The word no one wants to use: Panic. It is what economists used to call economic downturns. Thought I would post an interesting description of what a panic is from Clement Juglar.
From Clement Juglar’s A Brief History of Panics and their Periodical Occurrence in the United States, 3rd edition. Available for free through google books.
A panic may be broadly states as due to overtrading, which causes general business to need more than the available capital, thus producing general lack of credit. Its precipitating causes are broadly anything to do with overtrading. (Credit default swaps, housing speculation . . .)
In the United States they may be classed as follows:
1. Panics of Circulation, as in 1857, when the steadily increased circulation, . . . had rendered it very easy to grant excessive discounts and loans . .
2. A Panic of Credit, as in 1866, when the failure of Overend, Gurney & Co. rendered the whole business world over cautious, and lead to a universal shrinkage of credit.
3. Panics of Capital, as in 1847, when capital was so locked up in internal improvements as to prove largely useless.
4. General Tariff Changes. Luckily, we haven’t hit this panic yet.
The symptoms of an approaching panic, generally patents to every one, are wonderful prosperity as indicated by very numerous and schemes of all sorts, by a rise in the price of commodities [Sound familiar?], of land [Ring a bell?], of houses [ Holy cow!], etc, etc., by . . . a lowering of interest, by the gullibility of the public, by a general taste for speculating in order to grow rich at once, by a growing luxury leading to excessive expenditures, a very large amount of discounts and loans . . .
Juglar is famous for his business cycle theory: Prosperity, Panic and Liquidation (The Juglar Cycle). We are not in Panic mode - moving to Liquidation mode. Hang on tight!
Games to play in a Panic!
Panic: The Great Wall Street Game 1903 by the Panic Card Co.
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