Has the economic recovery and resumption of consumer spending been nothing more than a nationwide self-fulfilling prophecy? Have we gotten so sick and tired of being sick and tired that, with only our beliefs and hopes, we’ve willed a comeback into existence?
Sound crazy? Happens all the time.
In 1896, the philosopher William James delivered a speech that would subsequently be known as The Will To Believe. Essentially, he defended the right of people to hypothesize about a condition or outcome for which there was little or no evidence. His defense (or encouragement) of this practice was based on his assertion that fervent belief in something may just be enough to bring it about in the real world.
Without devolving into a debate on reverse causality or self-fulfilling prophecies, can we at least admit that the widely-trumpeted recovery was at least in part brought about by the fact that people believed in it before it even started?
Consider the fact that for almost a year, companies have been able to refinance and sell equity in the public markets while economic conditions for the populace have generally remained the same or even worsened. Much of this raised money has been used to shore up balance sheets thus adding to the profitability of the issuing corporation. Other uses have included increased buybacks and acquisitions.
These activities pump life into an economy in some respects, specifically in terms of bolstering confidence in America’s C-Suites that every move they make will not, in fact, be ruinous. These raises, refis and purchases were possible only because enough capital was coaxed off the sidelines with the siren call of a nascent recovery – a recovery which may or may not have truly existed outside of our imaginations!
If even a portion of our recovery has been built on The Will To Believe, then there is some importance attached to this mass-psychology remaining buoyant and self-perpetuating.