CONFIDENCE is a funny old thing. It is all a bit intangible but it creates very real problems when there is too much or too little of it.

Global stock markets have for a long time looked somewhat over-confident, given the world economic backdrop. At times, it has appeared that they are being buoyed far more by ultra-loose monetary policy, in the form of rock-bottom interest rates and potentially hazardous quantitative easing, than by economic fundamentals.

In a UK context, if you were to ask people what they thought about the general state of the economy as it affects them, surely the answers from most would not be particularly upbeat.

We are six years on from the end of the 2008/09 recession. But to many, weighed down by freezes and paltry rises in pay, zero-hours contracts, job insecurity and excruciatingly painful austerity including savage welfare cuts, it will feel like we are still in the depths of a recession. And a bad one at that.

Returning to global equity markets, which are down a long way from where they were even if they did have a better day yesterday, it is worth observing that the issues of low oil prices and slowing Chinese growth have been plain for all to see for a long time.

The suddenness and sharpness of the drops in equity markets in recent weeks surely cast further significant doubt over the efficient market hypothesis, which would hold that share prices reflect all publicly available information at any given time. Increasingly in recent years as they have swung wildly one way and the other amid changing sentiment and strong herd mentality, financial markets have often looked neither efficient nor rational.

In recent weeks, investors have taken cold feet, helping create a vicious circle of share-price drops and falling confidence around the world that is threatening to spill over increasingly into the real economy.

With crude prices having plummeted below $30, amid Saudi Arabia’s seeming determination to continue pumping oil regardless of its value and the thawing of relations between the West and Iran, investor jitters would seem unlikely to dissipate as quickly as they have emerged. Such sudden plunges in confidence are undoubtedly a significant worry, particularly in terms of their knock-on impact on economic activity around the world.

However, too much confidence can also be a bad thing. In terms of this perhaps less obvious truth, who better to take as a case study than Chancellor George Osborne? Remember his bullish tones in his debut Budget in 2010 about how he was going to solve all of the UK’s economic troubles, as he rode on a wave of spectacularly optimistic forecasts from the independent Office for Budget Responsibility that he had just established.

We were told that UK economic growth was going to accelerate pretty swiftly to an above-trend rate, even as the Chancellor hiked the scale of annual public spending cuts and tax rises to be in place by 2014/15 by £40 billion to £113bn. This wildly optimistic assessment of the outlook proved to be a pipe dream, as did Mr Osborne’s March 2011 Budget vision of “a Britain carried aloft by the march of the makers”.

Instead, what we have had is consistently disappointing growth. By the second quarter of last year, before the global headwinds gained strength, UK growth was already back way below its long-term average. This three-month period took in the run-up to the General Election, during which Mr Osborne cut an upbeat figure indeed as he proclaimed the Conservatives’ long-term economic plan was working.

Even now, Mr Osborne, seemingly utterly confident that he is doing a fine job, appears at least unperturbed and perhaps oblivious to the UK’s economic troubles. He remains determined to proceed with a further £12bn of cuts in annual welfare spending.

Research by the House of Commons Library, following a request by Shadow Scottish Secretary Ian Murray, this week revealed the impact on people in Scotland of Mr Osborne’s programme of cuts to in-work benefits being implemented through the new Universal Credit. The analysis showed the average Scottish single mother-of-two working full time on the new National Living Wage would be £3,321-a-year worse off by 2021.

We must not underestimate the impact of such cuts on society. And we should also be alert to the dramatic impact Mr Osborne’s welfare cuts will have in Scotland and the rest of the UK, by driving down aggregate demand.

A survey published this week showed confidence among Scottish small businesses had fallen to its lowest level since the start of 2013.

Not surprisingly, and echoing other economic surveys north of the Border, the woes of the oil and gas sector figured prominently in the Federation of Small Businesses’ report. But Westminster Government policy was also a crucial issue.

The last thing businesses of any size need right now is their customers, and people who might buy from them, having even less money to spend. Unfortunately, such a scenario seems almost inevitable.

To make matters worse, figures from the Office for National Statistics this week provided further signs that growth in real wages, which began not that long ago after many years of decline, is slowing already. This is very bad news for the domestic economy regardless of the global circumstances.

Whether efficient or rational or not, at least global equity market players attempt to adjust their behaviour as situations evolve.

Sadly, it seems the same cannot be said for the unshakably ebullient Mr Osborne. It appears the Chancellor, while he started the new year by getting his excuses in early and warning of international dangers, remains devoid of self-doubt about his policies.