Akademik

(i.RASH.uh.nul di.PRESH.un)

n.

A feeling of unwarranted pessimism regarding the stock market or the economy.

Investors have coined a new phrase for the relentless declines: "irrational depression," a play on the famous phrase "irrational exuberance" uttered by Federal Reserve Chairman Alan Greenspan to describe the stock-market surge of the late 1990s.

"Whereas two years ago, it was get me in at any price, now it's get me out at any price," said Alfred Goldman, chief market strategist at A.G. Edwards & Sons Inc. in St. Louis. "Unfortunately, investors are thinking with their emotions and not their minds."

— Amen Sachdev, "Dow slides below 8,000 to '98 level," Chicago Tribune, July 23, 2002

The Dow Jones Industrial Average had just plummeted 554 points, or 7.2 percent, the worst percentage decline in 10 years. . . . "I saw zero panic," said Frank Baxter, chairman and chief executive of Jefferies Group Inc. in Los Angeles. "There was no evidence of irrational depression. I think the market will open weak and come back later in the day tomorrow."

— Katherine Burton, "Dow dives record 554," The Post and Courier (Charleston, SC), October 28, 1997

As the above citation says, today's phrase is based on — is in fact the emotional opposite of — Alan Greenspan's now famous phrase, irrational exuberance. It's remarkable how perfectly this latter phrase — just a couple of four-syllable words — characterizes the frenzied expansion of the late 90s stock market bubble.

What's even more remarkable, in my mind, is that this phrase ever impressed itself upon the public consciousness. It was part of a speech that Mr. Greenspan gave in Washington, D.C. in December, 1996:

Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

— Alan Greenspan "The Challenge of Central Banking in a Democratic Society," The American Enterprise Institute for Public Policy Research, December 5, 1996

Somehow those two words managed to climb out of the muck of all that eye-glazing central-banker-speak and define an age. (Will the same thing happen to infectious greed, Mr. Greenspan's most recent attempt at big-time phrasemaking?)

Not surprisingly, the earliest citation I could find for irrational depression came during the stock market downturn of 1997, less than a year after Mr. Greenspan's speech.