  We’re all going to have to spend a lot more time talking about politics and economics and a lot less time talking about fashion, entertainment, and fancy gizmos that we really can’t afford anyway.

If that sounds boring, consider the alternative.  Do you really like the excitement that politics and economics has been giving you lately?

A simple first step is for everyone to admit how they really feel about their lives.  If you’re afraid, tell people so.  It may seem like a major blow to your social status to admit that you’re afraid, but aren’t there a few points for honesty?  After that, learn how to trust your guts as much as your head.  If something sounds too stupid to be true, it probably is.  Finally, check things out with a lot of people because no one is going to know everything.

In short, we need to have a much more active civic life.  But that’s the really boring way to put it.  Let’s say instead that if we talk about things and work together just a bit we can all have a bit more control over the mysterious forces that shape our lives from afar.

What should be obvious by now is that the leaders and “experts” are not doing what we have come to rely on them to do.  We’ll have to do it ourselves and not trust people who throw jargon or platitudes our way.  If that scares you more than what you already feel in your guts about the economic situation, remember what FDR told us the last time we went through this:

“The only thing we have to fear is fear itself.”

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17 thoughts on “Fear Itself

  1. I hope people can start talking about substantive issues in public. I never had any time for what most people think is interesting like sports or reality shows. It would be great if you got this started.

    Are you going to lead an economics discussion on twitter any time soon?

  2. Anna: I hope to start a discussion on twitter or, perhaps, google+. The advantages of the latter are that we don’t have a 140 character limit and the thread stays around so people can come into it when they want. But I’m exploring other options, too. Might do both.

    If I do this on twitter it’ll start Saturday or Sunday night and the tag will be #EconChat – look for it and we’ll see where we go. I hope to do something very open where we all understand that we’re not “experts” but we have access to articles and papers we can judge for ourselves. Call me “facilitator” not “leader”. 🙂

  3. I think it would be great if people stopped whining and learned how to work together. Maybe talking about it is the first step but it seems like we have a lot of talk as it is. It might be hard to get noticed.

  4. Jim: That’s …. sort of what I had in mind, but not as nicely put. 🙂 I have been waiting for the noize to quiet down, but if anything it’s gotten louder. I think it’s time for those of us with quiet voices to say our piece and not worry about who listens. I’ve been saying the Emperor has no clothes for some time – and that we can see why the Empress has a thing going on the side, too. But I think a few people are finally interested . Why not step it up a notch?

  5. My husband and I were talking about this exact same thing the other day. It’s impossible for lay people to digest and decode all of the information we’d need to be truly responsible citizens. It’s not just news – it’s laws and rules and systems. We *need* experts to hold our hands and walk us through it. In my opinion, that’s what the news should do. As someone who graduated from journalism school, I firmly believe the idea of “objective” journalism is crap. It’s the notion that gets us “he said, she said” reporting with absolutely no analysis from the very people who have the most information and (theoretically) the most insight into what’s really going on. But rather than being the watchdogs they set out to be, journalists have turned themselves into parrots who simply answer the “what” without dabbling in the “so what,” leaving the rest of us with the difficult task of putting it all together (or knowing where to find the interpreters like you, Erik). And people say we have a liberal media.

    I agree with you, though, that we all need to get more comfortable having serious civic conversations publicly. It’s an important step, and I think we all need a little encouragement to keep pushing that envelope. Thank you so much for this post!

  6. Meghan: Thank you – our discussion on this topic has a lot to do with going this direction, and I think it’s a good one. I think people do know a lot more than they might think, but a lot of it is in their guts – intuition tells us things our brains can’t totally wrap themselves around. But I don’t think we’ll be comfortable with that unless we can talk it out and say, yes, that does make sense after all.

    The extent to which this world is different than everything that came before it is that humans and their tech define their own world more than ever before – we’re not as beholden to weather and natural cycles as we once were. But if we created this world we can understand it and manage it. It’s ours. Leaving it up to “experts” or kings or others to take care of is one way of dealing with it, but they all have their own agendas and limitations. There’s a point where we all have to know just how we fit in if it’s going to work for us – or sometimes work at all.

    No one smart ever said democracy was easy. But it’s still a lot better than the alternatives.

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