Quote Originally Posted by fetishdj View Post
Personal opinion: All the above is true but one important thing was neglected - the role of the media.

Now, I am all for free speech (I would not, for example, say that any piece of news should be suppressed or censored) but it did seem to me that the media in this case turned a minor credit crunch into what is now an official recession. By stirring up people who did not fully understand the economy (and I don't pretend to fully understand it and I think few do who do not already work in the financial industry) into panicking over the 'impending recession due to the credit crunch' they caused them to make rash decisions, withdraw funds and do other things which, in effect, speeded up the development of said recession.

At the risk of using Dilbertesque managerial cliches: The financial market goes in cycles or boom and bust, often quite rapidly. One thing I have never understood is people not seeming to realise this. Ok, stock prices are low, house prices are low.... this means it is a time to buy and hold onto said stocks/property until the market recovers when you sell at a profit. It seems quite simple... but then I suppose there is the problem if everyone holds onto these stocks then the market suffers...
If everyone holds on to their stocks than people placing offers to buy can't buy, so the stock prices are driven upwards as the buy values go higher so the market doesn't suffer it recovers. The panic makes things worse because people are willing to sell off their undervalued stock, keeping the buyers trying to find those lower prices and resulting in the stock price staying low.

As for people not realizing this, many people do. People often react emotionally rather than intellectually in a lot of these situations, and make unwise decisions even though on a rational level they know those decisions are unwise. We've been taught all our lives to fix our mistakes and learn from them, but this is exactly what one doesn't want to do after the fact in a stock market.