As President Franklin D. Roosevelt famously once observed: “The only thing we have to fear is fear itself”. At the tail of end of an historic bull market, with an ongoing trade war, bond bubble and worrying signs of impending recession, policymakers should take note of, given the findings of research by Philippe Bacchetta and Eric van Wincoop into the causes of the Great Recession. As the two academics reveal, it can be a comparatively short step from boom to bust, once negative sentiment begins to drive a self-fulfilling chain of events that can quickly evolve into a panic driven, full-blown global economic crisis. A panic that would make the difference between an economic slowdown and another deep global recession.
5 min read Continue reading The economic cycle of fear: Will panic fuel the next global recession?