Abstract

The central bank interventions into the economies of the United States and Europe will not be successful. In the declining phase of an economic cycle, entrepreneurial emotions move from confidence to despair in the following stages: confidence, alarm, panic, false hope, and despair. Europe and the United States experienced the first stage of panic, a financial panic, from 2007 to 2009. Various philosophers, current research on emotions, and a literary analysis of the panic stages from several tragedies will be used to determine how fear develops into panic. This understanding of panic will then be applied to the financial panic that occurred from April 1, 1930 to July 1, 1932 and the economic panic that occurred from August 1937 to November 1937. Based on these analyses, it is then argued that a panic of sovereigns, who have resorted to historically unprecedented measures to shore up the financial sector of the economy, has replaced the financial panic of the banks. However, as confidence in the creditworthiness of the sovereigns dissipates, the confidence in the economic rebound will also dissipate, leading to intense panic and the next stage in the decline of the economies of both regions.