panic

panic

[pan-ik]
panic, crisis in financial and economic conditions, marked by public loss of confidence in the financial structure. Panics are characterized by a general rush of investors to convert their assets into cash, with runs on banks and a rapid fall of the securities market. Bank failures and bankruptcies naturally follow. Students of economic cycles have paid much attention to the process of panics, but without definitive result. Perhaps the earliest panic of modern capitalism occurred during 1720 in France and England. Known as the "Mississippi Bubble," it was touched off by wild speculation in the stock of John Law's colonizing company (see Mississippi Scheme). The first major panic in the United States came in 1819, after the War of 1812. The panic of 1837 was much more severe; it was brought on primarily by irresponsible financial operations in Western lands. Another crisis in 1857 was caused in part by massive European speculation in American railroads. Thus, when the panic struck it affected both Europe and the United States. In 1869 stock manipulations brought on the panic known as Black Friday. In 1873 there was a financial crisis in Vienna, as well as an American panic marking the bitter contest between agrarians (see Populist party), caught by overextended credit, and the financial interests. That conflict continued and was again reflected in the crises that came in the panics of 1893 and 1907. No great panic occurred again until 1929, when the U.S. stock market crash helped to precipitate a worldwide financial crisis. Confidence was not restored until after 1933, and the effects of the panic were felt throughout the Great Depression of the 1930s. Since 1929, central banks have been quick to provide liquidity to falling markets in order to prevent panics. For example, when the New York Stock Exchange dropped over 508 points (22.6%) on Oct. 19, 1987, the Federal Reserve released a large sum of money overnight to meet demands on brokers. In Sept.-Oct., 2008, the Federal Reserve and U.S. Treasury took more drastic and wide-ranging measures to ensure liquidity and stability in a financial system reeling from the effects of a collapsing housing bubble and the resulting credit crunch and accelerating stock market decline.

See M. A. Bernstein, The Great Depression (1989); C. P. Kindleberger, Manias, Panics, and Crashes (1989); C. R. Morris, Money, Greed, and Risk (1999).

In economics, a severe financial disturbance, such as widespread bank failures, feverish stock speculation followed by a market crash, or a climate of fear caused by economic crisis or anticipation of such a crisis. The term is applied only to the initial, violent stage of financial upheaval rather than the whole decline in the business cycle (see depression and recession). Until the 19th century, economic fluctuations were largely connected with shortages of goods, market expansion, and speculation (as in the South Sea Bubble). Panics in the industrialized societies of the 19th–20th centuries have reflected the increasing complexity of advanced economies. The Panic of 1857 in the U.S. had its seeds in the railroads' defaulting on their bonds and in the decline in the value of railroad securities; its effects were complex, including not only the closing of many banks but also severe unemployment in the U.S. and a money-market panic in Europe. The Panic of 1873, which began with financial crises in Vienna and New York, marked the start of a long-term contraction in the world economy. The most infamous panic began with the U.S. stock-market crash of 1929 (see Great Depression).

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For psychological condition, see Panic attack
Panic is a sudden fear which dominates or replaces thinking and often affects groups of people or animals. Panics typically occur in disaster situations, or violent situations (such as robbery, home invasion, a shooting rampage, etc.) which may endanger the overall health of the affected group. The word panic derives from the name of the Greek god Pan, who was said to have the ability to cause extreme, irrational fear, especially in lonely or open places. Panic is also known as Anxiety.

Prehistoric men used mass panic as a technique when hunting animals, especially ruminants. Herds reacting to unusually strong sounds or unfamiliar visual effects were directed towards cliffs, where they eventually jumped to their deaths when cornered.

Humans are also vulnerable to panic and it is often considered infectious, in the sense one person's panic may easily spread to other people nearby and soon the entire group acts irrationally, but people also have the ability to prevent and/or control their own and other's panic by disciplined thinking or training (such as disaster drills). Architects and city planners try to accommodate the symptoms of panic, such as herd behavior, during design and planning, often using simulations to determine the best way to lead people to a safe exit and prevent congestion (stampedes). The most effective methods are often nonintuitive. A tall column, approximately 1 ft (300 mm) in diameter, placed in front of the door exit at a precisely calculated distance, may speed up the evacuation of a large room by up to 30%, as the obstacle divides the congestion well ahead of the choke point.

In sociology, precipitate and irrational actions of a group are often referred to as panics, as for example "sex panic", "stock market panic". (See hysteria.) Panic is usually understood to mean active, but senseless behavior (e.g. trying to flee in a random direction or suddenly attacking others without consideration), while hysteria often carries a more passive notion (as in crying uncontrollably). An influential theoretical treatment of panic by a sociologist is found in Neil J. Smelser's, Theory of Collective Behavior.

The science of panic management has found important practical applications in the armed forces and emergency services of the world.

Many highly publicized cases of deadly panic occurred during massive public events.

The layout of Mecca was extensively redesigned by Saudi authorities in an attempt to eliminate frequent stampedes, which kill an average of 250 pilgrims every year.

Football stadiums have seen deadly crowd rushes and stampedes, such as at Hillsborough stadium in Sheffield, England, in 1989. This led to controlled entry gates and stricter rules by the end of the 1980s to regulate seating arrangements.

Etymology

"Panic" comes from Greek panikon, "pertaining to Pan." Pan is the god of woods and fields who was the source of mysterious sounds that caused contagious, groundless fear in herds and crowds, or in people in lonely spots

Panic and the law

Most jurisdictions limit the freedom of speech in order to deter people from creating potentially dangerous panic situations, especially a false alarm (the classic example is shouting "Fire!" in a crowded theatre when in fact nothing is burning).

Some criminal defendants attempt to evade or reduce the severity of their conviction by claiming their violence was induced by a sense of panic. Certain jurisdiction may limit punishment in case one's actions for self-defense were excessively powerful because of panic reaction.

Panic experienced by air travellers during the last minutes of their lives aboard crashing commercial flights has been the basis of several multi-million dollar lawsuits brought against airlines, based on the legal concept of emotional suffering.

See also

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