Essentially the argument posited by Samuelson is that there is a tendency when things are going poorly to cry chicken little and claim the sky is suddenly and inexplicably falling on our heads. The major culprits behind these hysterias both in the media and in politicians attempting to throw blame on previous administrations both justified and not fail to present an understanding beyond which that satisfies their agendas. Samuelson rather simply shows that, within the last generation, we have had a fairly stable and solid monetary policy that tends to be both effective within the business cycle and overall. He would point to the nature of the fluctuations of our GDP after the institution of the Fed and claim, and rightly so, that we have reduced the massive fluctuations that created those massive downturns. He also rightly warns of the risk of inflation if the government over-reacts to the matter as they did in the seventies. While the short term unemployment might spike, he urges that we show fiscal and monetary restraint, and remind ourselves that this too shall pass. Yes, this is an unfortunate downturn, yes, our GDP will drop and our unemployment rise, but no, this isn't a catastrophic downturn. So far, even though the credit crunch has all but destroyed Countrywide, the GDP damage is only like .4%. On a personal note, I liked the article, as I like almost any article putting things in proper perspective. We need to understand, both as economists and as people, that sometimes jumping in and acting as if every bad thing is an emergency, we do real emergencies an immense injustice, and soon we can't judge the difference between the merely unfortunate and the true crisis on the horizon.
“Hold the Hysteria” an article written by Robert Samuelson talks about the current condition of our nation’s economy. It is believed that our economy is slipping into a recession, but according to Samuelson this is hardly the case. There are two main “hysterias” that is causing the people to go into a frenzy and panic so to speak. The first of the two is the prices of homes are drop while the price for gas continues to rise. Next we have the idea of a financial meltdown and panic. Although it is not evident that the economy is in recession, but it is true that it has slowed down a bit. Accordingly to Samuelson, our economy has been stable thus far. He points out that even though the economy has hit a rough spot but it is not quite as bad previous occurrences. With some help from the government most business cycles are able to correct itself. “Government can help smooth business cycles and prevent financial panics. But if it's too aggressive, it may make matters worse” and with what we have learned in class this proves to be true. For example if interest rate was too high the Feds can print out more money to stabilize it. But if they print too much it can also cause a problem as well. Personally, I thought this article was well written and it included everything that needed to be said. It was not overcrowded with only facts and statistics but Samuelson included things that people needed to know. I believe that one should not just take in what they hear from others or the media. They should also learn to understand what it is that is being said to them. Most of us just take in information without ever comprehending it. This article is a good example, it lets people know about the economy’s status but also let them be able to comprehend what is being written in the article as well. There is always two sides to a story, and one should know about both sides before they can be able to say that they know what is going on.
In his article, "Hold the Hysteria," Robert Samuelson talks about the near panic displayed by many people in regards to the current state of the U.S. economy. This panic is for the most part unfounded, fueled mostly by politicians and members of the media looking to put out a juicy story. Even if we are in a recession, recessions are bound to happen. As the article states, there have been 10 since World War II, and even if the peak unemployment rate does reach the projected 6.1 percent and GDP does fall .4 percent, this would be a mild recession at that. A large part of the hysteria is caused by the belief that the economy is highly unstable. However, this is not the case. As Samuelson states, most markets are largely self-correcting. Given time, they will tend to level out. As for those that would compare our current situation to the great depression, there is not much of a comparison to be made. As Samuelson points out, current unemployment is about 4.8 percent, as opposed to 18 percent in the 1930s. Revisions in government policy and a better understanding of economics would prevent what happened then from happening now. The United States is presently better equipped to deal with things such as rising unemployment, etc. As Samuelson says, "If catastrophe strikes, it will probably result from something we don't now know or we haven't yet imagined."
In Robert Samuelson’s “Hold the Hysteria”; he explains why America should not be concerned about another depression. He compares and contrast past economic slow-downs or recessions and then dispels fears that the U.S. is headed for another depression. He does note that the economy is slowing down, but not at an exception rate compared to other slow-downs. He describes other periods of slow-down as having average unemployment rates of 7.6%, while our current economy is only experiencing 4.8% unemployment. He describes past slow economies with average GDP declines of 1.8% then projects a decline of .4% for the current economy. He then goes on to describe the nations fears of a “bear market”, which is a 20% drop in the Standard and Poor 500. He noted that at times our market has been close to 20%, but that since 1936 we have had 11 bear markets with an average decline of 34%. We are nowhere near that now. Samuelson blames the nation’s economic fears on media exaggeration, political finger-pointing, and complaining from “Wall Street Types”. Given the past cycles of economics ups and downs, he explores two possibilities for our slow-down: Are we in the middle of a highly unstable economy or are we simply experiencing a low point in a self-correcting business cycle? He goes on to describe his opinion that the markets being affected will self correct. He says that more buyers will come into the housing market as prices continue to fall which will cause construction to increase, creating more jobs. Businesses will reduce spending in order to repay debts. After the debts are repaid spending will increase again. But the most important points he makes is that the government will help smooth business cycles and reduce financial panic. This is the big difference between today’s economy and the economy of the Great Depression. Had the government been willing to bail out banks in 1929, financial panic would not have ensued and massive bank failures might have been avoided. All in all, Samuelson provides good arguments as to why we should not be panicked over the possibility of a depression and I tend to agree with him.
Response to “Hold the Hysteria” by Robert Samuelson
I agree with the author of the article “Hold the Hysteria”, Robert Samuelson, on his views that the United States’ economy is “hardly in a state of collapse.” I understand that our nation is experiencing a slowing or weakening economic state, but as we discovered in class, our country is no where near the state of the American economy nor close to what the American people experienced during the 1930’s and the Great Depression. In class, we discussed the economic conditions during the worst time of the Great Depression. In 1933, United States witnessed about 25 percent unemployment, large drops in real GDP, consumption, and investment.
There are many reasons why I believe that Samuelson feels there is no need for the people of the United States to panic over the present economic conditions. The first is because although the economy has declined, this decline has been minimal. The example provided by Samuelson in is article is that “Americans are expected to buy about 15 million vehicles in 2008; though down from 16.5 million in 2006, that's still a lot.” The United States is obviously not doing horrible if they can still manage to buy so many new cars. This year, we may not buy more cars that are new but we not dropping our consumption greatly. If the United States is experiencing or eventually entering a recessions, it will be mild compared to recessions of the 1990-91, 2001, and milder than the average postwar recession.
What I feel is the main reason why Samuelson feels that the Americans should remain calm is because most of the news and information that they hear is media hype. Samuelson writes that the present hysteria over the economy comes mostly from political finger pointing, “whining from Wall street types”, and a disagreement over whether the economy stable or unstable. The Author feels that if the American people remain calm, the market and economy will eventually right themselves. There is very little chance of another Great Depression happening in the United States. The government has implemented many programs and plans with the purpose of insuring this to the American population.
Robert Samuelson’s article entitled “Hold the Hysteria” talks about whether or not we should be frightened in the midst of the economy’s current state. Following the burst of the housing bubble, people have been whipped into hysteria about a coming recession. Samuelson acknowledges the fact that the economy has in fact slowed down, but remains confident that the economy is not at all doomed. People are frightened now for a number of reasons (other than a lack of knowledge) – rising gas prices, fewer jobs, and the aforementioned housing bubble. Even The New York Times went as far as to say that the economy may be on "the brink of the worst recession in a generation." Samuelson adds that the “evidence is scant.” He also adds that many markets are self-correcting, and that the government can help smooth business cycles. But even if a recession has already started, Samuelson notes that Mark Zandi of Moody’sEconomy.com has forecasted “peak unemployment of 6.1 percent (present unemployment: 4.8 percent) and a GDP drop of 0.4 percent.” If true, then that would indicate this 2008 recession would be even more mild than the last two (from 1990-91 and 2001).
But is the economy highly unstable, or is it capable of self-correcting itself? This argument is as old as economics has been around. Those who do think it is unstable feel that when housing prices fall, creating more foreclosures, the losses on the mortgage increase and erode the capital of banks which forces them to decrease lending. But Samuelson disagrees and adds that the housing prices will fall, and more buyers come into the market which revives sales and construction. It will basically correct itself, along with the government helping to smooth over the business cycles and help prevent financial panics.
The media is also blamed for all the doom and gloom. In my personal opinion, I feel it is typical that people are buying it. Most people do not exactly have a firm grasp on the fundamentals or theories of economics, and therefore are more susceptible to believing things that have no ground to them. With the gas prices, and such “reliable” sources like The New York Times telling people that the sky is falling, it is to be expected. So with no hard evidence of a coming collapse, it can pretty much be said that a lot of the fear-mongering stems from the natural human tendency to panic.
This article talks about the current state of our economy. The idea behind it is that when things are going bad they are only going to get worse. In terms of our economy this could mean a recession. Samuelson disagrees with this idea. He talks about two ‘hysterias’ which cause individuals to freak out. One of which is about financial problems and the other deals with gas prices increasing while the prices of houses decrease. This all stems from the idea that politicians and media personnel pass blame that doesn’t show a high level of understanding beyond their own agendas. Samuelson believes that we have a stable and effective monetary policy. He goes on to compare and contrast today’s economy with that of the Great Depression. Samuelson thinks our economy has seen worse and with government aid the cycle will correct itself. I agree with Samuelson and this article. While the economy may be declining, it is doing so at a minimal rate. In the article, Samuelson talks about the current unemployment rate and how is it much lower than it was in the 1930’s. A main reason for it being lower is because of better government planning. This goes along with his statement “the government can help smooth business cycles and prevent financial panics.” We learned in class that when interest rates are high, the government can print more money to the level things. It is important to keep in mind that printing too much money will cause more problems. This correlates with Samuelson’s idea that if the government is too aggressive it may make matters worse. I think this article does a great job of stating facts and bringing information together. It shows that it is important to have all the facts before making assumptions.
This article discusses about the general perceptions people develop about economic conditions in the United States, especially about recessions. According to the author, these perceptions develop from exaggerated information produced by media or predictions from pessimistic experts. These kinds of hypes lead to popular panic that the economy is in terrible condition. The author do not disagree that the current economic situation is not at its best shape and there are reasons to be concerned, but he disagree to the degree of the potential economic problem as projected by media or perceived by people. According to him the United States had faced recessions earlier and recovered eventually so there is no reason for the panic. He quotes New York Times saying the U.S. economy may be at “the brink of worst recession in a generation”. The author thinks there is disconnect between what people see around them and what is told to them. People see rising gas price, falling home prices and unemployment, that makes them upset and they are told that these are indicators of some catastrophic event to happen in future. This causes the panic. There is little evidence that the U.S. economy is about the face any major catastrophe. There have been 10 recessions since World War II, three of which created some noticeable impact in the economy. Occurring in 1970’s, 1990’s and early 2000, these recessions lasted on average 20 months and involved in 34 percent decline in output growth. The author considers these recessions no way comparable to the Great depression. U.S economy is huge, $14 trillion, and reverses in such a huge economy is normal. So there is no reason to panic about it. According to the author these panics not only develop from exaggerated projections from media but also due to disagreement about economy’s stability and ability of market forces to correct economic instability. Pessimism about economy raises concern that the current economic conditions (housing price fall, unemployment, fall in output growth etc) will eventually lead to Great depression. People tend to forget that a massive bank failure converted an ordinary recession to Great depression and during that time period U.S economy was structured differently. This article is a humorous presentation of the panic in the mind of common citizens in the United States. It did a nice comparison of the economic situations of different periods of recession and how incorrect information and skepticism can cause panic in people’s mind.
This article by Robert Samuelson is a much needed breath of fresh air. A voice of reason to offset all those voices that shout for panic. Americans seem to believe the Great Depression to be some kind of Economic bogeyman at that this current slow down that we are in is his return. This is pretty ridiculous as Samuelson points out in his article. There is no doubt we are currently experiencing an economic downturn. This would be the eleventh time we have had a so called recession since World War Two. This would be the third time in the last fifteen years, and even then Samuelson predicts it won’t bas as bad as the one in the early nineties or the one in two thousand and one.
Samuelson is not blowing the current economic downturn out of proportion. He points out that so far the weakness in the stock market has not been that disastrous, that it has been blown out of proportion. People fear the economy as being highly unstable and so panic. These fear mongers who view managing the economy like running with an egg in a spoon, that the slightest trip will bring the egg crashing down. But if the market is self correcting, like it has been for the last sixty years then, to be quaint, it will correct itself. As Samuelson points out that the low housing prices will lead to more buyers coming into the market, and so forth. All of this is the market reacting to re align itself at the equilibrium. He also points out that if the Government acts to aggressively to correct the current down turn, like it has done in the past, that could lead to an actual crisis, like massive inflation. People who compare today to the Great depression are deeply mistaken and most likely have some kind of ulterior motive.
I think it is really good that Samuelson has come out and tried to put peoples fears to rest. If people start to panic that what starts as a minor recession could potentially become something much more disastrous. In situations like this we have to depend on people not giving into their fears about the market being unstable, and listening to logic and reason.
This article deals with a topic which is of great controversy among the people in the United States. It is obvious that with the economic situation we are currently facing the people spending has decreased, the production and jobs are declining but are not yet collapsing although many people say otherwise. Financial markets for stocks and bonds are also considered in the down slope and people are already talking about a recession and even worse a second Depression. Meanwhile, Americans continue to spend money and are expected to buy about 15 million cars in 2008; 1.5 million less than 2006. For a economy a entering a steep economic downturn and possibly heading to a recession that’s still a lot of cars. People are scared for what they see around them and what they hear and are told. The first point is the rising gas prices, falling home prices, and fewer jobs. All Americans see this because they are facing it every day when they put gas to their car, can’t pay their mortgages and get fired from their jobs. The second point is “the “panic,” financial meltdown that suggest the onset of something catastrophic and totally outside the experience of ordinary people.” (Samuelson) Even The New York Times says the economy may be on “the brink of the worst recession in a generation.” It is obvious that the economy is slowing down and according to some economists a recession has already begun. There are many reasons why people are believing what they are told. First, media hype; political finger-pointing that is exaggerated, whining from the Wall Street and disagreement over whether if it is the economy that is not stable or if it is business cycles are mostly self-correcting. The author has a response for all the arguments that direct us to a recession and blames the “government policy- excessive rigidity by the Federal Reserve-actually aggravated the banking collapse.” (Samuelson) At the end the author assures that if a catastrophe were to happen, it would be from something that no one knows about or ever thought. The lack of panic is because the author is sure that it is just a cyclical process. Recessions don’t last forever and he is not afraid of another depression. Just as the U.S. has gotten through other recessions in the past, the author is confident that this time will not be different. The author trusts his government and he feels confidence. What I learned in class from the only Great Depression in the United States is that in order for a depression to occur the money and prices must fall as well as the interest rate. Although many of this facts are currently happening I am confident that the Government, Federal Reserve and Congress will not make the same mistakes twice. I am sure that it is only part of an economic cycle and that any time soon the United States will continue to grow economically. My personal reaction to the article is that the author does have good arguments of why to think we are not heading to a recession but the facts, statistics and numbers say the contrary.
“Hold the hysteria,” by Robert Samuelson expressed economic hysteria in his article. The article starts out with the current situation of the economy and how it is entering a recession, possibly. Is it really worth all the hysteria? According to Samuelson, it is not anything close. The author talks about how there are a lot of people overreacting to the current economic situation which is not necessary. What people hear is to blame for their reaction to the economy. Samuelson goes on to explain the fact that there have been numerous recessions and economic downfalls and this particular recession is not something to get all hysterical about. He even talks about how recessions are for the most part self-correcting.
Stated in class, as well as the article, recessions are repeated periods during which gross domestic product (GDP) falls. History has shown and the article also explains there have been a number of shocks to the economy. In the 1930’s the depression happened which is a severe decline in GDP but nothing to that extent has happened to date.
I feel it is important that more people are informed about the economic situation. Many people are overreacting to what is going on with the economy. The media should remind the public that this is not the first time a recession has happened and will not be the last. I feel people should not worry about this or get worked up. The author did a great job with the article. I liked how he stated his claims and backed them with numbers and statistical data. He even gave some history about the economy's past recessions after the depression. The fact that unemployment may reach as high as 6.1% and GDP may fall 0.4% is not something I would get all worked up about, its been worse.
Robert Samuelson’s article, Hold the Hysteria, is a reality check for those concerned about the state of the American economy. Samuelson says that Americans are lead to believe, incorrectly, that recessions are both uncommon and disastrous, while in fact they are neither. Americans are expected to purchase nearly fifteen million vehicles this year, which is down slightly from last year. Also the author notes that there have been ten countable periods since the Second World War, which have followed the historic traits of an economic recession. A recession is a period in history where there is a decline in output. Typically a recession last for 10 months and includes a rise in unemployment. Samuelson admits that the American economy has slowed but believes this recession to be milder than the recession in 2001 and the recession of the early 1990’s. He goes on to say that the weakness of stocks is “unexceptional”. Fluctuations in the stock market are common and only after a drop of twenty percent or more should the term “bear market” be used. There have been eleven bear markets since 1936, the last being the tech bubble from 2000 to 2002. A bear market typically last for twenty months and usually involve an overall decline of thirty four percent. Samuelson blames the causes of economic hysteria on the usual players including: media hype; political finger-pointing; and Wall Street whiners. He explores the possibility hysteria may lead from disagreements over whether the economy is largely “unstable or whether business cycles are mostly self-correcting”. Samuelson proposes that only forceful government intervention can help if you believe economies are unstable, however if you believe that markets self correct, heavy government intervention can be detrimental, as seen in recent Chinese history. Dependent on which philosophy you accept, recent activity may impact ones fears and opinions on our impending recession. Often the media is blamed for panic crated from the lack of unbiased information being fed to citizens, but when does the responsibility of being well informed become that of the citizens, themselves? The average American, I believe, only knows when to be concerned about economic policy when the media informs them that this is a time for concern. While reading this article I became relived to find, this recession, that we are in the midst of, is expected to be milder than the previous recession. However the authors final remark, “if catastrophe strikes, it will probably result from something we don’t now know or we haven’t yet imagined”, is concerning.
The article,”Hold the Hysteria” talks about how people believe the economy is entering a point of recession or some people believe it is a depression. The article states that the economy has not collapsed and gives an example of the expectancy of how many cars the American will buy this year. The article predicts 15 million vehicles will be bought this year compared to 16.5 million in the 2006 which the writer believes it is not a big deal. The article also point out that there are two types of people: the people that believe what others say and the other that analyzes what is around them. The article also points out that many economists believe the economy has entered in recession but believe it is not as terrible as other times. Also, it points out that stock had declined for an extended amount of time calling it “bear market”. Stock had not declined since 1936. Another major point that the article approached was that housing prices decreased and consumers were buying housing. Also it points out that if a consumer or a business had serious debt they would decrease their spending and pay on any loans owed. The article brings out a main point that the government policy has a lot to do with how the economy deals with matters such as the bank collapsing. Basically, the articles main point is the government has a lot to do with how situations are dealt with and the economy have not entered recession or a depression. The article states many points that are understandable but the writer seems too calm about what is going on with the economy. For instance, a decrease in jobs affects the amount of income a person will receive. The decrease in the housing price will make consumers buy a house because of the low rates. The writer also seems too calm writing about the market being a “bear market”. The stocks have declined 34 percent for 20 months. Overall, this article gives good points but seems too calm about what is happening in the economy. In my opinion, I believe this article make the issues of the economy seem like nothing is happening. Prices are increasing and the job rate has also decreased. Stocks have also declined. I believe the economy is entering a period of recession but it is not as bad as other downfalls in the economy.
Samuelson tries to put the current market slump into perspective compared to other slumps in American history. Historically he states that we see an average peak of 7 percent unemployment and less than a 2 percent decrease in growth, as compared to a current 4.8 percent unemployment and only .4 percent decrease in growth. Considering the numbers he is correct to say that the current recession, if we are indeed in one, is not as bad as any of the recent recessions and no where close to the great depression. Many fear that the current economy is unstable and could lead to another great depression while he is optimistic that our economy is stable enough to withstand a slight downturn.
As much as I like and prefer the optimism of our stable economy and that there is nothing to worry about considering past situations, I am going to have to take an opposing stance to him and most of the other comments on this blog to a certain extent. While personally I do feel safe that we will not plummet into 30 percent unemployment and massive depression I do feel that people are missing a big portion of the global picture. He casually puts some blame on the business cycle and that this little turn could just be cyclical. On this case at least in the United States, poor credit practices and multiple bankruptcies in the subprime market would not be considered part of a business cycle. Secondly in the very near future energy, water, and food supply worldwide will be a great concern, but currently energy is already taking its toll on economies world wide. And lastly he blames some hype on the media. Well in today's very wired and wireless connected world information and misinformation are widely available. The news of a thousand jobs laid off in the United States travels quickly compared to the past. Lastly, the economic problems abroad are more of a factor today then ever before. Just because right now the Unites States is stable does not mean that our ever growing trade deficit will not be a factor in our economy.
Currently we might feel we can bounce back for this downturn, but we need to be ever more cautious and understand everything around us before we say that since we haven't caught up to the past it cant get any worse. As much as I would like to continue in discussion with this topic, there is only so much I can write.
“Hold the Hysteria” by Robert Samuelson is an article dealing with people believing in the snow ball effect. One thing goes wrong then another followed by another. In the end it is a large ball of bad things. Many people believe that we are going into a recession by the author thinks it may just be economic slowdown. These are present in any business cycle. We have had some higher unemployment which “forecasts peak unemployment at 6.1 percent.” This is very minor compared to past recessions. The two worst recessions since the Great Depression hit unemployment levels of 10.8 and 9 percent. We are far from those numbers. With higher unemployment comes lower inflation as they are inversely related. This is a good thing for the economy as a whole. It will help drive prices down in the long run. The government is ready to handle these situations better than in the past. They have learned from their mistakes. But if the government is “too aggressive, it may make matters worse”. If the Fed increases the money supply to much then we will have lower interest rates to spark the economy but we will also have lower exchange rates, which we are see now. The whole tone of the article is to get people to settle down. Panicking about this can make things worse. Things are not bad as the media or presidential candidates want you to believe it is. These are just tactics used by them to get better ratings. They are looking after themselves and not the economy presently. Given time the market will self correct as any good market does. If things do get worse then “it will probably result from something we don't now know or we haven't yet imagined.” The stock market is still stable. Stocks have fallen below 20 percent indicating a bear market. They are still nowhere near as bad as other recessions. During the periods of “1937-1940 they fell 60 percent and 50 percent between 1973-1974 and again in 2000-2002. Things are not nearly this bad. Stocks would have to fall again by 40 percent before people started to worry.
Robert Samuelson’s main point in this article is that things aren’t as bad as they may seem. He says yes, we are in a slump, but it is normal for the economy to have ups and downs. He points out that there has been ten recessions since World War II. If allowed, the economy has the power to correct itself, and if too much is done to assist in the correction, more problems could arise.
One example he gives of this self-stabilizing mechanism is in respect to the housing price crisis. Values of homes are falling causing foreclosures and mortgage losses, but in time the falling prices will cause more people to enter the market for homes. If left alone, instead of the downward spiral that many believe is happening, the country’s economy will rebound from this recession as it has many times in the past.
Samuelson’s discusses how the current rates of unemployment, the slowing growth in gross domestic product, and falls in the stock market are nothing to be too concerned. All of these have been much worse in the past. Samuelson mentions one economist, Mark Zandi, who believes we have already entered a recession, and predicts that unemployment rates and decreases in GDP will be much less than they have been in other recessions.
If the government or Fed steps in to assist the market that is already self-correcting itself they could possibly cause more harm than good. A moderate amount of assistance in boosting the economy could be helpful, but if too much is done inflation could sharply rise.
Many people believe that we are worse off than we actually are. This could be caused by a number of different things. Samuelson says that it could be caused from, “media hype; political finger-pointing -- always given to exaggeration; and whining from Wall Street types.” He also says that some people just believe that the economy is unstable and is unable to correct itself. This could be caused by something we discussed in class from another article called the pessimistic bias. This bias causes people to always have a feeling that things are getting worse when they is really no need for concern.
The article by Robert Samuelson is a very interesting one. It talks about the state of the U.S. economy and the fuss surrounding the recession and the expectance of a depression. In this article, Samuelson tells is that there should be no cause for alarm as it is a recurring trend since WW II. Infact, it is not even as bad as the last two in 1991 ans 2001.
The stock market is another issue the aritcle touches on. Samuelson talked about the previous shocks to the stock market and how this current crisis does not compare to the previous ones; not even the one in 2002. All these problems are recurring trends that can be fixed by the government. However there are many opposers who would point to the great depression and how government involvement in banking policies led to the collapse of banks.
The answer is; government has to intervene to prevent the problem from goimg any further. Yes this has a high risk of full blown depression, but if the government regulates itself a depression can be prevented. Even Samuelson acknowledges that the government could be the answer to this problem.
This article was amazing, first of all. As the gas prices skyrocket and we come off of an awesome 14 trillion dollar bender of an economy so used to relative security that we panic at the idea of a massive recession, or worst still, an epic depression at any given moment. I like his references to cyclical economic long term trends, like the 10 noticeable declines in economic output since World War II …the most notable being between 1981-82 and 1973-75. Yet even then, the economy did not crash and burn. In fact, our economy is a self correcting one. As the housing situation deteriorates, and the prices are driven downward, and the foreclosures go up, there is actually an entirely different market that opens up, as opportunistic buyers capitalize on the low price tags.
The truth is a lot of these rises in inflation and declines in output we do feel on a micro level. It does affect us, of course, but it isn’t the bottoming out that the hype suggests. The point raised on too much government invention via the Federal Reserve actually further aggravating the situation is entirely true.
And as far as why he feels so little panic in reference to the Great Depression, the economy is not reflective of the economy of the 1930’s. The Great Depression was steeped with 18 percent unemployment, where as now we peak at a 7.6 percent at our worst hour. The conditions of the nation were entirely different too. This country is a different place then in the 1930’s. We are in a different age of industry and information travel as well, with a broad world market, not too mention ridiculous advances in technology and industry.
So the slow economy is reflective of what we should have come to understand and expect at times of decreased output, and really the climate of panic in the country in these more polarized political times, and in the age of instant gratification, is probably to be expected.
This article was amazing, first of all. As the gas prices skyrocket and we come off of an awesome 14 trillion dollar bender of an economy so used to relative security that we panic at the idea of a massive recession, or worst still, an epic depression at any given moment. I like his references to cyclical economic long term trends, like the 10 noticeable declines in economic output since World War II …the most notable being between 1981-82 and 1973-75. Yet even then, the economy did not crash and burn. In fact, our economy is a self correcting one. As the housing situation deteriorates, and the prices are driven downward, and the foreclosures go up, there is actually an entirely different market that opens up, as opportunistic buyers capitalize on the low price tags.
The truth is a lot of these rises in inflation and declines in output we do feel on a micro level. It does affect us, of course, but it isn’t the bottoming out that the hype suggests. The point raised on too much government invention via the Federal Reserve actually further aggravating the situation is entirely true.
And as far as why he feels so little panic in reference to the Great Depression, the economy is not reflective of the economy of the 1930’s. The Great Depression was steeped with 18 percent unemployment, where as now we peak at a 7.6 percent at our worst hour. The conditions of the nation were entirely different too. This country is a different place then in the 1930’s. We are in a different age of industry and information travel as well, with a broad world market, not too mention ridiculous advances in technology and industry.
So the slow economy is reflective of what we should have come to understand and expect at times of decreased output, and really the climate of panic in the country in these more polarized political times, and in the age of instant gratification, is probably to be expected.
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Essentially the argument posited by Samuelson is that there is a tendency when things are going poorly to cry chicken little and claim the sky is suddenly and inexplicably falling on our heads. The major culprits behind these hysterias both in the media and in politicians attempting to throw blame on previous administrations both justified and not fail to present an understanding beyond which that satisfies their agendas. Samuelson rather simply shows that, within the last generation, we have had a fairly stable and solid monetary policy that tends to be both effective within the business cycle and overall. He would point to the nature of the fluctuations of our GDP after the institution of the Fed and claim, and rightly so, that we have reduced the massive fluctuations that created those massive downturns. He also rightly warns of the risk of inflation if the government over-reacts to the matter as they did in the seventies. While the short term unemployment might spike, he urges that we show fiscal and monetary restraint, and remind ourselves that this too shall pass. Yes, this is an unfortunate downturn, yes, our GDP will drop and our unemployment rise, but no, this isn't a catastrophic downturn. So far, even though the credit crunch has all but destroyed Countrywide, the GDP damage is only like .4%. On a personal note, I liked the article, as I like almost any article putting things in proper perspective. We need to understand, both as economists and as people, that sometimes jumping in and acting as if every bad thing is an emergency, we do real emergencies an immense injustice, and soon we can't judge the difference between the merely unfortunate and the true crisis on the horizon.
“Hold the Hysteria” an article written by Robert Samuelson talks about the current condition of our nation’s economy. It is believed that our economy is slipping into a recession, but according to Samuelson this is hardly the case. There are two main “hysterias” that is causing the people to go into a frenzy and panic so to speak. The first of the two is the prices of homes are drop while the price for gas continues to rise. Next we have the idea of a financial meltdown and panic. Although it is not evident that the economy is in recession, but it is true that it has slowed down a bit. Accordingly to Samuelson, our economy has been stable thus far. He points out that even though the economy has hit a rough spot but it is not quite as bad previous occurrences. With some help from the government most business cycles are able to correct itself.
“Government can help smooth business cycles and prevent financial panics. But if it's too aggressive, it may make matters worse” and with what we have learned in class this proves to be true. For example if interest rate was too high the Feds can print out more money to stabilize it. But if they print too much it can also cause a problem as well.
Personally, I thought this article was well written and it included everything that needed to be said. It was not overcrowded with only facts and statistics but Samuelson included things that people needed to know. I believe that one should not just take in what they hear from others or the media. They should also learn to understand what it is that is being said to them. Most of us just take in information without ever comprehending it. This article is a good example, it lets people know about the economy’s status but also let them be able to comprehend what is being written in the article as well. There is always two sides to a story, and one should know about both sides before they can be able to say that they know what is going on.
In his article, "Hold the Hysteria," Robert Samuelson talks about the near panic displayed by many people in regards to the current state of the U.S. economy. This panic is for the most part unfounded, fueled mostly by politicians and members of the media looking to put out a juicy story. Even if we are in a recession, recessions are bound to happen. As the article states, there have been 10 since World War II, and even if the peak unemployment rate does reach the projected 6.1 percent and GDP does fall .4 percent, this would be a mild recession at that. A large part of the hysteria is caused by the belief that the economy is highly unstable. However, this is not the case. As Samuelson states, most markets are largely self-correcting. Given time, they will tend to level out. As for those that would compare our current situation to the great depression, there is not much of a comparison to be made. As Samuelson points out, current unemployment is about 4.8 percent, as opposed to 18 percent in the 1930s. Revisions in government policy and a better understanding of economics would prevent what happened then from happening now. The United States is presently better equipped to deal with things such as rising unemployment, etc. As Samuelson says, "If catastrophe strikes, it will probably result from something we don't now know or we haven't yet imagined."
In Robert Samuelson’s “Hold the Hysteria”; he explains why America should not be concerned about another depression. He compares and contrast past economic slow-downs or recessions and then dispels fears that the U.S. is headed for another depression.
He does note that the economy is slowing down, but not at an exception rate compared to other slow-downs. He describes other periods of slow-down as having average unemployment rates of 7.6%, while our current economy is only experiencing 4.8% unemployment. He describes past slow economies with average GDP declines of 1.8% then projects a decline of .4% for the current economy. He then goes on to describe the nations fears of a “bear market”, which is a 20% drop in the Standard and Poor 500. He noted that at times our market has been close to 20%, but that since 1936 we have had 11 bear markets with an average decline of 34%. We are nowhere near that now.
Samuelson blames the nation’s economic fears on media exaggeration, political finger-pointing, and complaining from “Wall Street Types”. Given the past cycles of economics ups and downs, he explores two possibilities for our slow-down: Are we in the middle of a highly unstable economy or are we simply experiencing a low point in a self-correcting business cycle? He goes on to describe his opinion that the markets being affected will self correct. He says that more buyers will come into the housing market as prices continue to fall which will cause construction to increase, creating more jobs. Businesses will reduce spending in order to repay debts. After the debts are repaid spending will increase again. But the most important points he makes is that the government will help smooth business cycles and reduce financial panic. This is the big difference between today’s economy and the economy of the Great Depression. Had the government been willing to bail out banks in 1929, financial panic would not have ensued and massive bank failures might have been avoided. All in all, Samuelson provides good arguments as to why we should not be panicked over the possibility of a depression and I tend to agree with him.
Response to “Hold the Hysteria” by Robert Samuelson
I agree with the author of the article “Hold the Hysteria”, Robert Samuelson, on his views that the United States’ economy is “hardly in a state of collapse.” I understand that our nation is experiencing a slowing or weakening economic state, but as we discovered in class, our country is no where near the state of the American economy nor close to what the American people experienced during the 1930’s and the Great Depression. In class, we discussed the economic conditions during the worst time of the Great Depression. In 1933, United States witnessed about 25 percent unemployment, large drops in real GDP, consumption, and investment.
There are many reasons why I believe that Samuelson feels there is no need for the people of the United States to panic over the present economic conditions. The first is because although the economy has declined, this decline has been minimal. The example provided by Samuelson in is article is that “Americans are expected to buy about 15 million vehicles in 2008; though down from 16.5 million in 2006, that's still a lot.” The United States is obviously not doing horrible if they can still manage to buy so many new cars. This year, we may not buy more cars that are new but we not dropping our consumption greatly. If the United States is experiencing or eventually entering a recessions, it will be mild compared to recessions of the 1990-91, 2001, and milder than the average postwar recession.
What I feel is the main reason why Samuelson feels that the Americans should remain calm is because most of the news and information that they hear is media hype. Samuelson writes that the present hysteria over the economy comes mostly from political finger pointing, “whining from Wall street types”, and a disagreement over whether the economy stable or unstable. The Author feels that if the American people remain calm, the market and economy will eventually right themselves. There is very little chance of another Great Depression happening in the United States. The government has implemented many programs and plans with the purpose of insuring this to the American population.
Robert Samuelson’s article entitled “Hold the Hysteria” talks about whether or not we should be frightened in the midst of the economy’s current state. Following the burst of the housing bubble, people have been whipped into hysteria about a coming recession. Samuelson acknowledges the fact that the economy has in fact slowed down, but remains confident that the economy is not at all doomed. People are frightened now for a number of reasons (other than a lack of knowledge) – rising gas prices, fewer jobs, and the aforementioned housing bubble. Even The New York Times went as far as to say that the economy may be on "the brink of the worst recession in a generation." Samuelson adds that the “evidence is scant.” He also adds that many markets are self-correcting, and that the government can help smooth business cycles. But even if a recession has already started, Samuelson notes that Mark Zandi of Moody’sEconomy.com has forecasted “peak unemployment of 6.1 percent (present unemployment: 4.8 percent) and a GDP drop of 0.4 percent.” If true, then that would indicate this 2008 recession would be even more mild than the last two (from 1990-91 and 2001).
But is the economy highly unstable, or is it capable of self-correcting itself? This argument is as old as economics has been around. Those who do think it is unstable feel that when housing prices fall, creating more foreclosures, the losses on the mortgage increase and erode the capital of banks which forces them to decrease lending. But Samuelson disagrees and adds that the housing prices will fall, and more buyers come into the market which revives sales and construction. It will basically correct itself, along with the government helping to smooth over the business cycles and help prevent financial panics.
The media is also blamed for all the doom and gloom. In my personal opinion, I feel it is typical that people are buying it. Most people do not exactly have a firm grasp on the fundamentals or theories of economics, and therefore are more susceptible to believing things that have no ground to them. With the gas prices, and such “reliable” sources like The New York Times telling people that the sky is falling, it is to be expected. So with no hard evidence of a coming collapse, it can pretty much be said that a lot of the fear-mongering stems from the natural human tendency to panic.
This article talks about the current state of our economy. The idea behind it is that when things are going bad they are only going to get worse. In terms of our economy this could mean a recession. Samuelson disagrees with this idea. He talks about two ‘hysterias’ which cause individuals to freak out. One of which is about financial problems and the other deals with gas prices increasing while the prices of houses decrease. This all stems from the idea that politicians and media personnel pass blame that doesn’t show a high level of understanding beyond their own agendas. Samuelson believes that we have a stable and effective monetary policy. He goes on to compare and contrast today’s economy with that of the Great Depression. Samuelson thinks our economy has seen worse and with government aid the cycle will correct itself.
I agree with Samuelson and this article. While the economy may be declining, it is doing so at a minimal rate. In the article, Samuelson talks about the current unemployment rate and how is it much lower than it was in the 1930’s. A main reason for it being lower is because of better government planning. This goes along with his statement “the government can help smooth business cycles and prevent financial panics.” We learned in class that when interest rates are high, the government can print more money to the level things. It is important to keep in mind that printing too much money will cause more problems. This correlates with Samuelson’s idea that if the government is too aggressive it may make matters worse. I think this article does a great job of stating facts and bringing information together. It shows that it is important to have all the facts before making assumptions.
This article discusses about the general perceptions people develop about economic conditions in the United States, especially about recessions. According to the author, these perceptions develop from exaggerated information produced by media or predictions from pessimistic experts. These kinds of hypes lead to popular panic that the economy is in terrible condition. The author do not disagree that the current economic situation is not at its best shape and there are reasons to be concerned, but he disagree to the degree of the potential economic problem as projected by media or perceived by people. According to him the United States had faced recessions earlier and recovered eventually so there is no reason for the panic. He quotes New York Times saying the U.S. economy may be at “the brink of worst recession in a generation”. The author thinks there is disconnect between what people see around them and what is told to them. People see rising gas price, falling home prices and unemployment, that makes them upset and they are told that these are indicators of some catastrophic event to happen in future. This causes the panic. There is little evidence that the U.S. economy is about the face any major catastrophe. There have been 10 recessions since World War II, three of which created some noticeable impact in the economy. Occurring in 1970’s, 1990’s and early 2000, these recessions lasted on average 20 months and involved in 34 percent decline in output growth. The author considers these recessions no way comparable to the Great depression. U.S economy is huge, $14 trillion, and reverses in such a huge economy is normal. So there is no reason to panic about it. According to the author these panics not only develop from exaggerated projections from media but also due to disagreement about economy’s stability and ability of market forces to correct economic instability. Pessimism about economy raises concern that the current economic conditions (housing price fall, unemployment, fall in output growth etc) will eventually lead to Great depression. People tend to forget that a massive bank failure converted an ordinary recession to Great depression and during that time period U.S economy was structured differently.
This article is a humorous presentation of the panic in the mind of common citizens in the United States. It did a nice comparison of the economic situations of different periods of recession and how incorrect information and skepticism can cause panic in people’s mind.
This article by Robert Samuelson is a much needed breath of fresh air. A voice of reason to offset all those voices that shout for panic. Americans seem to believe the Great Depression to be some kind of Economic bogeyman at that this current slow down that we are in is his return. This is pretty ridiculous as Samuelson points out in his article. There is no doubt we are currently experiencing an economic downturn. This would be the eleventh time we have had a so called recession since World War Two. This would be the third time in the last fifteen years, and even then Samuelson predicts it won’t bas as bad as the one in the early nineties or the one in two thousand and one.
Samuelson is not blowing the current economic downturn out of proportion. He points out that so far the weakness in the stock market has not been that disastrous, that it has been blown out of proportion. People fear the economy as being highly unstable and so panic. These fear mongers who view managing the economy like running with an egg in a spoon, that the slightest trip will bring the egg crashing down. But if the market is self correcting, like it has been for the last sixty years then, to be quaint, it will correct itself. As Samuelson points out that the low housing prices will lead to more buyers coming into the market, and so forth. All of this is the market reacting to re align itself at the equilibrium. He also points out that if the Government acts to aggressively to correct the current down turn, like it has done in the past, that could lead to an actual crisis, like massive inflation. People who compare today to the Great depression are deeply mistaken and most likely have some kind of ulterior motive.
I think it is really good that Samuelson has come out and tried to put peoples fears to rest. If people start to panic that what starts as a minor recession could potentially become something much more disastrous. In situations like this we have to depend on people not giving into their fears about the market being unstable, and listening to logic and reason.
James Walsh T-Th 1 to 2:30
Hold The Hysteria
This article deals with a topic which is of great controversy among the people in the United States. It is obvious that with the economic situation we are currently facing the people spending has decreased, the production and jobs are declining but are not yet collapsing although many people say otherwise.
Financial markets for stocks and bonds are also considered in the down slope and people are already talking about a recession and even worse a second Depression. Meanwhile, Americans continue to spend money and are expected to buy about 15 million cars in 2008; 1.5 million less than 2006. For a economy a entering a steep economic downturn and possibly heading to a recession that’s still a lot of cars.
People are scared for what they see around them and what they hear and are told. The first point is the rising gas prices, falling home prices, and fewer jobs. All Americans see this because they are facing it every day when they put gas to their car, can’t pay their mortgages and get fired from their jobs. The second point is “the “panic,” financial meltdown that suggest the onset of something catastrophic and totally outside the experience of ordinary people.” (Samuelson) Even The New York Times says the economy may be on “the brink of the worst recession in a generation.”
It is obvious that the economy is slowing down and according to some economists a recession has already begun. There are many reasons why people are believing what they are told. First, media hype; political finger-pointing that is exaggerated, whining from the Wall Street and disagreement over whether if it is the economy that is not stable or if it is business cycles are mostly self-correcting. The author has a response for all the arguments that direct us to a recession and blames the “government policy- excessive rigidity by the Federal Reserve-actually aggravated the banking collapse.” (Samuelson) At the end the author assures that if a catastrophe were to happen, it would be from something that no one knows about or ever thought.
The lack of panic is because the author is sure that it is just a cyclical process. Recessions don’t last forever and he is not afraid of another depression. Just as the U.S. has gotten through other recessions in the past, the author is confident that this time will not be different. The author trusts his government and he feels confidence.
What I learned in class from the only Great Depression in the United States is that in order for a depression to occur the money and prices must fall as well as the interest rate. Although many of this facts are currently happening I am confident that the Government, Federal Reserve and Congress will not make the same mistakes twice. I am sure that it is only part of an economic cycle and that any time soon the United States will continue to grow economically. My personal reaction to the article is that the author does have good arguments of why to think we are not heading to a recession but the facts, statistics and numbers say the contrary.
“Hold the hysteria,” by Robert Samuelson expressed economic hysteria in his article. The article starts out with the current situation of the economy and how it is entering a recession, possibly. Is it really worth all the hysteria? According to Samuelson, it is not anything close. The author talks about how there are a lot of people overreacting to the current economic situation which is not necessary. What people hear is to blame for their reaction to the economy. Samuelson goes on to explain the fact that there have been numerous recessions and economic downfalls and this particular recession is not something to get all hysterical about. He even talks about how recessions are for the most part self-correcting.
Stated in class, as well as the article, recessions are repeated periods during which gross domestic product (GDP) falls. History has shown and the article also explains there have been a number of shocks to the economy. In the 1930’s the depression happened which is a severe decline in GDP but nothing to that extent has happened to date.
I feel it is important that more people are informed about the economic situation. Many people are overreacting to what is going on with the economy. The media should remind the public that this is not the first time a recession has happened and will not be the last. I feel people should not worry about this or get worked up. The author did a great job with the article. I liked how he stated his claims and backed them with numbers and statistical data. He even gave some history about the economy's past recessions after the depression. The fact that unemployment may reach as high as 6.1% and GDP may fall 0.4% is not something I would get all worked up about, its been worse.
Robert Samuelson’s article, Hold the Hysteria, is a reality check for those concerned about the state of the American economy. Samuelson says that Americans are lead to believe, incorrectly, that recessions are both uncommon and disastrous, while in fact they are neither. Americans are expected to purchase nearly fifteen million vehicles this year, which is down slightly from last year. Also the author notes that there have been ten countable periods since the Second World War, which have followed the historic traits of an economic recession. A recession is a period in history where there is a decline in output. Typically a recession last for 10 months and includes a rise in unemployment. Samuelson admits that the American economy has slowed but believes this recession to be milder than the recession in 2001 and the recession of the early 1990’s. He goes on to say that the weakness of stocks is “unexceptional”. Fluctuations in the stock market are common and only after a drop of twenty percent or more should the term “bear market” be used. There have been eleven bear markets since 1936, the last being the tech bubble from 2000 to 2002. A bear market typically last for twenty months and usually involve an overall decline of thirty four percent. Samuelson blames the causes of economic hysteria on the usual players including: media hype; political finger-pointing; and Wall Street whiners. He explores the possibility hysteria may lead from disagreements over whether the economy is largely “unstable or whether business cycles are mostly self-correcting”. Samuelson proposes that only forceful government intervention can help if you believe economies are unstable, however if you believe that markets self correct, heavy government intervention can be detrimental, as seen in recent Chinese history. Dependent on which philosophy you accept, recent activity may impact ones fears and opinions on our impending recession.
Often the media is blamed for panic crated from the lack of unbiased information being fed to citizens, but when does the responsibility of being well informed become that of the citizens, themselves? The average American, I believe, only knows when to be concerned about economic policy when the media informs them that this is a time for concern. While reading this article I became relived to find, this recession, that we are in the midst of, is expected to be milder than the previous recession. However the authors final remark, “if catastrophe strikes, it will probably result from something we don’t now know or we haven’t yet imagined”, is concerning.
The article,”Hold the Hysteria” talks about how people believe the economy is entering a point of recession or some people believe it is a depression. The article states that the economy has not collapsed and gives an example of the expectancy of how many cars the American will buy this year. The article predicts 15 million vehicles will be bought this year compared to 16.5 million in the 2006 which the writer believes it is not a big deal. The article also point out that there are two types of people: the people that believe what others say and the other that analyzes what is around them. The article also points out that many economists believe the economy has entered in recession but believe it is not as terrible as other times. Also, it points out that stock had declined for an extended amount of time calling it “bear market”. Stock had not declined since 1936.
Another major point that the article approached was that housing prices decreased and consumers were buying housing. Also it points out that if a consumer or a business had serious debt they would decrease their spending and pay on any loans owed. The article brings out a main point that the government policy has a lot to do with how the economy deals with matters such as the bank collapsing. Basically, the articles main point is the government has a lot to do with how situations are dealt with and the economy have not entered recession or a depression.
The article states many points that are understandable but the writer seems too calm about what is going on with the economy. For instance, a decrease in jobs affects the amount of income a person will receive. The decrease in the housing price will make consumers buy a house because of the low rates. The writer also seems too calm writing about the market being a “bear market”. The stocks have declined 34 percent for 20 months. Overall, this article gives good points but seems too calm about what is happening in the economy.
In my opinion, I believe this article make the issues of the economy seem like nothing is happening. Prices are increasing and the job rate has also decreased. Stocks have also declined. I believe the economy is entering a period of recession but it is not as bad as other downfalls in the economy.
Samuelson tries to put the current market slump into perspective compared to other slumps in American history. Historically he states that we see an average peak of 7 percent unemployment and less than a 2 percent decrease in growth, as compared to a current 4.8 percent unemployment and only .4 percent decrease in growth. Considering the numbers he is correct to say that the current recession, if we are indeed in one, is not as bad as any of the recent recessions and no where close to the great depression. Many fear that the current economy is unstable and could lead to another great depression while he is optimistic that our economy is stable enough to withstand a slight downturn.
As much as I like and prefer the optimism of our stable economy and that there is nothing to worry about considering past situations, I am going to have to take an opposing stance to him and most of the other comments on this blog to a certain extent. While personally I do feel safe that we will not plummet into 30 percent unemployment and massive depression I do feel that people are missing a big portion of the global picture. He casually puts some blame on the business cycle and that this little turn could just be cyclical. On this case at least in the United States, poor credit practices and multiple bankruptcies in the subprime market would not be considered part of a business cycle. Secondly in the very near future energy, water, and food supply worldwide will be a great concern, but currently energy is already taking its toll on economies world wide. And lastly he blames some hype on the media. Well in today's very wired and wireless connected world information and misinformation are widely available. The news of a thousand jobs laid off in the United States travels quickly compared to the past. Lastly, the economic problems abroad are more of a factor today then ever before. Just because right now the Unites States is stable does not mean that our ever growing trade deficit will not be a factor in our economy.
Currently we might feel we can bounce back for this downturn, but we need to be ever more cautious and understand everything around us before we say that since we haven't caught up to the past it cant get any worse. As much as I would like to continue in discussion with this topic, there is only so much I can write.
“Hold the Hysteria” by Robert Samuelson is an article dealing with people believing in the snow ball effect. One thing goes wrong then another followed by another. In the end it is a large ball of bad things. Many people believe that we are going into a recession by the author thinks it may just be economic slowdown. These are present in any business cycle. We have had some higher unemployment which “forecasts peak unemployment at 6.1 percent.” This is very minor compared to past recessions. The two worst recessions since the Great Depression hit unemployment levels of 10.8 and 9 percent. We are far from those numbers. With higher unemployment comes lower inflation as they are inversely related. This is a good thing for the economy as a whole. It will help drive prices down in the long run. The government is ready to handle these situations better than in the past. They have learned from their mistakes. But if the government is “too aggressive, it may make matters worse”. If the Fed increases the money supply to much then we will have lower interest rates to spark the economy but we will also have lower exchange rates, which we are see now.
The whole tone of the article is to get people to settle down. Panicking about this can make things worse. Things are not bad as the media or presidential candidates want you to believe it is. These are just tactics used by them to get better ratings. They are looking after themselves and not the economy presently. Given time the market will self correct as any good market does. If things do get worse then “it will probably result from something we don't now know or we haven't yet imagined.”
The stock market is still stable. Stocks have fallen below 20 percent indicating a bear market. They are still nowhere near as bad as other recessions. During the periods of “1937-1940 they fell 60 percent and 50 percent between 1973-1974 and again in 2000-2002. Things are not nearly this bad. Stocks would have to fall again by 40 percent before people started to worry.
Robert Samuelson’s main point in this article is that things aren’t as bad as they may seem. He says yes, we are in a slump, but it is normal for the economy to have ups and downs. He points out that there has been ten recessions since World War II. If allowed, the economy has the power to correct itself, and if too much is done to assist in the correction, more problems could arise.
One example he gives of this self-stabilizing mechanism is in respect to the housing price crisis. Values of homes are falling causing foreclosures and mortgage losses, but in time the falling prices will cause more people to enter the market for homes. If left alone, instead of the downward spiral that many believe is happening, the country’s economy will rebound from this recession as it has many times in the past.
Samuelson’s discusses how the current rates of unemployment, the slowing growth in gross domestic product, and falls in the stock market are nothing to be too concerned. All of these have been much worse in the past. Samuelson mentions one economist, Mark Zandi, who believes we have already entered a recession, and predicts that unemployment rates and decreases in GDP will be much less than they have been in other recessions.
If the government or Fed steps in to assist the market that is already self-correcting itself they could possibly cause more harm than good. A moderate amount of assistance in boosting the economy could be helpful, but if too much is done inflation could sharply rise.
Many people believe that we are worse off than we actually are. This could be caused by a number of different things. Samuelson says that it could be caused from, “media hype; political finger-pointing -- always given to exaggeration; and whining from Wall Street types.” He also says that some people just believe that the economy is unstable and is unable to correct itself. This could be caused by something we discussed in class from another article called the pessimistic bias. This bias causes people to always have a feeling that things are getting worse when they is really no need for concern.
The article by Robert Samuelson is a very interesting one. It talks about the state of the U.S. economy and the fuss surrounding the recession and the expectance of a depression. In this article, Samuelson tells is that there should be no cause for alarm as it is a recurring trend since WW II. Infact, it is not even as bad as the last two in 1991 ans 2001.
The stock market is another issue the aritcle touches on. Samuelson talked about the previous shocks to the stock market and how this current crisis does not compare to the previous ones; not even the one in 2002. All these problems are recurring trends that can be fixed by the government. However there are many opposers who would point to the great depression and how government involvement in banking policies led to the collapse of banks.
The answer is; government has to intervene to prevent the problem from goimg any further. Yes this has a high risk of full blown depression, but if the government regulates itself a depression can be prevented. Even Samuelson acknowledges that the government could be the answer to this problem.
This article was amazing, first of all. As the gas prices skyrocket and we come off of an awesome 14 trillion dollar bender of an economy so used to relative security that we panic at the idea of a massive recession, or worst still, an epic depression at any given moment. I like his references to cyclical economic long term trends, like the 10 noticeable declines in economic output since World War II …the most notable being between 1981-82 and 1973-75. Yet even then, the economy did not crash and burn. In fact, our economy is a self correcting one. As the housing situation deteriorates, and the prices are driven downward, and the foreclosures go up, there is actually an entirely different market that opens up, as opportunistic buyers capitalize on the low price tags.
The truth is a lot of these rises in inflation and declines in output we do feel on a micro level. It does affect us, of course, but it isn’t the bottoming out that the hype suggests. The point raised on too much government invention via the Federal Reserve actually further aggravating the situation is entirely true.
And as far as why he feels so little panic in reference to the Great Depression, the economy is not reflective of the economy of the 1930’s. The Great Depression was steeped with 18 percent unemployment, where as now we peak at a 7.6 percent at our worst hour. The conditions of the nation were entirely different too. This country is a different place then in the 1930’s. We are in a different age of industry and information travel as well, with a broad world market, not too mention ridiculous advances in technology and industry.
So the slow economy is reflective of what we should have come to understand and expect at times of decreased output, and really the climate of panic in the country in these more polarized political times, and in the age of instant gratification, is probably to be expected.
This article was amazing, first of all. As the gas prices skyrocket and we come off of an awesome 14 trillion dollar bender of an economy so used to relative security that we panic at the idea of a massive recession, or worst still, an epic depression at any given moment. I like his references to cyclical economic long term trends, like the 10 noticeable declines in economic output since World War II …the most notable being between 1981-82 and 1973-75. Yet even then, the economy did not crash and burn. In fact, our economy is a self correcting one. As the housing situation deteriorates, and the prices are driven downward, and the foreclosures go up, there is actually an entirely different market that opens up, as opportunistic buyers capitalize on the low price tags.
The truth is a lot of these rises in inflation and declines in output we do feel on a micro level. It does affect us, of course, but it isn’t the bottoming out that the hype suggests. The point raised on too much government invention via the Federal Reserve actually further aggravating the situation is entirely true.
And as far as why he feels so little panic in reference to the Great Depression, the economy is not reflective of the economy of the 1930’s. The Great Depression was steeped with 18 percent unemployment, where as now we peak at a 7.6 percent at our worst hour. The conditions of the nation were entirely different too. This country is a different place then in the 1930’s. We are in a different age of industry and information travel as well, with a broad world market, not too mention ridiculous advances in technology and industry.
So the slow economy is reflective of what we should have come to understand and expect at times of decreased output, and really the climate of panic in the country in these more polarized political times, and in the age of instant gratification, is probably to be expected.
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