…And Get Bigger

Just as there is gradation for positive numbers, there is a color to negative ones, too. On the plus side, consistently small increments marked by the infrequent jump is never to be associated with a healthy economy let alone one that is booming. A truly booming economy is one in which the small positive numbers are rare. The recovery phase preceding the boom takes that to an extreme.

If conditions swing the other way, the same holds true. This is about probability, derived from consistent patterns taken from understanding how economies work. Momentum is often a key piece, therefore sentiment. It’s just not sentiment as is commonly derived in the form of surveys.

Economists and central bankers talk endlessly about the virtuous circle for a reason. People get to feel good and so they start acting on those feelings. More action in people, more buying, building, and servicing. The economy jumpstarts to life, what Keynes called pump priming. Only to Keynes, pump priming wasn’t pop psychology it was hard action.

Orthodox Economics declares that it is nearly sufficient enough for those feelings. This is one reason why there is no money in monetary policy; the entire official paradigm has shifted to psychological manipulation.

Real economic momentum may not be so simple. People may get to feeling positive even very positive but still remain cautious in becoming so. I think things are getting better but I’m going to wait to make sure (once bitten and all that). The economic breakout can stall, which is pretty much the story of the last decade around the world.

They call these a boom each and every time anyway (the psychology) yet they end up being so fragile. The reason is that the process stops far short of one, never achieving momentum from the positive turn in feelings. People start toward optimism in sentiment and while they are waiting for confirmation, bam, “something” hits the system (eurodollar #n) and everyone scurries back toward what the Japanese call the “deflationary mindset”.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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