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Monday, June 27, 2011

Is the Media Stifling the U.S. Recovery?

Americans are becoming more pessimistic about the future, despite not seeing their own economic situations worsen  
One practical economic problem is that perception can sometimes dictate reality. Even if the economy is moving along well, if consumers get spooked -- whether for a legitimate reason or not -- it can take a step back. Of course, the reverse is also true: that's what causes bubbles. Irrational optimism about some asset, like houses, causes too much economic activity, which leads to a painful correction. Because perception matters, the media plays an important role. If it pushes the public in the wrong direction, then their sentiment about the economy could be skewed with a counterproductive result.

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