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What Is The Underlying Driver Of Any Economy?

When you take a look at the economies of the world it can be very difficult to see exactly what makes them tick, what is the main driver and what should be the first target in signs of trouble. Have you guessed what drives markets? What turns economic cycles? It is you............

The main driver for any economy is human nature and how those who participate in the economy feel about their prospects, the prospects for the country and prospects for certain areas of the economy. Cast your mind back to the run on Northern Rock and the problems which that caused, and continues to cause, what was the main element there?

While one problem was the ongoing credit crisis in the US, people were more concerned that the bank was going out of business. What started as a small number of withdrawals soon grew until suddenly it was a run on the bank and starting to affect assets and cash flow. Northern Rock literally went from being a leading UK bank to overnight becoming the black sheep of the banking world.

Human (and more importantly investor) sentiment can be a very powerful instrument, something which can push economies to record highs in good times but cause them to plummet to the depths of despair in difficult and uncertain periods.

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