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You don’t need the alphabet soup of economic indicators to figure out how the economy is doing.  All you need is to observe the Seesaw at your nearest playground.  A healthy economy is when the side of consumer spending is up, and the consumer savings side is down.  A declining economy is when spending is down and savings up.  Currently, the economic teeter totter is at even keel.  Consumer spending stands at about $11.9 trillion and consumer savings in domestic banks and credit unions amounts to about $11.1 trillion.  Prior to the Great Recession, in mid 2007, the teeter totter was in full swing, with consumer spending all the way up at $9.7 trillion, and consumer savings all the way down at $6.7 trillion.  

An even keel economic teeter totter means we are in a transitional period of recovery.  We will be fully recovered when the spending side of the seesaw will go up and the savings side will go down.  On the other hand, if the spending side will start going down, thus lifting the savings side, we are on the verge of a recession.  The main driver of the economic seesaw is the level of consumer financial anxiety measured by the Money Anxiety Index, which stands at 68.2 In October.  When the Money Anxiety Index goes up, consumers spend less and save more, and vice versa.
 
The Money Anxiety Index measures consumers’ level of financial worry and stress.  Historically, the Money Anxiety Index fluctuated from a high of 135.3 during the recession of the early 1980s, to a low of 38.7 in the mid 1960s.  The money anxiety Index was developed by Dr. Dan Geller, who is an expert in behavioral finance, and the author of the book Money Anxiety.  The index is highly predictive.  It signaled the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.   

 
 
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The U.S. economy is suffering from a “long-term economic anxiety” according to New York Governor Andrew Cuomo in an interview with Charlie Rose aired on October 13, 2014.  We are experiencing a “slow, drip, drip, drip” recovery as a result of a “confidence crisis in the economy” stated Governor Cuomo.  The Governor’s observations are consistent with the findings of the Money Anxiety Index, which shows that consumers are slow in restoring their financial confidence in the economy.

Although we are now more than five years past the end of the last recession, the Money Anxiety Index is still 10.6 index points higher than its 58.6 level prior to the Great Recession.  The prolonged period of higher level of money anxiety adversely impacted consumer spending and the economy.  In the last five years, consumers increased their bank savings ratio to GDP to 57 percent compared to a range of 39 to 47 percent in the 20 years prior to the Great recession.  The increase in the ratio of bank savings to GDP amounts to about $2 trillion that should have been circulating and stimulating the economy under pre-recession level of money anxiety.

The Money Anxiety Index measures consumers’ level of financial worry and stress.  Historically, the Money Anxiety Index fluctuated from a high of 135.3 during the recession of the early 1980s, to a low of 38.7 in the mid 1960s.  The Money Anxiety Index Is highly predictive.  It signaled the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.   The money anxiety Index was developed by Dr. Dan Geller, who is an expert in behavioral finance, and the author of the book Money Anxiety.  

 
 
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The equity market rabbit sprinted forward 83.9% while the turtle economy moved at a slower pace of 20.8% growth since the end of the Great Recession.

The equity market sprinted forward too fast compared to the slow-moving and steady economy.  In the 5 years since the end of the Great recession, the Dow Jones Industrial Average (DJIA) increased by 83.9%, from 9,221 in Q2 of 2009 to 16,954 in Q2 2014.  At the same time, the Gross Domestic Product (GDP) increased by 20.8%, from $14.3 trillion to $17.3 trillion over the same time period.

The current volatility and slow down in the equity market is the result of sprint syndrome.  After running too fast for too long, compared to the economy, the equity rabbit is catching its breath, which will give the turtle economy a chance to catch up a bit.  

The vital signs of the economy are healthy.  In September, employers added 248,000 non-farm jobs bringing the three-month average to 224,000.  Energy prices keep on dropping, which is likely to free up more money for the holiday-season shopping. Additionally, the October preliminary Money Anxiety Index at 69.2 is below the 50-year average of 70.7.  This is the first time in the past 6 years that the Money Anxiety Index dipped below the 70.7 level signaling that consumers are responding to the gradual improvement in the economy.  

The Money Anxiety Index measures consumers’ level of financial worry and stress.  Historically, the Money Anxiety Index fluctuated from a high of 135.3 during the recession of the early 1980s, to a low of 38.7 in the mid 1960s.  The Money Anxiety Index Is highly predictive.  It signaled the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.   The money anxiety Index was developed by Dr. Dan Geller, who is an expert in behavioral finance, and the author of the book Money Anxiety.  

 
 
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Listen to Dr. Dan Geller discuss the impact of financial anxiety on the economy; how excess bank savings is slowing down the economic recovery; the good and bad news about unemployment; the problem with student loans and when to expect more robust economic recovery.

Click here to listen.

 
 
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October preliminary Money Anxiety Index at 69.2, and the September final at 69.3, are both below the 50-year average of the Money Anxiety Index at 70.7. This is the first time in the past 6 years that the Money Anxiety Index dipped below the 70.7 level.  In the last 50 years, the Money Anxiety Index fluctuated from a high of 135.3 during the recession of the early 1980s, to a low of 38.7 in the mid 1960s.  On the eve of the Great Recession, the Money Anxiety Index stood at 58.6.

The recent decline in the level of money anxiety among consumers is attributed mainly to the encouraging employment news.  In September, employers added 248,000 non-farm jobs bringing the three-month average to 224,000.  The improvement in employment also means a likely increase in consumption as a result of widening payroll.  The timing of the projected increase in consumption in the 4th quarter is especially important to retailers that are gearing up for a stronger holiday season sales.

The Money Anxiety Index measures consumers’ level of financial worry and stress.  Historically, the Money Anxiety Index fluctuated from a high of 135.3 during the recession of the early 1980s, to a low of 38.7 in the mid 1960s.  The Money Anxiety Index Is highly predictive.  It signaled the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.   The money anxiety Index was developed by Dr. Dan Geller, who is an expert in behavioral finance, and the author of the book Money Anxiety.