|  MAY 1988

Exorcise fear of a depression by Charles Bebber

Exorcise fear of a depression by Charles Bebber Not surprisingly, economic reports in the weeks following the stock market's Black Monday bristled with references to pessimism, alarm and failure of confidence. Contemporary economic thought has long taken for granted that psychology plays a key role in the economy's performance. The high drama of October, therefore, compelled analysts to weigh again and again the possible emotional repercussions on markets and consumers. From the standpoint of psychology, however, questions can be raised regarding their repeated allusions to one particular psychological element—raw fear: - In its first issue after the plunge, Newsweek worried that ""the cascading Dow and record trading volume marked a major shift in psychology and sent a powerful shiver across the country... If hastened by a financial panic, a recession could quickly spread, creating deep economic distress around the globe."" - The initial issues of the several business publications waxed equally ominous. John Curran, Fortune's chief stock market writer, described the nosedive and its aftermath as a ""once-in-a-lifetime trauma,"" ""hair-raising,"" ""chilling"" and ""emotionally wrenching."" - New York Times columnist R.M. Rosenthal, concerned about the emotional fallout from Black Monday, even interviewed a psychiatrist, who warned that ""panic and fear are the other side of greed"" (a fact well known by traders).

by Charles Bebber