Monday, September 28. 2009
David Krueger MD
- I was talking with the owner of
one of our favorite antique stores in an area close to our weekend
ranch. He said, “People are just not spending money.” The
downtown area of the little town was somewhat dead, and the nursery
where we frequently visit had few customers.
-
- He continued, “They don’t
seem to be out of jobs, no one is making any less money, but people
just aren’t spending.”
- Since I believe homespun
research can come close at times to the neuroeconomics lab, I asked
why he felt this was the case.
- “Everybody is watching the
news too much.”
-
- The positive wealth effect
occurs when rising values of homes, stock portfolios, and retirement
accounts make people feel wealthy. Even though no one takes a
single dollar from these assets, the heightened mood results in
spending more.
- People feel the impact of the
economic downturn in an inverse way: the negative wealth effect.
Even though they make the same money at their same job, people spend
less.
-
- We spend not according to how
much money we have, or even what we need, but we spend according to
how we feel.
- Neuroeconomists have
demonstrated that people who are fearful cling to what they have.
Our nervous systems constrict in a primitive but adaptive effort for
survival. With this withdrawal and fear, people reduce spending.
The condition people seek to avoid becomes what they bring about.
When fear is dominant, money may not only be constricted, but
horded. Since we make what we do hitchhike on something conscious
and logical so that it makes sense, consumers become “risk-adverse”
and hunker down. Spending gets a bad reputation.
- A study at the University of
Toronto demonstrated that when people are in a positive mood, their
visual cortex takes in more information. In a positive mood people
both see and process a greater number of possibilities in their
environment. A good mood enhances the size of the window of their
perspective.
- The emotional contagion
(“collective tilt”) of the economic downturn has the reverse
effect on spending of an expanding economy—even without a direct
impact on the individual. Increased tension produces both emotional
regression and narrows perspective. The stress hormones of
epinephrine and cortisol block information processing.
- For both good and bad stress, a
modicum of balance is crucial to regulate states of mind. Look for
opportunities to see the big picture when a natural inclination is
to remain hyper-focused. Being grounded and centered allows a state
of mind for optimum synthesis of thinking with access to existing
knowledge. When you’re relaxed and centered, you have the
greatest access to all your states of mind—all the information you
possess.
- From a Buddhist teaching:
“Return to the earth now if your mind is troubled and your heart
is uncertain, for it is by returning to the beginning that we can
clearly see the path.”
- A reminder: The Teleseminar
series Your New
Money Story™
starts Tuesday,
September 29, 2009 at 7:00 PM Eastern for five Tuesdays. It is
recorded for schedule conflicts.
- Your New Money Story™
Workbook
with 48 annotated exercises and work tools will illuminate your
money story and systematically guide you to write a new one.
- www.NewMoneyStory.com
|
Tweet This Post!
Share This Post on Facebook!
Share This Post on LinkedIn!
Stumble This Post!
Digg This Post!
