Hence, the Panic of 2008, which preceded the calendar year, is a more revealing description of the recent economic and financial travails. As I will describe, panics involve generalized fears – often related to financial firms – that magnify economic weakness. The encouraging news, I should note, is that panics end. And this panic is showing meaningful signs of abating.
The storied panics in U.S. economic history were generally marked by widespread bank runs as depositors lost confidence in large segments of the banking system.2 Such was the case in the Panics of 1837, 1857, 1873, 1893, and 1907.