If there were no future, accumulation of wealth would be insanity. But that means that fluctuations in our wealth are intimately and inextricably involved with our view of the future. Hence, people who attach a degree of permanence to any particular level of wealth begin to plan and shape their futures accordingly. If the wealth disappears through no fault of their own, but purely because other investors have placed a new value on these assets, their view of the further is not only disrupted-in some cases, with a loud sucking sound, their future can vaporize entirely, along with their egos. A pile of wealth that is shrinking is sliding back toward the past, sometimes years into the past, rather than into the future.
Panic selling is a desperate gasp to keep the future from vanishing into a black hole.
When that happens, plans begin to change. A decision that made sense at 6550 begins to look problematical at 5550, even though nothing may have modified except the level of the stock market and the valuation of the portfolio. On the occasion when that process proliferates, an entire economic landscape is transformed from sunshine to storm, such as after the stock market top in the early months of 1973. I am not trying to make a market forecast. On the contrary, we do seem to be living through a period of low risk in which the world of economics and finance appears to be immune to shock, at least compared with most of past history.