Apart from the understandable anxiety over lifestyle change (from limiting yourself to window shopping to foreclosing your home), I keep getting asked why we're seeing extreme reactions and herding mentality* regarding the financial crises. Real losses and risks aside, how much does psychology have to do with it?
The Seven Psychological Reasons Why We Are Freaking Out
1. Illusion of control makes everything tolerable. Problem is, we are plum out of illusions: Psychological literature shows that we can tolerate terrible situations if we have some semblance of a timetable. Are we in the eye of the storm? Is there light at the end of the tunnel? In this situation, none of the usually soothing experts are providing us with anything to hold on to; in fact some of the smartest are admitting that the situation is mind-boggling even to them.
2. Big monsters are manageable; hoards of "regenerating" ones are not: A huge ape on the Empire State Building? Okay. An asteroid coming straight for earth? Which side? Undetermined numbers of birds or aliens, rapidly spreading viruses, or wildly gyrating stock market make for psychological terror, a nightmare without a morning, an endless season of "The Fugitive." You get the picture. Note the soaring sales of safes at Home Depot to see how desperate we've become.
3. Herd mentality - should I stay or should I go now?** :It is a natural human reaction to stop to get a gander if we see a group gathering. It could be kids break-dancing, someone getting CPR, or Bruce Willis filming "Die Hard 9." We don't care; we want to see too. All we notice is that someone has slowed down to look, so let the rubbernecking begin. In the same vein, people fleeing will automatically cause others to turn around and follow them, even without knowing why. Only if you are a fireman, a superhero, or a psychotic looter, do you run towards the danger. Whether it's a blowout sale, a giant raptor, or a chance to be an extra next to Elle McPherson, the person jogging next to you might get "it" instead of you if you don't quicken the pace, so giddayup. (Worse, if you are the one in the back, you might get eaten alive or crushed). It's a survival response that served us well at other times. We just hope that whoever started the lemming-like stampede wasn't dyslexic.
4. The news intensifies fear: Words and images that portray devastation encourage a panic reaction regardless of how much or how little we are personally affected. Sure, you'll dial up your friends' friends with Ivy League financial degrees, but you can't help but automatically panic when you are surrounded by a media announcing a veritable Armageddon. The psychological effect of using graphic war/natural disaster-like words promotes terror. A few examples: "crash," "upheaval," "financial carnage," "credit tsunami," and emergency response to stop the "financial bleeding" (and add to this pundits telling you "not to panic," or "stay calm," and you know for sure you are going to hell in a handbasket).
5. Angry at Dad. Unresolved financial oedipal issues: Government, banks, credit cards - a cynic might say these are the adult "love objects" of your average adult American (the original childhood ones being our parents). They have to do with safety and trust. Long story short? "They" let us down. Bring in the rage. Alternate this with guilt because, though they didn't regulate, the other guilty party is you--the overspending, overextended-now-negative-equity home owner.
6. Nowhere to run, no where to hide: You can't go under the bed, put on your earphones, or drink yourself numb indefinitely...It's global, baby. You have to be awake - and hypervigilant in case anything twitches in the financial field. Moving to Italy, India, then Indonesia won't help. That big World Equity Indices page is bathed in red. It's got negative signs all over it.
7. Money makes people crazy. Thoughts about money make people crazy. Therefore the financial crisis is making people crazy: Yes, if you foresee that you can't pay your bills in the near future, that will make you panic. However, the panic can be exacerbated depending on what money means to you - esteem, happiness, security, and comfort. What you can do: try to differentiate between realistic money problems you'll have to face and the emotional connection you have to cash/credit. You probably have to look at what money means to your parents, and what money meant to you growing up to fully understand your reaction.
*This term has often been used along with "group intelligence," "mob behavior," or "mob mentality."
*Rather than the Clash's song, you might consider humming The Kinks' Low Budget.
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Write more for us Belisa!
I'd just add one small thing: our reaction to Crime. Specifical
We don't like to look at crime. If there is anything that we DON'T want to look at, it is the presence of crime. We stubbornly refuse to "see" that there are people out there who will intentiona
We don't want to consider "high crime." We don't want to contemplat
When we ARE forced to regard that high crime has, indeed, happened, then we look for just one scapegoat. We especially do not want to consider high crime to be "a regenerati
In reality, the problems in the U.S. Economy root back at overconsum
This could take a while to unwind.
How are alcohol sales these days?
Like ronpublic, I would add another point (also w/o a catchy term): "I didn't cause it, so why am I on the hook?" True, a lot of people that are neither wallstreet bankers nor upside down on mortgage they couldn't affor in the first place are losing jobs and watching wealth dissapate. Also true that no matter what President Elect's tax scheme will be, every one of us will foot the bill for the bail out just as we did with the savings and loan debacle. In the end, though, no one questioned the run-up in real estate and stock prices - and we all profited from it either directly or indirectly
8) I don't have a catchy term for this, but try "What goes up NEVER comes down syndrome". For the past 8 years, Americans have really come to believe that things would never come crashing back down. We saw the dotcom crash at the beginning of the millenium, but for some reason, it didn't quite resonate. We hadn't seen real estate come down since the early nineties. We started to believe that we were entitled to free growth and prosperity
Well, Duh.
Greed and profit are immune to politics.