Market panic: Should we trust it?

Mark Perry at Carpe Diem has an excellent post comparing the 1991/92 recession to the current recession in terms of “media reporting”.

As he illustrates in his post, the constant comparisons to the Great Depression also occurred during this time – even though for the US it was a relatively mild recession.

Although I am a little more pessimistic about the current outlook for economic growth than Mark Perry is, I agree with his point, and think that it is especially relevant to today – there is often an incentive for people to exaggerate the severity of a crisis (to sell papers, or extract surplus from government).  As a result, instead of just buying the hype, economic commentators should try to keep in mind what is fundamentally going on – whatever you think that is 😉

In terms of New Zealand we should also remember that 1991/92 was a terrible recession – unemployment reach 12% and average income (according to the GNDI) fell 10%.  Even a repeat of this type of recession is a cause of concern for us here in little old NZ.