What is Consumer Confidence?

By Dr Boyce Watkins, appearing as a guest here on Cure Money Madness.

If you listen carefully to the words of Treasury Secretary Henry “Hank” Paulson and Ben “Big Ben” Bernanke (chairman of the Federal Reserve) you might notice a trend in their language. The word “confidence” is used a lot when they speak. Many of their monetary proposals are not necessarily valuable for their financial power, but also for their psychological power.

Some of you may wonder what confidence has to do with anything. After all, if you’re broke, confidence doesn’t exactly put money in your pocket. If you’re 100 pounds overweight, confidence won’t help you win the Olympic 100 meter dash. When you are flying on a crashing plane, confidence doesn’t keep the plane from slamming into the ground. But confidence is important to an economy, and one of the most significant drivers of economic growth. In fact, over confidence has driven US economic growth for the past 10 years. Here are some reasons that confidence matters in the minds of Hank and Big Ben:

1) Confident consumers spend money

If you think you might lose your job next year, are you going to max out your credit cards? I certainly hope not. If you are worried about being able to make ends meet, are you going to buy that big screen TV? Not unless you want your wife to leave you. So, even if it doesn’t hold any truth, the mere forecast of a weak economy is enough to make many Americans hold off on consumer spending, one of the great driving forces of the American financial system.

2) Confident companies invest money and hire workers

Investments involve risk. Your hunch may work out, and it may not. If you don’t believe the economy is getting better, you are not going to consider taking that risk. No one plans to go to the beach if the weather man says that it’s going to rain. When economic rain is in the forecast, companies pull out their umbrellas and hold off on new projects. This reduces the number of jobs in the economy, because nearly every job created in America is the result of someone making an investment.

3) Confident Americans do not take their money out of banks

In case you didn’t know, your bank does not have your money. Your money is part of a large base of financial capital that is loaned out to individuals and consumers seeking to get a good return on their investment. So, without investing, your bank would have no interest in paying you any interest at all. So if, say, 30% of all customers of the same bank decide to get their money out at the same time, the bank would have serious financial problems. It is a lack of confidence that could cause customers to “run” on their bank and take out their money.

4) Confident investors keep their money in the stock market

The stock market is a place where fortunes are made and lost. Some part of that fortune is psychological, given that no asset can have a value which exceeds that which someone is willing to pay for it. When investors lose confidence, they take their money out of the stock market, and reductions in demand for stocks lead to massive paper losses in the market. Additionally, most Americans are “momentum traders”, meaning that when the market goes up, they tend to buy more, and when it goes down, they tend to sell. History shows that it is actually the opposite approach that tends to work best.

5) Confident banks make loans

Banks have to keep a certain portion of their funds on hand at all times to meet federal requirements. If they are fearful that their customers might come and demand their cash, they hold onto their capital to ensure that it is available. If they are afraid that their borrowing customers will not be able to repay loans due to a weak economy, they also hold back on issuing new loans. The truth is that when economic forecasts are grim, conservative bankers become even more fearful than the rest of us.

The bottom line of this article is that confidence matters. So, the next time you hear Ben Bernanke give a speech, you can be confident that he is going to use language that makes you feel more secure. Whether you choose to believe those words is up to you.

Dr. Boyce Watkins is a Finance Professor at Syracuse University. He does regular commentary in national media, including CNN, BET, ESPN and CBS.

For more information, please visit his blog :  www.boycewatkins.com.

A few blogs on consumer confidence I thought you would also enjoy :

Q :  Can you please provide specific and concrete steps for releasing the  limiting beliefs around money I currently have and replacing them with new and expansive beliefs.

A : The first thing is to become aware of your feelings during every financial transaction you make:  investing, saving, spending, talking about what dinner cost, giving your kids their allowance, responding to a charitable request.  What is your belief about money in every situation?

Now ask yourself:  what would your life be like without that limiting belief?  The answer to that question will be the seed for the creation ofa new curative money message.

Some blogs I found about Money Beliefs :

I am drawn to make others take a step back and think outside the box – especially with money.

Have you heard the latest money joke?

No?

That’s probably because there isn’t one. ( Ok, I did find the jokes about money listed at the end of this blog  – but in general, it’s not a huge humor topic! )

Money is serious. Say the word, and people’s posture improves. It’s as if they were hearing a parent’s voice telling them to mind their manners and tuck in their shirt. I’ve seen playful looks freeze into masks of solemnity when the subject of money comes up, with worry lines around the mouth and anxiety wrinkles around the eyes. Money is stressful; as my father used to say, it’s “no laughing matter.”

Well, it should be. All this gravitas around money is actually an obstacle to money success. It keeps us from thinking clearly about money, from looking at it realistically and making wise decisions about it. We feel weighed down by the ponderous complexity we assume surrounds the issue of money. The bulk of all that information hurled at us by the media displaces our common sense. And the freight of a culture that equates financial worth with self-worth produces the kind of stress that makes us react to events when we ought to be responding with objectivity and common sense.

That’s why one of the things I always try to do in my workshops is to get folks to lighten up about money. So when I found myself staring at a money boa in a San Francisco novelty store one day, I bought it instantly.

What’s a money boa? It’s about a hundred folded up hundred-dollar bills—fake ones, of course—strung together like a scarf. The fakes are pretty authentic-looking, so at a glance, I really do appear to be “wearing” $10,000 around my neck.

I first wore the money boa at a curing money madness workshop I did in New York for 500 people. I knew, because it’s always the case, that a lot of the workshop participants were feeling stressed, hopeless, and frustrated about their money situation. Yet even as I approached the podium, boa flapping as I moved, I could hear a few embarrassed titters. Then some chuckles. And by the time I was center stage, the place was downright mirthful. The point was made. A weight had been lifted, and in this more buoyant environment, it was a lot easier to help participants cure their money madness.

A few days after the workshop, I had to fly east on business. To my dismay, I found that I couldn’t really pack the boa; the hundred-dollar bills could not be refolded. So I simply wore the boa, and the reactions this provoked were pretty astonishing.

As I made my way through San Francisco Airport to board my plane, kids ran up to touch the boa and to ask for money. Adults smiled at me and shouted out questions; I just responded that I wanted all of us to lighten up about money, and every one of them agreed and thanked me for the reminder. A security guard asked if the money were real, and once I boarded, my fellow passengers were quick to start chatting; all by itself, the money boa broke the ice.

Then I arrived in New York. Cold, distant, unfriendly New York, as legend has it, money capital of the world. In fact, despite the fact that it was May, New York was chilly and windy—at least, until I walked its streets wearing my boa.

People laughed. They waved. Cops directing traffic at the world’s busiest intersections blew their whistles. New Yorkers wisecracked one-liners at me. Yes, there was a man living on the street in Times Square who tried, somewhat aggressively, to rip some “money” off the boa, and there were a number of people who simply didn’t notice at all, but for the most part, the reaction was: that’s funny.

All of this says to me that there is an untapped reservoir of lightness about money that has been pushed down inside us by a lifetime of stressful conditioning. The conditioning affects different people in different ways: some are obsessed by money, some are determinedly oblivious to it, some find it a distasteful necessity. But it seems to me that if we can access that reservoir of lightness, going back to a time before the conditioning planted distorted childhood money messages in us, we might clear the way for curing our money madness and making better, more successful money decisions.

How to do that? Remember back when you were seven or eight years old and were given a five-dollar bill to spend as you liked? If you could recapture the sense of wonder and excitement those five bucks incited in you, you’d be halfway there. So here are three suggestions for putting the fun back in money:

1. Save in a shoebox. Literally. Identify something you want to save for, find a shoebox (or piggy bank, or similar), and start putting in loose change on a regular basis. Even better, save with a friend: maybe plan a vacation together, and determine that every time you get together, you will each put ten bucks into the vacation kitty. Watch your savings grow, just as you would if you were seven or eight—with a sense of wonder and delight—and have fun spending it.

2. Consider the path your money travels next time you pay for something. The dollar that bought you today’s newspaper, for example: it helps pay the bills of the newsstand vendor, the salary of the driver whose truck delivered the papers, the reporters and photographers who covered the stories you’re reading, the editors, production team, and so on. Money works; it has a function. But it travels light; money is not leaden.

3. Come up with three reasons why you are overpaid for your work. Maybe it’s the lunchtime use of the office computer to do your shopping. Or the skybox at the stadium you get invited to regularly. Or the secret fact that you would do this work for nothing. Think about it, come up with your three, and write them down. No, this is not a joke.

Jere are the jokes about money i could actually find!

When my wife and I started dating, we shared our sex histories with one another on the first date. But we did not have a serious money conversation until we’d been together for almost three years-and then only when a specific concern made it absolutely necessary. The subject of money between us was taboo.

Bernhard Lietaer, author of On Human Wealth: The Future of Money, speaks to the money taboo: “If I asked you how much money you have and where it came from, it’s actually more indiscreet today than asking with whom you slept last night.” Further, he states, “Most people have about as much perspective on money as fish have on water.” Fish are born in water, live, and die in water. They don’t step out of it to look at what water is. Likewise, our beliefs about money are unexamined-until, that is, we look past the money taboo.

As my teaching partner, Anne Watts, points out:

Beliefs about money fill all our heads. We all have them. They can be fed by major experiences or by simple messages we’ve picked up along the way. These translate into limiting beliefs like: money is the root of all evil; don’t trust people with money; money equals safety; it takes money to make money. The list goes on and on. These beliefs remain unexamined until we are startled awake, often by our own discomfort, and we begin to see just what it is we are living in-those subconscious thought streams about money we swim around in all day.

It doesn’t take an extreme circumstance to be startled awake. A little bit of discomfort can go a long way, as it did the day my wife and I first saw the house that we eventually purchased together. Glowing with excitement when she saw the backyard, Janine said, “Plenty of space to put in a garden.” I could tell by her tone and the look in her eye that she was imagining a full-blown permaculture installation, complete with pond and multiple tiers. All I could see was a pile of invoices.

I looked away, secretly hoping the garden idea would decompose. Mustn’t let on that we can afford it, went my thinking, she might insist on having it.

At that stage in our relationship, all of our financial information was my secret. In my family of origin, the primary messages about money included: “Don’t talk about it,” and, “Money is the only thing that will give you security.” In the absence of clear and conscious money talk, those undercurrents translated into thought patterns that held my own sense of prosperity in check. In essence, I believed that my job as the head of the household was to watch the purse strings and silently monitor my wife’s spending to keep us secure.

Something about the juxtaposition of Janine’s obvious pleasure at the idea of a garden and my obvious distress in the moment triggered a new awareness. Janine delighted at the thought of working the soil, picking out and planting seeds, watching those little cotyledons send the plant’s first two tender green leaves up through the earth and then grow into broccoli, asparagus, collard greens, and beets. She wanted the pleasure of plucking our dinner salad straight out of the yard. She was giggling with delight at the thought, while I, on the other hand, looked and felt like quite the curmudgeon. What was that all about?

I began to examine my resistance and looked at what was behind the “mustn’t let on” thought stream. Was it true that one shouldn’t spend money on a garden? I felt into the feelings, and asked myself: is this a new feeling, or a familiar old feeling?

I knew from the work I had done with Anne and the Human Awareness Institute-an organization dedicated to eradicating ignorance and fear in the areas of love, intimacy and sexuality-as well as earlier training in meditation, that I could dive beneath the surface of my thoughts and gain valuable perspective if I paused for a few moments. This self-reflection and inquiry process is one of the skill sets Anne and I teach in our workshop: Financial Intimacy and Freedom for Couples.

I knew from experience that shifting my beliefs could radically alter my experience, and I wanted a radical new me to step in for the curmudgeon that particular afternoon. But I also knew that simply denying my feelings or sweeping them under the sod would not do. So I took a slow stroll around the side of the house and stayed with the feelings. What does this feeling want me to know? I scanned my body, relaxed my mind and allowed my awareness to do a full sweep. Almost immediately, a memory of my father came into my mind’s eye and I watched him flinch when the eight-year old me asked, “How much money do you make, Dad?” He flashed me a look of disdain that nipped that conversation in the bud-for good.

Once I connected the dots between these early experiences that told me to stay silent about finances and my difficult feelings, I was able to take a deep breath and relax. Immediately, a sense of spaciousness filled my mind. All of a sudden, I was much less attached to my original idea about the garden. From this place of openness I began to look into my present-moment thoughts and feelings. A garden can increase the value of one’s home, came the first thought. That was predictable; my mind is ever watchful when it comes to the bottom line. Then, following on that, I realized that a garden could be quite a lovely sanctuary, a place of beauty, a place to enjoy the textures and smells of seasonal change, a source of high-quality fruits and vegetables for our family.

My thinking expanded further as I imagined throwing a party in our backyard, hosting community events, having a place to explore the natural world with my kids, and being able to appreciate the ordinary miracles of peach and almond blossoms. It would be lovely to meditate out in the garden, I thought. Walking back toward my wife, I said, “Actually, Janine, we can afford a garden.” The garden has become all of the above and much, much more; it is the best investment I have ever made.

Whenever I tell this story, Anne likes to mention another important aspect of partnership and intimacy:

This experience with the garden highlights the way in which two people’s differing values can either create friction between them, or, if handled consciously, open new possibilities for each while solidifying the couple’s bond. Spencer grew up in the city where there were no gardens; they were simply not important to him. It had not occurred to him that a garden could add to the quality of his life. In relationships, distinct individual values such as gardening can become shared values for the couple, and thus expand each person’s horizons.

In the workshop Anne and I teach together, we start by posing this question: What is the best way to deepen intimacy with your partner?

Most people, especially Californians, will answer: Talk about ecstatic lovemaking!

No, we assert. Talk about money.

Some say: Insane! Talk about money to increase intimacy?

Of course, we realize that what we are suggesting is counter-intuitive. After all, money is the number one identified cause of divorce in the U.S. And yet, from my experience as both a workshop leader and financial advisor, money-talk is the greatest aphrodisiac of all. Think about it. If you can be open, honest, and fully present with your lover while talking about such a taboo topic, what might you discover?