I can attest that writing has helped me recover from traumatic events, but sometimes I’m unable to write because I’m so caught up with the overwhelming emotions.

Why do you say the next immediate shock may occur in the healthcare market? How do you see this playing out?

Hmm, Katrina comes to mind when I read your suggestion that forward looking policies are needed to deal with crises. I think there’s a great deal of denial that happens before and during a crisis which contributes to the poor reaction. For example, the Internet stock bubble, anyone working in the industry at the time if they had a bit of insight at all could see the successes weren’t “real”.

http://delong.typepad.com/sdj/2008/08/income-and-pove.html provides some data.

Real median income taken since the last peak has not grown at all, it’s net shrunk. That’s the first time this has happened in my lifetime, and I’m 52.

In practical terms it means that people are doing what they are supposed to be doing to get ahead, and it isn’t working. They aren’t getting raises, or better jobs, they are treading water, or worse.

Yes, this condition will definitely lead to learned helplessness. But I don’t think its about trauma so much as the everyday story.

And if you are considering that GNP growth doesn’t follow the same curve, you’re missing the point. The rewards of growth have gone to the few, the very few. Which doesn’t help everybody else.

Second, since no one wants to be out on three strikes, theory and history (again see the link below) show consumers are inclined to quit after two negative shocks, which is now happening to their home equity following their stock equity losses during the dot.com bust.

I agree with Dan’s “learned helplessness” as a prevalent consumer condition since they make investment decisions on what Shiller calls “information cascades.” They can only safe-haven themselves by quitting when their trend following goes awry since they don’t know any better way to make complex financial decisions. This is not so irrational since it’s our pro-survival herd conditioning, as well as an operant macro-pricing signal.

Bob Bronson
Bronson Capital Markets Research
http://www.financialsense.com/editorials/bronson/main.html

If one expects even a very positive future, yet one’s certainty of that expectation being fulfilled is very low, then overall, one may be much less confident.

I think that many “consumers” feel jolted by what they have experienced as a “blind-side” hit. They did not see the mortgage market collapsing so rapidly or the cost of transportation and food rising so rapidly. Not only have many experienced significant reversal of fortune, but they have also been shaken by a realization that they were SO wrong in their positive expectation.

So not only has the plunge been sudden and severe but I believe that the fact that it was so unexpected has contributed to the greater loss of confidence than we have experienced in past downturns.

heir faith in their ability to judge their own future well-being greatly decreased. This is based on so many having turned out to have been “wrong” about their expectations in the recent past. A recent failure to predict the future accurately will discourage one from confidently stating a belief in a positive future today.

As for the various failures, complete agreement that meaningful regulation is the key.

As for “the yoked dog,” exposing my political leanings, I like to think it will be roused energetically into a new state of excitement and optimism (i.e., hope!) by dramatic and historic new leadership (and not an Alaskan soccer mom).

Part of the persuasiveness comes from your total immersion in the subject. An immersion that is evident by the fact that your article reveals that you to are a “yoked dog.” This is a great metaphor for our current socio-political system. The political leaders are the “control dog” and the rest of us are obviously the “yoked dog” whimpering in the corner of our cage…”please give us more regulation.” The only difference is that in our system the “control dog” also creates some of the shocks.
The human mind is wonderful and mysterious. After centuries of experience with the force and coercion of political systems and their disastrous results, we ask for more. Now if only your study can show us the way to throw off the yoke

Unfortunately, we can’t get “forward-looking policies that stave off potential problems in markets that have not (yet) failed” if the government continues to have such a poor fiscal policy and the Fed continues to print money out of thin air.

I also agree with Barry’s point about the lack of knowledge about past crises like the S&L crash in the 80′s (I was born in 1981 but I study financial history).

Lastly, Robert is so right about the people in govt., they’re still people just like us. I too watch the news but I don’t let it affect my life.

While I have opinions, I don’t let poor journalism and fear-mongering ruin my day, week, month or year.