Will Positive Thinking Save the Economy?

By Tracy R Twyman

So Barack Obama has apparently been reading a book called Animal Spirits by Robert Shiller, about how human psychology affects economics. And according to a propaganda piece from the Financial Times, this book has inspired Obama to approach the economic issues wholly psychologically. Just as The Secret teaches that you can create personal wealth and success just by thinking positively, Obama is going to try to do the same thing on a macroeconomic scale.

Of course, as I wrote in my book Solomon’s Treasure, the value of money, and thus the health of an economy, does indeed rest solely on people’s belief in it. This is true even more so now that our money is pure fiat currency, with no precious metal backing it, and no direct relationship to the value of gold. I compared the modern fiat monetary system with the process of alchemy. Turning lead into gold is like turning paper into money, and the Universal Agent or Philosopher’s Stone that makes that transformation possible is human belief. It works both in the economy as a whole, and in one’s personal finances as well, as The Secret purports.

But anyone who has ever tried to utilize The Secret in their personal life will tell you that it’s not so simple. Positive thinking helps power the actions you take to solve your economic problems, and improves your likelihood of success. But just sitting around meditating on wealth does not manifest it out of thin air, and it is suicidal to ignore major economic problems in your life, hoping that they will go away if you pretend they aren’t there.

The same holds true for our economy as a whole. The President, Bernake, and Geithner are trying to reinflate the bubble that this fake economy has been riding on for decades, with the belief that, if we can just get the consumer confidence index up, people will buy more stuff, and everything can get going again. People will start buying cars and homes and going on vacation and everything else, if he can just inspire them to feel good about the economy. So Obama, Bernake and Geither have now decided to just “declare”, by fiat, that the economic recovery has begun. As the FT article states:

Since mid-March President Barack Obama and his team have mounted a sophisticated effort to brighten those “ideas and feelings”, reassuring the nation with “glimmers of hope across the economy” and the assertion that “we’re starting to see progress”.

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