Wall Street Can't Control The Contigious Panic of The Marketplace

The panic and anxiety that rocked Wall Street to its core in the space of a few minutes last week has been blamed on both technological malfunctions and human error. But whatever the cause, panic and anxiety could well be compared to an incurable neurological disease that is likely to be even more disruptive in the future.  No amount of technological interference can forestall the inevitable – a far more severe sell-off that will have investors running for the hills and buyers disappearing.

Our global interconnected financial system is akin to a nervous system without a brain; panic and anxiety can spread like a contagion and infect all corners of the market.  What occurred last week was an anxiety attack caused by some financial neurons going haywire with over-stimulation.  This happens to many Americans every day; and last Thursday, it seemed to strike nearly everyone on Wall Street.  Traders were suddenly struck cold with fear that was reminiscent of a patient with a severe panic or anxiety disorder.  So far, at least, this patient has failed to be diagnosed correctly.

Panic and anxiety are natural features of the human condition, and one that plays a necessary role in the world of financial markets.  But this panic was so acute, so sudden, that it brought to mind Black Monday in 1987 or the historic panics of the 19th century.  When a patient with panic or anxiety problems enters treatment, there is any number of remedies that the doctor may prescribe to the patient. 

But what happens when, as in the global financial system, the panic and anxiety attack not just the central operator (the brain, in this analogy), but the entire nervous system itself?  The body has mechanisms to heal itself when crippling fear and panic arise.  The markets have no such self-healing method.