Trump blames the media for talking down the US economy, but can a bit of pessimism really spark a recession?

Remember the global financial crisis? That happened even though – and arguably because – hardly any economists, let alone journalists, warned of its coming

Sentiment may affect stock markets more than consumer behaviour (AP)

Last week Donald Trump, via his preferred communication channel of Twitter, renewed his attacks on the media for what he called their attempts to create a US recession. On the other side of the Atlantic, whenever Remainers point out the actual or probable economic damage from leaving the EU, Brexit supporters accuse them of trying to “talk down” the economy.

Is it true that talking about a possible recession can become a self-fulfilling prophecy? Can a healthy dose of optimism alter economic reality?

As far back as in the 1930s, John Maynard Keynes wrote about a link between people’s confidence and their financial decision making. He argued that decisions to open a mine or build a factory cannot be based on what is realistically very limited knowledge of likely long-term returns. Instead, they “can only be taken as a result of animal spirits” or, in other words, optimism.