Tuesday, January 24, 2012

Melting Confidence

From Zero Hedge, on the 'confidence game':
But in this little seed of a criminal idea is a greater and more important truth: confidence is something that is shared by two or more people. It can grow or shrink, quickly or slowly, and has its roots in the social wiring most human beings share. And from an economic standpoint, confidence is an essential lubricant of any capitalist based system. You need confidence in the legal system, the market’s ability to set prices fairly, and in your fellow citizen to hold up their end of a bargain, just to name a few structural necessities.  And you need confidence that the underlying economy is sound, that you will continue to have a job, that interest rates will remain stable, that inflation is under control, and so forth, before you will spend freely.
Tyler addresses an important issue:
But the current picture of global consumer confidence from the Nielsen survey looks very much like one of those sketches of an iceberg in a children’s textbook.  A lot of the mass is below the surface, with only a tiny bit poking up out of the water. It pays to consider the possibility that global consumer confidence has gone through a semi-permanent shift to something below the waterline, invisible to producers of goods and markets alike. If true, this would mean that consumers will only slowly begin to reappear, essentially as the iceberg melts.
The confidence trend for Ireland - from Nielsen - shows how much ice is left to 'melt'. A lot:

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