Here here!

Will Wilkinson goes off about economists and their ignorance of human psychology.

I often wonder if injecting tons of cash into the economy will affect the overall fear that pervades society right now. I mean, here's the basic economics:

1. I hear all this dreadful news from friends, the radio, and TV, and we're all afraid we're going to lose our jobs.
2. I stop spending.
3. Sales drop because my friends and I all are scared of the same thing. Companies can't support the number of employees thay have because sales are down so they lay people off and downsize (including some of my friends)
4. This reinforces my fear that I could be next
5. Go to step 1

So I think it's true that injecting money into the economy would work, just like giving medicine to a sick child would work.  But if you can't get your kid to open his mouth because he's afraid of the spoon, then what?

Our entire economy from the stock market, to the value of the dollar itself, is based on basic human psychology.  My guess is that economists spend way too much time in school learning math and not enough time learning how the mind works.  If you ever want to see what a pack of cattle we all are, just read the book "The Tipping Point" by Malcom Gladwell.  It's a fascinating look at what makes us tick and why some products turn into iPods and others into Zunes.  You might be surprised by what drives the behavior.

In any case, this is hitting home for me right now.  I'm fearful for the future financially.  I'm likely going to get a sizable tax return this year (assuming CA doesn't give me an IOU - Try doing that to them when you OWE taxes).  I started thinking of all the things I need.  A kitchen remodel, new roof, new laptop...  Then I had the thought everyone in politics doesn't want me to have...  Maybe I should just put it in the bank.  If something happens to my job, I could live for months if I kept the money.

That doesn't mean there is no amount of money that I would continue to hold onto.  If someone gave me a million dollars, I'd be happy to spend some of it right now.  But when you're living pretty tight and every single bill seems to be on the rise including gas, groceries, heating, etc.  it's pretty darn tempting to horde the cash....  That is until the dollar crashes and it isn't worth the paper it's printed on. *sigh*