That was a question raised today by Christopher McNally, a political economist at the East-West Center in Hawaii, where I'm currently doing a fellowship on the fallout of the global financial crisis (yes, this blog is proof to my bosses that I'm actually working and not drinking Mai-Tais on the beach). McNally made the point that markets don't just act independently—they do in part what we think they will do. This idea, also known as "reflexivity," comes from uber-investor George Soros, who uses it to explain bubbles (which are to some extent a function of our belief in rising markets) and market crashes (in which herd mentality inevitably prevails).

 

I asked McNally if he thought reflexivity might work in the real economy—i.e., if we assume that Americans are more positive than, say, Europeans (which McNally, a Swiss native, would agree with) then is it fair to assume that American's positive natures will somehow pull them out of crisis first? McNally believes it's likely—and notes that there's a lot more talk about "green shoots" in the economy here in the US than in Europe or many other parts of the world.

 

Of course, all that positive thinking (and subsequent spending on the part of businesses and consumers) might bring us out of recession faster, but it could also fuel the next debt bubble. But perhaps volatility goes hand in hand with the "can-do" attitude.