In the past month the American people’s confidence in the state of the economy has plummeted according to recent Gallup polling.

Economic Confidence Index by Week, May-August 2010 and 2011

The scariest part of the poll is that in only one month there has been a 14 percent increase in the number of people who think the American economy is getting worse and a 10 point increase in the number who rate the economy as poor. Currently, an overwhelming 77 percent feel economic conditions are worsening.

Percentage Saying Economic Conditions Are Getting Worse by Week, May-August 2010 and 2011

This is very scary because our economy is so dependent on consumer spending. The rapid increase in economic pessimism combined with millions of people losing wealth due to the recent huge drop in stock values could cause people to pull back on spending, reducing demand for goods and services. This is what the beginning of self-reinforcing downward spiral would look like.