When will you know the economy is getting better? A look at the psychology of the current financial storm.

Most individuals and media outlets have been looking at outside factors to give a signal as to which direction we are headed, in the financial and stock markets. When the fact of the matter is, that the information you need to look at, is right in front of you. You see the changes which have taken place since September, have created a loss of trust and confidence in these markets by most Americans. It started with a stock market drop and then a run on Banks, followed up by the greatest intervention by our government since the Great Depression. This will truly be seen by historians as transformational period in our society.

For the past 40-50 years the messages we get from television advertising and newspapers all were focused to tempt us to shop to buy these great things. There was never any focus or messaging about saving. We were encouraged to borrow to finance our shopping. We were told that 70% of our economy depended on the consumer, even though our tax system was based upon our income, not our consumption.

We embraced the psychology of greed along with the underlying fear that if we weren't in the game, we would lose out on our share of the pie. So we thought we could use "OPM" for everything. What is "OPM?" It stands for "Other People's Money." Many a seminar has been conducted these past 20 years by real estate experts with keynote speakers like Donald Trump and others hyping OPM as the way to become rich. The theory was to put as little, to no, cash down as possible, and borrow the remaining balance from the bank to buy property and then rent them out to have a positive cash flow and use "OPM" to own the property. This was the early hype that caught up so many speculators who wanted to get rich quick. The game worked until the banking industry was also caught up in the idea, overextended itself and ultimately created the Sub-prime mess.

You never saw advertising to encourage consumer saving. Just think about how we define ourselves, "Consumers". That should have been a clue if we paid attention to the use of our language. Occasionally, we would hear that we Americans had one of the lowest savings rates in the world. We did hear that Japan had the highest savings rate in the world and often also heard their economy was "stagnant", that was a "bad" thing and they needed to encourage spending.

We have been heading from the psychology of "abundance" these past 40 years to the psychology of "scarcity" now. Fear has gained the upper hand in our society today. We placed our faith in all banking and insurance institutions. We placed our faith in our government and we thought we had proper oversight and regulations to ensure there was no wrongdoing and we blindly followed as individuals, by trusting people we hardly knew, to manage our money for us. We took little to no responsibility for ourselves and thought everything would be fine as everybody was doing the same thing.

Now we just don't trust anyone anymore. We hear of people like Madoff who used Ponzi schemes to bilk Billions from charitable trusts and philanthropists, who thought they were going to make huge gains by investing with Madoff. When you think about this more deeply one comes to the question as to how did smart people make such stupid mistakes? There is an expression, "If it's too good to be true, it most likely isn't true." But these so called smart people never questioned the reality of the basis of the investments and allowed themselves to be swept up by the gains they saw were possible. Greed ruled the day.

So now fear grips the Nation. We are awaiting the unemployment rate numbers today which most likely will show a 7% unemployment and an acceleration in the unemployed. Many are waiting on the sidelines to catch the "bottom" of the stock market so they can get back in and make a killing on the gain, as a once in a generation opportunity. But what if it doesn't come back for a long time?

Trust has been broken and while some may be waiting for any sign the markets will be turning back up soon, the psychology of our Nation doesn't support this scenario happening any time soon. As I stated in the beginning of this post, "When the fact of the matter is that the information you need to look at, is right in front of you." And what is that information? It is how you are feeling! As long as fear grips you, it most likely is gripping others as well. And no change in the stock market is going to convince you to jump back in until you feel more secure and less afraid. The answer is this. You must start with living within your means all the time going forward. If something seems too good to be true, it probably is too good to be true. Buy only what you can pay for with cash or pay off within a very short period of time, like 30 days. Lend a helping hand to others still trying to recover from the loss of wealth and confidence in themselves and start being more trustworthy to others. It is up to all of us to restore confidence in our fellow citizens. We will need to go from exclusively a Consumption society to a more balanced society, where we consume what we can afford and save a portion of our income regularly. We stop living from paycheck to paycheck. We stop getting caught up in instant gratification. Some things are worth waiting for rather than buying something on impulse. We hopefully wouldn't shop for a spouse that way, as it is too important a decision. Would we?

So we will know things are turning around when we individually are feeling more secure. It takes one person at a time to get there, so you be responsible for getting yourself there first and watch others follow. It starts with you!