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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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