[Viewpoint] Remain calm as stocks adjust

A bombshell, scare, collapse, tsunami, panic and freefall are some of the expressions we’ve frequently heard in the last few days in media reports about the instability of the financial market. Since I am also in the journalism field, I cannot say I never use these expressions. However, some reporters are using expressions that are too sensitive and daunting. Insecurity over the economy is widespread already, and the media is fanning the sentiment with provocative and exaggerated diction.

Stock prices naturally fluctuate, and if they go up they have to come down. This time, the scope of fluctuation was rather serious. It is clear that the Kospi did not fall for no reason. The financial struggles in the United States and Europe, which became the direct cause of the latest crisis, did not happen overnight. We all knew that debt-related problems in the U.S. and Europe would destabilize the global economy. It would be rather strange if stock markets were unaffected. To fail to anticipate the impact and view the recent turmoil as a bombshell would require complete neglect of all the early warnings so far.

The downgrade of the U.S. credit rating was largely expected. It did not occur without notice like an earthquake. After all, what does the U.S. credit rating’s downgrade actually mean? The United States is the only country in the world that can print U.S. dollars. It is awkward to downgrade the credit of a country with a key currency, especially one that serves as the world’s foreign reserve. Should we understand this unique situation as a panic or scare?

Indeed, the market is chaotic. The resistance it has shown so far is running out. Before the aftereffects of the 2008 financial crisis could completely disappear, the markets were flushed with cash. There are conditions that could enable an economic slump and higher inflation to occur at the same time. With all these volatile elements, the markets fluctuate drastically even after a minor irritation.

Since Lehman failed, the risk of financial crises in various sizes happening again increased all over the world. If an anomalous climate becomes frequent, it transitions into the new normal climate. Financial crises are becoming a routine now. The new normal condition may be a more frequent cycle of crisis and recovery.

At this point, we need to be calm and composed. Korea is neither the origin nor the focus of the crisis. We need to be wary and prepare to respond to the spreading flame. Using expressions even more provocative than Western media and fretting over the future only encourages instability. Some people seem to be acting as if the economy is not unstable enough.

Instability could be a self-imposed mantra. If you keep saying the economy is unstable, the market will really act unstable. If you call the latest market condition a “collapse,” what do you expect for the future? It is not late to say “collapse” after the market actually falls. There is no need to encourage insecurity and call for another crisis.

I don’t mean to say we should not be aware of crisis. Being aware of the crisis and feeling insecure are two different psychologies. We don’t feel insecure if we are aware of possible crises and respond rationally. The market always sends warning signs before it falls into a complete crisis. Only those who are aware of the crisis detect the sign and respond accordingly. But you may feel insecure if you are not sensitive about these signs and are struck unprepared.

Money is not something you can make only when the market is thriving. There are opportunities abound even in a sluggish market. Which market player will be prepared to make money: someone who’s panicking or someone who is calmly seeking chances? The risk we need to avoid is not just the insecurity in the financial market. Another risk is failing to seize the opportunities that will come with the crisis. When we are trapped in insecurity, we are more likely to miss these chances.

We have experienced chaos in the financial market several times due to external shocks. Every time, the Korean economy has endured the impact and gotten over it. Just as Warren Buffett said, confidence is what we need right now. Stock prices may have fallen, but it does not mean the end of the world. The legend of the United States and the U.S. dollar has begun to decline. Everyone in the market, including those directly involved - just observing or supervising - needs to maintain composure.

*The writer is a social news editor and senior business writer of the JoongAng Sunday.

by Nam Yoon-ho