“ANIMAL SPIRITS”(COMMENT).

“ANIMAL SPIRITS” (COMMENT). Annalisa and Nick have each expressed the view in comments here that markets are emotionally driven so that media comments can feed on themselves. Talk about how bad the economy is going to be has the same kind of impact that euphoric comments had in boom times. Nick then kindly asked me for my opinion. I agree with Annalisa and Lee and Nick. Futher, you can say that you agree with Keynes (or, if you wish, that Keynes agrees with you). I have the following quote from Keynes to provide support: “Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over many days to come, can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities.” By coincidence, Robert Skidelsky, the biographer of Keynes, has an article today which emphasizes the central role that people’s uncertainty about the future plays in Keynesian economics. Beliefs about the future based “so flimsy a foundation” can lead to “sudden and violent changes” when there is new information. Skidelsky also points out that one reason that people hold money is “a way of postponing transactions. The ‘desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future….'”