Socially Constructed Reality

“The fear is spreading. For months now, investors have been lured to overseas markets with the promise that surging growth and solid economic fundamentals in Asia and the Middle East would insulate them from the credit squeeze plaguing the United States market.

“But the broad international sell-off on Monday — and the prospect of a steep market decline in the United States on Tuesday — raised fresh concerns that a looming recession and the fallout from subprime mortgages could have global repercussions.

“Some analysts saw the sell-off, with leading indexes off 4 percent to 7 percent worldwide, as being driven by fear more than by fact.

“‘I don’t think it’s warranted by the fundamentals,’ said Edward Yardeni, an independent strategist. ‘The resilience of the global economy in the face of a credit crunch has been impressive.’

“Mr. Yardeni warned, however, that in a time of panic and fear, less attention is paid to fundamentals, like a fairly tight United States job market and strong growth and the extraordinary buildup of foreign exchange reserves in emerging markets. The result is panic selling and the prospect of a global recession. ‘People are creating the financial violence that they hoped to avoid,’ he said.

(“To Some, the Widening Crisis Seems Driven by Fear, Not Facts.” Landon Thomas, Jr. www.nytimes.com, January 22, 2008)

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