Currently everyone is obsessed with the movements of stock exchanges, exchange rates and oil prices. Each news bulletin seems to start with the latest percentage fall in the FTSE, the Dow or the Cac40. We are able to monitor the changes in near real time via feeds from the BBC, BFM or CNN and can feel close to the action and depressed or elated accordingly. But is this a good thing?
I remember being at an Operational Research Society conference a number of years ago, and listening to another delegate commenting on the phenomenon of slowing traffic and stopped traffic on Britain's motorways. His view was that there was a phenomenon of brake light traffic jams, where a car slows using its brakes, and the one behind slows as well using their brakes and as the phenomenon goes down the line of drivers, the effect magnifies until traffic comes to a halt for no obvious reason than weight of traffic compounded by someone using their brakes about 15 miles and 15 minutes ahead of you. In areas where there is little traffic, you don't get the same effect.
Now I can't help wondering if an element of the current fall in share prices isn't following the same form of phenomenon. Despite the extra funds being pushed into banks and the support from the IMF, at the moment (to be VERY precise as these things change by the hour - so 10:36am GMT on Monday 27th October) the main European exchanges are all showing falls of between 3.64% on the Dax, through 4.81% on the FTSE to 6.18% on the Cac40. But they are following the lead or the red brake lights of Tokyo and Korea who fell overnight. We need one of the indices to not show red, so that others can take their feet off the brakes and let the rescue packages do their thing.
Of course the fly in the ointment is always those who decide, once there has been some growth again, to take their profits, which can push things back again. We do need to stop seeing red all the time however, if any sort of confidence is to develop.
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