Economics

Better Start Working on Your Bernanke Costume

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Over at EconLog, Bryan Caplan gives advice on how to scare small children. This comes naturally to him, since he's an economist.

For maximum fright, Caplan suggests starting early, with vague warnings of a monster in the neighborhood and the terrible deeds it has done, so that when you jump out from behind something dressed like the monster, the kid is primed for maximum freak out. His point, of course, is that scaring kids is awesome. Oh, sorry. Actually, his point is this:

If you think that the recent stock market crash was a psychologically-fueled "panic," it is quite likely that Paulson-Bernanke's pre-crash fear-mongering was the crucial factor that sent investors over the edge.  If P-B had gotten hysterical without warning, the world might have just laughed at them—and expected them to retire to "spend more time with their families."

There's a huge psychological component to market movement, and the it's-all-in-your-head-but-it's-in-everyone-else's-head-too-so-you'd-better-SELL! angle is always worth keeping in mind.

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  1. There’s a huge psychological component to market movement

    Up as well as down.The equity markets still seem over-valued to me.

  2. This is my costume.
    Whadaya think?
    Too soon?

  3. Buy on rumor, sell on news.

  4. Be greedy when others are fearful, and fearful when others are greedy.

  5. Paulson-Bernanke’s Chicken Little squawking fit, played a big roll in the sudden market collapse. The preceding and ensuing bailouts will turn an otherwise mild recession into a full blown depression.

    Paulson-Bernanke are the pushers in our junkie economy.

  6. The streets aren’t running with blood.

  7. THt’s right, let’s all get scared by the evil government. GOvernment is the source of all evil in the world! Evil! EEEEEEEEEEEEVVVVVVVVVVIIIIIIIIILLLLLLL!
    At least you gave up blaming it on the Jews.

  8. @SIV-No but the evil government will make them run with blood! EEEVVVVVVIIIIIIIILLLL!

  9. The streets aren’t running with blood.

    I can make it happen!
    Just tell me what to do!

  10. Warren,
    Educate yourself. This wasn’t ‘chicken little squawking’. This is the deflation of a massive asset bubble. The writedowns are real. The credit losses are real. The consequent funding and liquidity shortages are real and will have huge implications for the so-called ‘real economy’. The market collapse was sudden because investors held on to the hope of a soft landing until the Lehman failure made it crystal clear just how bad things were. Bernanke and Paulson didn’t do this.

  11. Fidel Observer:

    I have decided, for the rest of this month, to completely ignore the common wisdom about feeding trolls. Have some tofutti on me. It was made with Ma Chalmers’ special moldy soybeans.

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