Let’s think our way out of this crisis

Given how much fear drives markets, it seems like a major leap of faith could get us jump started out of this mess. Or is that too simplistic… 

I almost passed over this WSJ piece that at first glance looks like more number crunching and financial reporting that glaze the eyes, but then caught this:

“Right now, more than a crisis in mortgages or in housing, we have a crisis in confidence. That is biggest problem in trying to analyze the current market,” said James Stack, president of market research firm InvesTech Research in Whitefish, Mont. “You cannot analyze psychology.”

Let’s try.

Says here…

“There were a lot of people that were banking on Washington to get us out of this. I don’t know if there is anything Washington can do,” [Todd] Salamone said.

That tells us a lot of people ought not expect government to solve all of our problems.

In other words, don’t rely on the “Abracadabra” effect.

As recent history teaches, economic crises arouse an emotional panic that tempts us to believe that centrally planning the economy is the medicine for economic recovery and the best safeguard against future volatility. To make matters worse, spin doctors lead anxiety-laden people to believe the notion that without government oversight we are doomed. This history displays a major moral temptation of economic crises: a prideful belief in our capacity to “save” the economy by controlling the decisions of the millions of human beings who participate in it every day.

As Dr. Bradley reminds…

We have forgotten what Harvard economist and past president of the American Economic Association, Frank Taussig, told us in his 1911 book, Principles of Economics: “We must accept the consumer as the final judge.”

And consumers seeking goods and services they need fuels the engine that drives the economy. We can do this. As soon as we can summon up some confidence…