Picture
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.   

 


Comments


Your comment will be posted after it is approved.


Leave a Reply