If a prediction of a recession causes the market to crash, can it be said that the prediction itself is part of the cause of the recession? Like a self-fulfilling prophecy?
In: Economics
The market is made out of grownups telling imaginary stories about money. As long as the stories say there is going to be more money, they make more money. But sometimes, the money itself is imaginary. That’s how a company like Uber can get millions of dollars but never turn a profit. Everyone likes the pretend story that it’s making money so they act like it’s true.
But eventually someone opens their wallet and finds out it’s full of imaginary money instead of real money. They don’t like what might happen if other people find out. So they try to find ways to convert that imaginary money back to real money. But every trade they make just leaves them with more imaginary money. Soon, everyone notices how flustered everyone else looks and the spell’s broken: nobody believes the story anymore.
So yes, in some ways calling out the signs of a recession cause the recession. It makes people nervously go over how much of their money is imaginary and, if they don’t like the ratio, they try to dupe other people into giving them real money for imaginary money. That just makes other people more likely to notice how much money is imaginary.
Grownups are smart. Especially grownups with a lot of money! That’s why they don’t starve in a recession. You should give them all of your money and trust them with it, so they might remember and help you when it happens.
Latest Answers