The Sound of Money – Can Music Predict Economic Downfalls? | by Pavle Marinkovic | October 2023

Detecting economic trends in texts

A picture from Etienne Girardet

Our mood is affected by the events around us and especially ours cultural landscape. In other words, the movies we watch, the songs we listen to, and the stories we consume can shape how hopeful or pessimistic we feel about our financial future.

So what if this warm fuzzy feeling we have about our financial future is called consumer optimismcan it help us detect an economic downturn?

We have a precedent for that.

The University of Michigan has been conducting surveys of consumer optimism since the 1950s and found something fascinating.

When the national mood begins to change (either showing signs of optimism or pessimism), 9 months later we can expect an economic recession.

A “Consumer Sentiment Index” created from these surveys has successfully predicted the last seven recessions in the United States, with a single false alarm in the 1960s.

We could have early warning system for the future of our economy built into ours collective psyche!

Two mental habits come into play: rumination and our explanations for the bad things that happen.

Rumination it’s like a broken record that keeps playing negative thoughts in your head. The more you focus on problems, the more likely you are to get stuck in this negative feedback loop. It’s like a song that gets stuck in your head and affects your mood over and over again.

Then there it is how we explain bad events. Pessimists they tend to blame these events on causes they think are stable, global, and internal. They would say, “This is going to take forever, it’s going to screw everything up, and it’s my fault.” Target optimists have a different perspective on things. They explain bad events as unstable, specific and external. They said “it’s temporary, it’s just one thing and it’s not my fault”.

The way we say things to ourselves affects our expectations, mood and…

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