However, sentiment is vital to understanding economic conditions and what the effect of current 'fundamentals' will be. To understand the dynamic in a primitiv

However, sentiment is vital to understanding economic conditions and what the effect of current 'fundamentals' will be. To understand the dynamic in a primitive economic sense, imagine that you can either farm and produce an excess of food to store away, or you can learn a specialized skill. In one scenario, you were too optimistic, and there will turn out to be no demand for your specialized skill. In another one, you can sell your excess food to other people in return for their skilled services. (Or maybe you're the one selling your services) And in yet another scenario, everyone has tried to save up wealth in the form of food, and extra food ends up being relatively worthless relative to other goods and services they need to buy for a high quality of life. When there is poor confidence about the future of the economy, people will tend to save rather than invest in the future. While, on an individual level it makes sense to store up safe assets, for an entire economy pessimism and poor sentiment can be self-fulfilling. Furthermore, those stores of wealth whether grain, currency or diamonds only maintain value as long as people are confident that they can be traded for other goods and services they need—something that becomes an increasing challenge when those goods and services simply aren't being produced in sufficient quantity. So, while you can't lie your way out of problematic fundamentals, underinvestment due to uncertainty is also an impediment that must be overcome, regardless of whether it is created by gloom about the prospects for the economy as a whole, or fear that markets will collapse, or fear of political upheaval where your potential gains will be confiscated.