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The Simple Dollar

Don't fall victim to economic scaremongering

The truth about any article you read or video you see from someone who is announcing economic doom is that they’re either trying to sell you something or they’re trying to make a profit for themselves, Hamm writes.

By Guest blogger / April 24, 2013

A specialist looks at a graph at his post as he works on the floor of the New York Stock Exchange. Fear is a great salesman, Hamm writes.

Richard Drew/AP/File

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A few times a week, I’ll hear from a reader who’s really worried about imminent economic collapse. They’ll usually send me a video or a link of some sort in which some economist is talking about how the stock market is about to lose almost all of its value or something similar.

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The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds – we just want simple ways to manage our finances and save a little money.

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One example of this I’ve seen three times in the last few days is this article from moneynews.com, in which economist Robert Wiedemer is proclaiming that the stock market is on the verge of a 90% loss in value. His evidence for this is that some large-scale investors appear to have sold some blue chip stocks in recent days.

Here’s the truth about any article you read or video you see from someone who is announcing such economic doom: they’re either trying to sell you something or they’re trying to make a profit for themselves.

For example, in that article, the only links a person can find are links either to videos of Wiedemer promoting his book Aftershock or direct links to an order page so you can buy that book for yourself. Furthermore, if you look at his Amazon page, you can see that he’s been selling books that talk about financial apocalypse for the last decade. 

If you dig into the background of the vast majority of articles that talk about extreme financial doom, you’ll almost always find someone trying to sell either some of their own content or trying to sell you some kind of investment.

Why do they do this?

It’s simple: fear is a great salesman. If they can convince you that something bad is coming and that they have the antidote for it, you’re very likely to buy that antidote. If the bad thing never happens, it’s not a big deal – they’ve still made the sale.

Are they lying?

That’s an interesting question, and it’s really hard to say from an outside perspective. I know people who adamantly believe that something terrible is about to happen any day now, but yet they get up each day to face a relatively normal day. The fact that every day goes by without apocalypse doesn’t squelch their fear.

There are many people who have believed deeply in social or religious movements that have predicted a coming apocalypse. One doesn’t have to read too much into history to find out about doomsday cults and financial panics of various kinds.

What’s happened in each of those cases? The doomsday didn’t come. People woke up the next day and continued their lives.

As I’ve said before, I think FDR said it best when he said “The only thing we have to fear is fear itself.

A financial meltdown may eventually happen. (I actually think it’s more unlikely now than ever because all of the global economies are so interlinked, but that’s beside the point – it might actually happen.) Even if it were to happen, buying someone’s book or internet video or investing in whatever investment the guy on the radio tells you to invest in won’t help you. What will help you, both today and in the event of a crisis, is having useful skills and having diversification in what investments you do have.

The post Selling Fear appeared first on The Simple Dollar.

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