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Collective fear feeds a recession or depression. Banking panics are real and speculation of a prolonged recession of course deepens and lengthens it. FDR (in hi
by curo 7y ago
Collective fear feeds a recession or depression. Banking panics are real and speculation of a prolonged recession of course deepens and lengthens it. FDR (in his 1933 inaugural address) certainly believed this to be true: "nothing to fear but fear itself."
- onlyrealcuzzo 7y agoShort-term fear can cause a sell off. You need long-term consistent fear to cause a recession (it's based on a quarter or year, depending on how you define it). You usually don't have consistent long-term fear without reason. It's usually the underlying problems that cause recessions. It's usually short-term fear that causes market crashes.
- mrep 7y agoSo much this. Every recession that I remember studying in my economics classes had an actual market failure acting as a trigger that caused widespread panic which resulted in a recession. The 2018 us stock market downturn comes to mind as a panic that didn't result in a recession because there was no actual market failure causing actual economic harm outside of pure speculation.