Image credit: Frank Bellew, “Panic, as a Health Officer, Sweeping the Garbage out of Wall Street,” The Daily Graphic, Sept. 29, 1873, Library of Congress
By Jason Zweig | 12:05 pm ET Jan. 26, 2016
With China’s stock market crumpling another 6%, it’s worth looking back at the financial history of the word “panic” to see whether its past offers any hints about what investors can expect in the present and the future. What is a market panic, anyway? I defined it this way in my book The Devil’s Financial Dictionary:
PANIC, n. and v. Contagious fear that sweeps across a crowd, a market or a planet, frightening multitudes of people into selling and leaving the rest wondering whether they should….The word derives from the god Pan, who haunted the pastures and wild places of ancient Greece. In the form of a grinning but ugly man with the horns, ears and hairy legs of a goat, Pan was the god of herds and flocks, serenading them with his pipes…. Pan was also the god of fertility — and a market panic, by sweeping away the weak until bargains emerge, sets the stage for future growth.
You can see how an earlier era of investors thought of the term in this engraving, by the illustrator Frank Bellew for the cover of the Sept. 29, 1873, edition of The Daily Graphic, titled “Panic, as a Health Officer, Sweeping the Garbage Out of Wall Street.”
“Panic” appears to be dressed in rags, but in fact Mr. Bellew has portrayed him wearing breeches and a jerkin, or rough shirt, made of goat skin — an obvious reference to the Greek god. (This sculpture, from the 1st century A.D., shows how common that imagery was.) The garbage that Panic is sweeping out of Wall Street consists mainly of strips of ticker tape bearing such descriptions as “ROTTEN RAILWAYS,” “SHAKY BANKS” and “BOGUS BROKERS.” A few squawking ducks, one hobbling to the left between Panic’s feet, are trying to escape the wreckage — symbolizing the old Wall Street term “lame ducks,” or traders who bought stock with borrowed money they can no longer afford to pay back.
Only seven years earlier, New York City had established a Department of Health to help combat cholera by working to keep streets and neighborhoods clean. As part of that campaign, a horde of street sweepers regularly scrubbed the thoroughfares of New York with push brooms.
In his unforgettable image, Mr. Bellew compares bad investments, and weak investors, to sources of disease.
By spreading the fear that flushes out such “garbage” in the short term, panic ends up improving the hygiene of the market in the long term. That’s good for investors who have the staying power to outlast a panic — and bad for those who don’t.
Source: WSJ.com, MoneyBeat blog