The Market Frenzy (or, How the Economy Falters Under Consumer Fear)

I'm not an economist, not by any stretch of the imagination. Even with some of the reading I've done recently, I don't have the best grasp of the concepts involved, which is odd, as I've always had a penchant for theoretical mathematics (albeit, I doubt the market works under the principles one finds in Chaos mathematics and Fuzzy Logic, even though it seems it might).

What I have come to understand, however, is that invested funds, either in a simple interest bearing bank account, piled into CD's, IRA's, stocks, bonds, etc., are the pillars of our economic system. The institutions holding these funds are using them as their financial backing and, to a degree, their worth. Without the money of the individual citizen, these organizations, companies and institutions cannot effectively operate.

This is where fear takes its toll.

A large financal entity starts to crash... and we, as consumers, read our daily news, which always has the worst to say. We wonder about our savings, our investements... we worry about losing them, of course, which is an understandable reaction. We react by pulling our funds out of the hands of the institutions in order to save whatever scraps we can.

And the system continues to fail.

What we don't do is the 'math'. We don't take into account the consequences of our actions. Imagine the following example:

The economy starts to buckle, as it is now. Fifty million citizens begin pulling their funds out of the market. Let's say, between varying incomes, fiscal personalities and lifestyles, the average funds pulled are $50, 000 per citizen.

That's $2,500,000,000,000. Yes, two and a half trillion dollars. Right out of the market, no longer in the system.

It would scare the hell out of me at only twenty percent of that amount, because that is some of the money fueling the success of our economy.

Now, I don't entirely agree with our seven hundred billion dollar bailout... not in the overall practice of it, at least, but the theory is sound. If we pour money into the system, it should help to stabilize it. It's exactly what the government did during the Great Depression, albeit a few years later than they should have (I believe it was 1932 when they pushed money into the banks). It began part of the process that pulled our economy back on track. It worked... and it's exactly what they're trying to do now.

We, as citizens, might not appreciate the use of our tax dollars in this venture. We might cry out, "Why save those who made the bad decisions? Why should they profit when we, the poor, the middle class, lose everything we've worked to gain?"

It's a simple answer. If they don't, we will be exactly where we were at the beginning of the Depression. And there won't be any blame to cast on a single target. It's not the fault of Presidents, current or past nor the fault of any political party or faction. It's our fault, however, if we continue to pull our money out of the system.

And it's fear, again. A fear we need to control, lest it cause further, irreparable damage.

As for me, personally, I'm in the lower income bracket. I don't have a savings account or a stock portfolio. I don't have any immediate money to lose. However, a wounded, dying economy means a weaker job market... it means my employer may go out of business. It means myself, and many others who aren't immediately affected, will be unable to readily support our families.

I've read some of the books...I've watched history documentaries. I, for one, do not wish to relive what my great-grandfathers experienced. I'd rather handle the fear of the present situation and let it slide on by than deal with the fear of being unable to provide for myself and my family.

So, no, I'm not an economist. I'm a simple 'working class' man who offers this advice: Don't pull the supporting pillars out from under the institutions, no matter how much you might distrust them at present. You'll lose much, much more in the long run than you will right now... and I'm not referring to just monetary matters.