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Politics and Panic

September 27, 2008

Two aspects of human behavior - politics and panic - need to be kept out of the reaction to the current financial situation. Both are counterproductive. Both would aggravate the problem.

Concern has grown to the point that The Associated Press has begun referring to the situation as the "worst global financial crisis since the Great Depression." Throughout the world, government leaders, central banks and other financial institutions believe a genuine emergency is in progress.

We do not mean to adopt an unrealistically optimistic view - but we believe that the economy is basically sound.

Tighter credit markets and plummeting stock prices reflect more a loss of confidence than any real flaws in the vast majority of companies, including financial institutions.

Certainly, some very large financial institutions have suffered meltdowns. Some have been sold at bargain-basement prices. Others are in bankruptcy. A few big ones have been taken over by the U.S. government. But that will make the economy stronger, not weaker. Consumers and investors should not allow panic to guide their financial decisions.

Politicians should refrain from demagoguery - as difficult as that will be for them.

Tough times lie ahead - but they need to be addressed rationally, not in a self-fulfilling defeatist manner.



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