Monday, October 20, 2008

The Fear Index 

This is a good explanation of the VIX -- the volatility index that is also called "The Fear Index." Note that some call it a self-fulfilling prophecy. The more people focus on it, the more volatile it becomes. That is the definition of panic.

What will it take for markets to settle? A mass belief that the economy is going to be OK such that money sitting on the sidelines re-enters the markets. The breakdown in trust is so high at this point that no amount of jawboning will instill confidence. The White House is correct when it says it will take time for the economy to turn -- time the present administration doesn't have.

The next administration that is certain to be Democratic will have a hard job on its hands to turn around the incredulity of the business community. It won't have much time in which to do it either. If it fails, the US will be stuck in neutral and throwing money at the problem. If ever there was a time for an effective communications program that could help re-start economic activity, this is it.


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