Denial, anger, bargaining, depression, acceptance & the financial crisis
Over the last one -and-a-quarter years, since the run on Northern Rock, I’ve been making a concerted effort to understand the credit crunch, the financial crisis and the recession. The nature of understanding big, bad events is that we are so busy trying to understand them that we have little time to reflect.
Typically, we follow a five stage process.
- First, we deny the crisis either saying “I’m OK – it doesn’t affect me” or conversely ranting “This can’t be happening.”
- Then we move on to anger, when we are quite clear we are not to blame and that someone else such as politicians and bankers should be punished for getting us in to our mess.
- When we are a bit further along, we work out what will stay the same in our lives and what we can can cut out.
- The next stage is to resign ourselves to our mess dragging on for twenty years or so, and we are actually secretly relieved because if the mess is that big, there is nothing you and I, ordinary Joe citizen, can do about it.
- And eventually we begin to dig beneath the surface of the crisis and, in this case, set about upgrading our financial know-how and skills.
Where are you? And where are the people around you?
My job as a psychologist
I have a page where I store good, accessible explanations of how we got into the financial crisis and I will expand it to include the financial know-how that you and I should have.
Being a psychologist though, I think it is my job to bring to your attention key psychological ideas that equip you for understanding the recession and the ways we react to it.
- The first psychological idea in this post is described in the at the beginning. We often respond to bad news in five rough stages of denial, anger, bargaining, depression, and acceptance. We go through these stages when we hear of the sudden death of a loved one. And we are going through similar stages as we get our heads around the idea that our financial system has been subject to a the equivalent of a major earthquake.
- The second psychological idea in this post is that objective knowledge matters. Positive psychology emphasizes that our attitude to a problem makes a big difference. It does, and I will return to that in other posts. But objective information matters too. It is foolish to pretend that a large box isn’t heavy. We are much better off when we understand the principle of levers. We do need to take charge of our education about the financial system. We clearly did not understand it well enough to play our role as informed voters, wise buyers and sellers of stocks and shares, and savvy consumers of mortgages and credit cards.
- The third psychological idea is the one I wanted to highlight today because I think it will be key to the mental housekeeping required to come to terms with the recession.
In the west, we have a weird idea that time is linear
Of course, we ‘know’ that yesterday was before today and today comes before tomorrow. Unfortunately our separation of time into yesterday, today and tomorrow, has some peculiar side effects. This works in two ways.
- In good times, we spend like mad and rack up debt. We take ‘Carpe Diem‘ or ‘seize the day’ far too far. Tomorrow features insufficiently in our thinking about today, and when tomorrow comes, we are in a mess.
- Equally, in bad times, we look ahead, see a diminished tomorrow, and we feel dejected. In short, we bring tomorrow far too much into today.
This inability to act appropriately in time is an inability to ‘give unto Ceasar’ or to accept that ‘for everything there is a season’. The net effect is that we enjoy life a lot less. We also rack up unhealthy deficits and one day we wake up very disappointed with our lives and where we have taken ourselves.
And then we are into the five stage process I described at the outset. This cannot be happening. It is not my fault. OK, I will compromise. Oh, this is impossible. And then ultimately: OK, I’d better get on and understand this.
Are you acquainted with philosopher Alan Watts?
At the end of this post is a video presentation, about 3 minutes long, that accompanies the late English philosopher, Alan Watts, talking about the way we confuse time.
He begins “you get into kindegarten, then you get into first grade . . .” And ends, life “was a musical thing and you were supposed to dance or sing while the music was being played”.
Do watch it!
I grew up in a competitive culture so this resonated with me. I have long protested that we should let 3 year olds be 3, and 18 years olds be 18. Preparing for the next year is part of a 3 year old’s experience but it is not all of their task. And being 3 should never be dreary. Nor should being 84!
Recessions are simply part of life
Like preparing for a test or examination, they are there to be enjoyed (!) along with all the other activities that come at the same stage.
It takes time to work through the five stages of our reaction to bad news. And we work through at different paces. So we need to be patient with ourselves and each other. But we also do need to resolve not to become stuck at any stage.
We may be in for a long and difficult time in this financial crisis. What I am suggesting is that we sing and dance to the music nonetheless!
Come with me!
Here is the link to this great presentation accompanying Alan Watts. Do enjoy it and have a good weekend! There is a season for everything!
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