THE EDITOR, Sir:

Your editorial in Saturday's edition, titled 'Weathering the financial storm', carries a message from those who participated in Thursday's Editors' Forum: "Be prudent with your money, especially your disposable income; adjust your lifestyle; eliminate the things you can do without; batten down as you would for a hurricane; worse is yet to come; look carefully and weigh your options."

Fuelling the downward spiral

While this might sound like prudent advice, it, in itself, also helps to fuel a downward spiral in a recession. Economies need a 'flow' in order to work. Even though credit in 1930 was still ample and available at low rates, United States consumers, fearful of what was happening, cut back expen-ditures by about 10 per cent.

This fuelled the further downward spiral. Situations like what is happening now create in people a 'batten down' mentality of cutting back expenditures and tightening up. This goes on to further slow down economies. Let me state that I am not advocating reckless spending or running up your credit card debt, but do not cut back on your normal expenditures. You will, inadvertently, slow down an economy. Economies are all about flow and confidence.

In fact, what is called behavioural economics/finance shows that when a person experiences a loss, he needs a gain of about 2.4 times that loss to mentally overcome the loss. Losses, or even the impression of a loss, tend to create a greater mental downturn than the same amount of gain. A big part of the picture is confidence, and clear thinking is needed right now.

I am, etc.,

MARK BROOKS

Malvern PO

St Elizabeth