The housing market is collapsing (or has already), gas prices are high and our income stabilizes or goes down. Banks fall out of the sky, governments bail them out. Every day, we are brainwashed by news and information about our bad economy, through television, internet, radio and newspapers. If that isn’t enough, it is the talk of the day at the office, in public transport, at birthday parties and in the supermarket line. I said to myself: It’s enough!

Like with nearly everything around us, economy is being shaped by the collective mind of all of those who are part of it. As employee, entrepreneur or consumer, you are part of it. Your supply is based on demand, and your demand is satisfied by supply. If demand rises, and supply doesn’t, prices go up, and the demand will drop again. If prices go up, you can buy less. As soon as people notice that, they want more salary. As soon as they get their few percent rise, they can buy again, and demand rises. To support the rising demand, supply has to increase, which means more production, more jobs and lower prices. And so on, and so on. Obviously, economics is a lot more complicated than that, but this is one of the basics.

Why does the economy goes bad? At some point, when things are going really well, a simple psycological impulse can turn the tide: “It’s going so well, but it can’t stay like this forever, so let’s save some money now that I can afford.” That means people spend less, and save more, and less spending leads to lower demand while supply has been high. So… prices drop, or stay high, but income usually doesn’t, so companies start to see their profits dropping. They start firing people, restructure their company, or otherwise, and economics start to panic. And so does the public. Recession starts.

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