World stock markets have continued to decline during the U.S.'s credit crisis. But economic downturns are not a new problem in some parts of the world. The Daily Lobo asked Matias Fontenla, associate professor of economics, if Americans are overreacting to the market's drop.
Daily Lobo: Are Americans too sensitive to economic fluctuations? Should they be?
Matias Fontenla: There might be arguments for both sides on how people would react. Yes, people are freaking out - some are - but, then again, you see people who freak out for just about anything. I don't know the answer to that. I have no clear for or against. Since the '70s there have been 117 full-fledged financial crises in the world. Latin America has had many. The last big one in Latin America was in Argentina, 2001 to 2003, where it was such a horrendous financial crisis that it brought out the biggest and greatest depression of Argentina's history. It was bigger than the Great Depression, where GDP fell by more than 30 percent, where the unemployment rate was 25 percent and where 57 percent of the population fell below the poverty line. It was bigger than the numbers for the Great Depression in the U.S.... Perhaps Americans should understand that this is some serious situation that we are in, and it's different. It's not just a regular slow, downward session, because we have business cycles all the time. The economy goes up and down, but this might be bigger than the ones we have seen before. Certainly not - hopefully, with the information we have today - hopefully not as big as the Great Depression. I'm almost sure we are going to do just fine, or it's not going to be as bad as the Great Depression. Because the economy is depressed, some credit companies are freezing out. (And) if there is no credit, then nobody can buy homes. We buy homes on credit. We buy cars on credit. We buy furniture on credit. For Christmas season, we overspend on our credit cards and pay them off during the year, and if there's no credit given, then nobody buys cars, nobody buys homes. We have people that can't buy things anymore, and it turns into a cycle.
