ABC: 'Is The Recession All In Your Head?'

In the wake of former Sen. Phil Gramm's statements earlier this week about this being a nation full of whiners, the good folks at ABC's "Good Morning America" brought on a consumer psychologist Sunday to discuss whether or not the McCain advisor had a point.

Shockingly, not only did Kit Yarrow tell host Kate Snow that "the way consumers feel about things is very emotional," but also these "emotions are trumping reality" thereby creating a snowball which makes the economy worse.

Yarrow not only believes that things are "not as bad as consumers feel like it is," but also that the media are at fault because "everything is described as a crisis."

What follows is a partial transcript of this rather shocking and refreshing exchange (video available here, photo courtesy ABCNews.com):

KATE SNOW, HOST: So, things are certainly bad for a lot of Americans. I don't think we want to discount that. But you say this is a psychological recession. What do you mean by that?

KIT YARROW, PSYCHOLOGIST: It's a snowball, really. I think the way that consumers feel about things is very emotional. And those emotions are trumping reality, creating this snowball where they're pulling back on spending which is then making our economy worse. It's not quite as bad as consumers feel like it is.

SNOW: How so? How is it not as bad as we think?

YARROW: Well, you know, we've had really great prosperity for the last few years. We've had very cheap gas. We've had a lot of increase in our home values. We've had it really pretty good as stock market increases. And, emotion is always caused by this mismatch between what we perceive and reality. Right now, I think there's a big mismatch between what we perceive should be, basically our expectations of the economy and now what we're getting. And that's causing people to feel fearful, and upset and angry. And, really, it's that emotion, the psychology that's contributing to our economy right now in a negative way.

SNOW: To fall on our sword here a little bit, do you think part of it's our fault, the media's fault for constantly talking about how bad things are?

YARROW: I do actually. Yeah, I have to say some of it does there. Everything is described as a crisis. And you know there's been a preponderance of information coming at consumers, I think just the volume of it. And, it's described in anecdotal terms as well, which causes consumers I think to feel especially fearful. When you describe an individual's personal situation, I think people empathize with that, and it makes them feel really afraid for their security as well.

SNOW: How much is about expectations though also, in terms of, things have been going so well for so long, do we sort of think that's what we deserved, and now things aren't going maybe quite as well, we suddenly think it's terrible?

YARROW: Absolutely. It's very well put. So I think we've become quite entitled to a sense that we're going to have continued prosperity, and, you know, if we hadn't had it so good for so long, I don't think there would be this level of emotion that's causing us to drawback on our spending. It's really more like, we expect it to be great growth, and you know any sort of normal growth is considered a catastrophe now.

SNOW: Which is not to say it's not painful to go to the gas pump and pay those prices. Well, thank you so much -- go ahead.

YARROW: I was going to say, and you know, gas prices and food prices in particular are causing people to be very emotional about it because every single day, they're aware of difficulties.

SNOW: Hits you right in the face.

YARROW: It does.

SNOW: Kit yarrow thanks for being with us. Very interesting.